| Abstract: |
The widely accepted view that finance is important to improve the lives of
individuals has led to a tenacious policy support for financial inclusion. The
term itself has evolved with time, and along with it, the approaches to
measure financial inclusion. This paper in the 17th edition of the Inclusive
Finance India Report
(http://inclusivefinanceindia.org/inclusive-finance-india/) describes the
evolution of financial inclusion in India and the various strategies used to
quantify so far. The paper presents new thinking on measuring financial
inclusion, including the latest Findex measure from the World Bank and the
holistic input-output-outcome approach by Dvara Research and XKDR Forum. While
both approaches depend upon household surveys, the paper identifies gaps
between the measurement focus of the Findex, which continues to focus on bank
accounts and payment systems, and the Dvara-XKDR approach which incorporates a
greater coverage of what the household holds as financial instruments, how
they are used and the perceived well-being of households that are more
financially included. The evidence presented suggests that the
input-output-outcome can be more useful to both policy makers and financial
service providers in identifying households that are financially less included. |