Redefining financial inclusion - an empirical analysis of demand side factors

The crux of financial inclusion is balancing the beam of supply and demand for financial services such as banking, insurance, pension and capital markets of the economy restricted not only to rich but also serving its poor populace. The study through its empirical investigation redefines the term as “Financial Inclusion is a process which primarily instigates financial education amongst the masses to ensure full participation in the financial products backed by affordability and accessibility”.The study proposes not only to develop a financial inclusive score i.e index based on above definition but put forth the factors influencing the level of financial inclusion using Factor Analysis based on primary data(1000 validated respondents) extracted from Rural Konkan districts of Maharashtra. The study using Pearson Correlation Analysis, data being parametric in nature inferred a positive correlation between financial literacy and usage of financial products. A principal component analysis (PCA) was conducted on the 27 items with orthogonal rotation (varimax) which placed the components of financial literacy and usage of financial products as key drivers in determining the level of financial inclusion. A combined index of financial literacy score and usage of financial product known as financial inclusion index based on quantile function is presented in this article.