Copyright Page
© 2021 International Monetary Fund
WP/21/90
IMF Working Paper
Monetary and Capital Markets Department
Measuring Digital Financial Inclusion in Emerging Market and Developing Economies: A New Index
Prepared by Purva Khera, Stephanie Ng, Sumiko Ogawa, and Ratna Sahay1
Authorized for distribution by Ulric Eriksson von Allmen
March 2021
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Abstract
Adoption of technology in the financial services industry (i.e. fintech) has been accelerating in recent years. To systematically and comprehensively assess the extent and progress over time in financial inclusion enabled by technology, we develop a novel digital financial inclusion index. This index is based on payments data covering 52 developing countries for 2014 and 2017, taking into account both access and usage dimentions of digital financial services (DFSs). This index is then combined with the traditional measures of financial inclusion in the literature and aggregated into an overall index of financial inclusion. There are two key findings: first, the adoption of fintech has been a key driver of financial inclusion. Second, there is wide variation across countries and regions, with the greatest progress recorded in Africa and Asia and the Pacific regions. This index should offer a useful analytical tool for researchers and policy makers.
JEL Classification Numbers: C38, G10, G20,03 0
Keywords: Fintech; digital financial services; financial inclusion
Author’s E-Mail Address: pkhera@imf.org; sng@imf.org; sogawa@imf.org; rsahay@imf org
Table of Contents
Abstract
I. Introduction
II. Literature Review
III. Methodology
IV. Indicators of Financial Inclusion: Stylized Facts
V. Findings
A. Traditional Financial Inclusion Index
B. Digital Financial Inclusion Index
C. Comprehensive Financial Inclusion Index
VI. Conclusion
References
Appendix I: Composition of various financial inclusion indices
Appendix II: Construction of the Financial Inclusion Index
The authors wish to thank Tobias Adrian, Martin Čihák, Ulric Eriksson von Allmen, Amina Lahreche, Kimberly Beaton, and Majid Bazarbash for their guidance, support and immensely helpful feedback and comments. We’d also like to thank Itai Agur, Patricia Alonso-Gamo, Pelin Berkmen, Nicolas Blancher, Era Dabla-Norris, Bidisha Das, Jennifer Elliot, Federico Grinberg, Dirk Jan Grolleman, Frederic Lambert, Elena Lukoianova, Inutu Lukonga, Jennifer Moyo, Maria Soledad Martinez Peria, Nicolas Racine, Celine Rochon, Kazuko Shirono, Amadou Sy, Jose Torres, Tomohiro Tsuruga, Hector Carcel Vilanova for their helpful comments; and participants of various seminars and conferences in which we presented the key findings.