Year: 2017 Vol.: 66 No.: 1
Authors: Mynard Bryan R. Mojica and Claire Dennis S. Mapa
Financial inclusion has become a policy priority in many developing countries, including the Philippines. However, the issue of its robust measurement is still outstanding. The challenge comes from the fact that financial inclusion is a multidimensional phenomenon. A comprehensive measure is therefore needed to adequately gauge the inclusiveness of a financial system. This paper constructed a Financial Inclusion Index (FII) to measure access to and usage of financial services in the Philippines using provincial data. Results show that while there are marked geographical disparities based on the FII, there is significant positive spatial autocorrelation indicating that nearby provinces exhibit similar levels of financial inclusion. The paper also showed the relationship between the FII and some variables that are often linked to financial inclusion such as income, poverty, literacy, and employment as well the province’s level of human development and competitiveness. On the methodological side, possible improvements and technical innovations in constructing the FII are laid out to maximize its potential as an analytical tool for surveillance and policy-making.
Keywords: inclusive finance, composite indicator, financial inclusion index