An Investigation Into Indicators Impacting Financial Inclusion Among Small and Marginal Farmers in India: A Case Study of Punjab, Haryana, and Rajasthan

Abstract

Financial exclusion has adverse socio-economic effects on lower income stratum of the population especially among small and marginal farmers at the bottom of the economic pyramid. India suffers from a high level of financial exclusion disproportionally among farmers holding small lands (holding land less than ≤2 hectares). This study provides an index for measuring the degree of financial inclusion using principal component analysis to compute weights endogenously for aggregating 12 indicators of access, usage, and barriers during 2016-17. The study investigates the critical indicators impacting the level of financial inclusion among small and marginal farmers using both supply side and demand side. The result provides evidence that the supply side is the most important dimension in developing country like India for broadening the financial access among lower income group. The study finds that to achieve a high level of financial inclusion policymakers should maximize access and minimize the barriers which will lead to an increase in the usage of financial services.