Determinants of Financial Inclusions: Comparing High, Middle, and Low-Income Countries

Abstract

The objective of this paper is to examine determinants of financial inclusion in high, middle, and low-income countries. We use the World Bank’s 2017 Global Financial Inclusion database and apply probit estimation for different measures of financial inclusion, including account, payment, saving, and borrowing. For the combined sample, we find that being a man, more educated, richer, employed, and older to a certain age increases the likelihood of access to formal financial services. For the three subsamples, the impact of education and income on the likelihood of saving and borrowing formally is highest in high-income countries and lowest in low-income countries but the ranking is reverted for formal account and payment. However, the magnitude of impact increases with the level of education and income in each of sub-group country for all four formal financial inclusion measurements. Our finding also supports the view that substitution between formal and informal credit is based on income level.