Despite significant policy support for financial inclusion, there is little evidence about what has been achieved by way of knowing which households and individuals are financially included, or what is the impact of such inclusion on these persons. We propose a measurement framework that aims to capture these aspects of financial inclusion using an input-output-outcome perspective. The input to financial inclusion is measured as participation in formal financial sector instruments. The output is the extent to which these are used. The outcome is how those who hold and use these instruments perceive their own well-being. A survey questionnaire is designed to collect this information, with two distinct features: It is conducted for a household, since financial holdings benefit more than one individual in a household. It is designed to facilitate regular collection, in order to aid financial service providers and policy makers in their thinking about improving financial inclusion. We deploy the questionnaire to understand the financial inclusion of a sample of 300 low-income households in two geographic areas in India. We find that financial participation has a positive correlation with financial well-being, a relationship which is significant even after controlling for income level and ownership of physical assets.
Measuring Financial Inclusion: A project report, Natasha D’cruze, Indradeep Ghosh, Geetika Palta, Misha Sharma, Susan Thomas, February 2023