Financial inclusion and its determinants: The case of Goa

Abstract

The aim of the paper is to examine the extent of financial inclusion in Goa through an in- depth analysis of the access and usage of banking services across the talukas in Goa for the period from 1994-95 to 2014-15. The study is based on the data collected from the Directorate of Planning, Statistics and Evaluation, Government of Goa. By using an Index of Financial Inclusion, the study classifies all talukas in Goa into high, medium and low categories, with respect to financial inclusion. In order to understand the factors affecting financial inclusion, a multiple regression model is developed and estimated following the method of ordinary least squares. The results show that the spread of the commercial banking network is not evenly distributed across talukas in Goa. It is observed from the study that although there has been an improvement in outreach activity in the banking sector, the achievement is not significant. The findings also indicate that regions characterized by low levels of education, lower degree of urbanization and lower levels of tourist arrivals seem to be less financially inclusive. In other words, regions that are less developed are also less financially inclusive. The results of the regression analysis show that the three independent variables, namely, urbanization, school enrolment and tourist arrivals, are found to have a positive impact on financial inclusion and are statistically significant. The findings of this study have policy implications for initiating measures that would enhance the levels of financial inclusion in all regions, especially the less developed ones.