Measuring Financial Inclusion: A meta confirmatory factor analysis

Gerhard Kling

Financial inclusion has emerged as a research topic recently, being promoted by the World Bank and other organisations. With an increase in research funding and public awareness, financial inclusion has entered the policy domain. There are many ways to define and measure financial inclusion, which as a social construct is latent. This abundance of concepts and measures might serve to stimulate academic debate – but contributes to ambiguity in setting targets for optimal levels of financial inclusion. This study conducts a systematic review of definitions, measures and associated data sources highlighting methodological issues and discrepancies. Drawing on methods developed in psychometrics, we apply a meta confirmatory factor analysis to test various measures using cross-country and Chinese data sources. Our contribution is threefold: (1) we integrate Western and Chinese perspectives on financial inclusion, (2) we identify data sources, (3) we derive methods to measure financial inclusion. Our methodology can be applied to different contexts.

Authors: Vanesa Pesque-Cela, Lihui Tian, Deming Luo, Damian Tobin and Gerhard Kling

(Main focus of the presentation is on the methodology, i.e. the meta confirmatory factor analysis of the study)

Gerhard Kling is Professor of International Business and Management at the School of Oriental and African Studies, University of London. Before joining SOAS, he was Professor of Finance at the School of Management, University of Southampton. He held academic posts at Bristol Business School and Utrecht University. He worked as a Practice Specialist in Corporate Finance at McKinsey & Company, where he mainly focused on firm valuation and M&As. He received his PhD in economics from the University of Tuebingen and was awarded the Dissertation Prize of the International Economic History Association. He has published in the British Journal of Management, International Journal of Research in Marketing and R&D Management. His current research focuses on M&A, internationalization, corporate governance and corporate finance.