What determines financial inclusion? A household-level investigation in rural Odisha, India

In India, extensive efforts have been made to foster financial inclusion as a development strategy. However, achieving fuller financial inclusion remains a far cry. Focusing on the supply, demand, and quality side of financial inclusion based on a rural household-level survey in Odisha, this study examines the status of financial inclusion for rural households and identifies the factors determining the same. Besides, it highlights the preferred mode of financial transactions among rural people. The financial inclusion index (FII) results based on principal component analysis indicate that more than half of the sample rural households still fall under low FII. The regression results indicate that factors like landholdings, gender, caste, family types, and distance of the banks play a significant role in determining financial inclusion among rural households. Besides, household financial behavior does matter. Interestingly, an overwhelming proportion of people prefer the physical mode of financial transactions. There is, thus, a need to sensitize people to bring about a change in their financial behavior. At the same time, efforts to make programs more gender and caste-inclusive would go a long way in achieving the desired results.