Government policy and financial inclusion: analyzing the impact of the Indian national mission for financial inclusion

Can government policy be effective in expanding financial inclusion? In 2014, India - challenged by poverty and financial exclusion of large parts of its population - introduced the National Mission for Financial Inclusion (PMJDY) initiative, to improve access to financial services. This study examines the impact of the PMJDY initiative on financial account ownership and usage of a range of financial services, traditional and FinTech. Specifically, using multiple measures of financial inclusion, logistic regressions are applied to World Bank survey data on 6,000 respondents for the years 2014 and 2017 to yield the following key results. First, there is lower probability that women, the young, the poor, and the less educated will own financial accounts or use financial services - whether traditional or FinTech. However, education and employment improve the likelihood of a woman using FinTech services. In contrast, for men what matters is income level. Second, the financial inclusion initiative appears to have contributed to financial inclusion. Specifically, following the introduction of the PMJDY, respondents - particularly women and the poor - were more likely to own financial accounts or use traditional and FinTech services. The new government initiative, nevertheless, generally did not impact the use of traditional or FinTech financial services that require proactive action.