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Information and Communication Technology Diffusion and Financial Inclusion: An Interstate Analysis for India

Author

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  • Amrita Chatterjee

    (Assistant Professor, Madras School of Economics)

  • Simontini Das

    (Assistant Professor, Jadavpur University, Kolkata: 700032)

Abstract

Financial Inclusion has its primary objective in providing access to useful and affordable financial products and services that meet the needs of so far unbanked population for transactions, payments, savings, credit and insurance in a responsible and sustainable way. The penetration of banking services in India has made reasonable progress though there are still regional disparities with especially the rural and female population lagging behind. However, not only access but also usage of financial services matters. Moreover, as there is a strong initiative towards digitalized cashless economy in India, it is important to examine whether the country is ready for a more technology-driven financial system. As far as the diffusion of telecommunication technology is concerned, India has made a remarkable progress in urban areas giving rise to significant digital divide between rural and urban India. With spread of mobile and mobile internet though, this divide has come down to some extent. Thus if this inclination towards mobile technology can be properly channelized to improve the access as well as usage of financial services through spread of mobile banking then more and more people can be brought under the purview of institutional credit system leading to reduction in poverty and inequality. The current paper intends to study the role of information and communication technology (ICT) diffusion in improving the status of financial inclusion across the different states of India. Two separate indices for Financial Inclusion and Information Technology Diffusion are formed and the states are clustered to club the states similar in terms of their performance. Then the paper tries to test whether ICT diffusion is one of the indicators of Financial Inclusion in India. The dynamic panel data analysis helped us to identify the role of technology as well as other socio-economic factors which can contribute in interstate disparities in FI. The results show that technology does play an important role in improving financial inclusion. As the elderly people in rural as well as urban areas are still not that familiar with mobile and internet, they may not be able to get benefited by ICT revolution. But lack of education and more importantly poor status of financial literacy play a very vital role in FI

Suggested Citation

  • Amrita Chatterjee & Simontini Das, 2019. "Information and Communication Technology Diffusion and Financial Inclusion: An Interstate Analysis for India," Working Papers 2019-178, Madras School of Economics,Chennai,India.
    • Handle: RePEc:mad:wpaper:2019-178
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    More about this item

    Keywords

    Financial Inclusion; Information and Communication Technology Diffusion; Dynamic Panel Data Model;
    All these keywords.

    JEL classification:

    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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