Measuring Digital Financial Inclusion Across the Globe: A New Multidimensional Index

In this paper, a new index of digital financial inclusion is developed using the access, usage, and availability dimensions of digital financial inclusion. The two-stage principal component analysis is applied to develop an index using the IMF financial access survey data for 68 countries from the year 2014-2021. The countries are further divided into four groups using World Bank income classifications. The new index proposed in this study covers 68 countries based on continuous data from the IMF FAS survey. The index is a contribution to the ongoing literature on digital finance and will be used as a device to measure digital financial inclusion. The results show that the high-income countries are technologically advanced and have a higher ranking in digital financial inclusion while the upper middle (UMIC) and lower-middle-income countries (LMIC) are making steady progress with respect to the digitization of the financial sector while low-income countries are less digitally inclusive due to lack of digital infrastructure. Moreover, they have the problem of a lack of digital finance data. International financial institutions i.e. The World Bank, IMF, and national financial institutions such as central banks should work towards a vibrant and digitally inclusive financial sector.