A Methodological and Comparative Analysis of a Financial Inclusion Index of Guangxi, China

This paper endeavors to investigate the factors influencing the measurement of financial inclusion extent. It focuses on creating a comprehensive index to assess the impact of multi-dimensional variables, with specific reference to Guangxi, China. The financial inclusion index, along with its sub-indices, encompassing permeability (IFI1), availability (IFI2), and utility (IFI3) of financial services, were computed using the coefficient of variation and Euclidean distance methodologies. The coefficient of variation was employed to determine the weight of each indicator, denoted as Wi which represents the relative importance of each indicator in the overall assessment of financial inclusion. When considering multiple dimensions (n dimensions), these weights are used to compute values in an n-dimensional space, allowing for a comprehensive evaluation of financial inclusion within a region using a principal components approach. Highlighting significant disparities in financial inclusion among different regions in Guangxi, its IFI1 recorded a mean of 0.132 bounded by a minimum of 0.032 and a maximum of 0.549. While IFI2 recorded an average value of 0.092 comprising per capita deposit balance and loan balance of financial institutions. IFI3, which relates to the end of year percentage of deposit balance in GDP and of loan balance in GDP, has an average value of 0.089. Across all three dimensions, there is a notable disparity between the minimum and maximum values, signifying an imbalanced distribution of financial resources and services. Among these three dimensions, IFI2 exhibits a higher standard deviation, suggesting marked variations in balances between deposit and loan, emphasizing the need to adjust lending thresholds to meet the diverse demands in the financial market.