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Exploring demand-side barriers to credit uptake and financial inclusion

Anshu Singh (Vaikunth Mehta National Institute of Cooperative Management, Pune, India)

International Journal of Social Economics

ISSN: 0306-8293

Article publication date: 29 April 2021

Issue publication date: 31 May 2021




The purpose of this study is to explore the demand side factors affecting financial inclusion in general and credit uptake in particular.


The present study is descriptive and exploratory in nature and is purely based on primary data. The data collection instrument has been scientifically after thorough review of literature and seeking expert opinion. Primary data have been collected from the respondents of lower socioeconomic class in selected rural areas in the State of Maharashtra, India. Exploratory technique like factor analysis and structural equation modelling have been used to identify the inter-relations between financial inclusion and underlying barriers.


The study concludes that there are major latent issues that determine the uptake and usage of financial services, major being “operational and implementation challenges”, “financial literacy” and “affordability”. The “usage” aspect further impacts financial inclusion along with “access” variable. These are some of the most important factor for creating demand-driven approach towards financial products and services specially credit. The author concludes that the identified latent barriers with respect to the “usage” dimension of financial inclusion require greater policy attention so that it can complement the supply-side measures.

Practical implications

The study establishes that merely having “access” through bank account ownership will not fulfil the objective of financial inclusion, and it is the “usage”, which is also important to realize the full potential of financial inclusion at the bottom of the pyramid. So, policy actions should be directed toward enhancing the “usage” aspect of financial services. The “usage” dimension could be enhanced through targeted interventions to mitigate the effect of identified latent barriers.


Though researchers have made a mention of demand-side barriers to financial inclusion, detailed study on the topic is missing. The study is one of its kinds in exploring the severity of various demand-side barriers that determine financial inclusion. In the context of emerging economies like India, financial inclusion is often measured in terms of banking outreach and “access”. There are limited studies capturing the “usage” dimension of financial inclusion.



The author is grateful to the Faculty of Commerce, Savtribai Phule Pune University, Pune, India for providing all the necessary technical and academic support for the completion of this investigation as a part of the doctoral research in banking and finance domain.


Singh, A. (2021), "Exploring demand-side barriers to credit uptake and financial inclusion", International Journal of Social Economics, Vol. 48 No. 6, pp. 898-913.



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