Measuring Digital Financial Inclusion in Lower Middle Income Countries

Abstract

This study aims to measure the Digital Financial Inclusion (DFI) Index in lower-middle-income countries (LMICs) during the period 2014–2023 using a weighted multidimensional approach based on a two-stage Principal Component Analysis (PCA) method. The research utilizes publicly available datasets from the International Monetary Fund (IMF), the World Bank (WB), and the International Telecommunication Union (ITU). The findings indicate that the level of DFI in these countries has shown a gradual upward trend over the years but remains relatively low. Moreover, there are significant disparities in DFI levels across countries, with both the access and usage dimensions of financial services playing a crucial role in determining DFI in lower-middle-income countries.