The level of financial inclusion in Ukraine: Measuring access, quality, and usage of financial products and services

Abstract

While financial inclusion is seen as a goal of socio-economic development, there is still no clear understanding of how to measure it. Following this concern, the paper deals with the computation of the financial inclusion index of the Ukrainian economy using an annual dataset spanning from 2008 to 2020 and following the Sarma methodology. The object of the study is a set of indicators of usage, access and quality of financial products and services. The obtained results demonstrate the medium level of financial inclusion. The improvement of financial inclusion is observed in 2012, 2013, 2020 (namely 0.55 – 0.56 in the range of 0 and 1). From 2015 (0.38) till 2018 (0.39), the revealed downward trend affirms that the withdrawal of banks from the market has deteriorated the level of quality and usage of financial products and services. Financial inclusion declined during the cleaning up of the banking system in 2014–2016, just as it did after the global financial crisis in 2009–2010. Despite the development of the payment infrastructure, there is a need to diversify access, increase quality, and quicken the usage of financial products and services due to existing distrust in national financial institutions. Improving financial literacy and consumer protection, and closing regulatory gaps in the non-banking sector are seen as ways to enhance financial inclusion. Thus, financial regulators should establish an upward trend in financial inclusion that will ensure full access to formal financial services and will not adversely affect the stability of financial system.