Applying the principal component analysis method in measuring the financial inclusion index at the provincial/city level in Vietnam

Abstract

Promoting inclusive financial development is one of the important goals in the socio-economic development strategies of countries in general and Vietnam in particular. Assessing the situation of
financial inclusion in different dimensions and levels helps the financial institutions, Government have a multi-dimensional view of the comprehensive financial situation. This study uses the principal component analysis method with the Vietnam Household Living Standard Survey dataset in the period from 2016 to 2020 conducted by the General Statistics Office to calculate a financial inclusion index based on indicators reflecting the level of household use of financial products and services. The research results will help the State Bank of Vietnam, financial institutions, and provinces/cities to assess the financial inclusion rankings of the provinces/cities. Based on the findings, the author provides several recommendations to promote inclusive financial development in localities.