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Faith-based Financial Exclusion in India
One of the key determinants of access to financial services is branch density as loan-making depends on information that necessitates local presence. This paper hypothesises that the proportion of Muslim population has an inverse relationship with branch density in India. The hypothesis is tested using data on commercial bank branches from the Reserve Bank of India and census data. The ordinary least squares estimation shows the expected negative sign for the coefficient of Muslims and the positive sign for the level of urbanisation, both being statistically significant. Commercial bank loan rates are related to the proximity to branch offices, wherein lower branch density not only affects the Muslims (who voluntarily do not participate) but also the general population with serious implications for financial deepening and welfare.
Financial inclusion is a cherished goal of any progressive society, as exclusion would imply the inability to transform one’s talents into productive uses due to the lack of inherited physical, financial, and social capital. Greater access to financial services then paves the way for achieving a number of sustainable development goals (SDGs). It has been identified as an enabler for seven of the 17 SDGs (Khan et al 2022). An inclusive financial system would ensure that as many people as possible have access to financial services required for sustainable livelihoods. The access to credit can smooth consumption, employment, income and good health (Karlan and Zinman 2010).
Financial Inclusion and Branch Density
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