Determinants of Financial Inclusion of Low-Income Households in Urban Sri Lanka: An Empirical Analysis of the Colombo District

Purpose: This study aims to identify the level of financial inclusion of low-income households and its determinants in Colombo District, Sri Lanka.
Methodology: Both descriptive analysis and logistic regression analysis are carried out using both primary and secondary data. Primary data were collected through a sample survey using a semi-structured questionnaire covering 383 households in Colombo district, and reports of government institutions have utilized for secondary data. Information gathered for nine variables i.e. age, gender, income, education, occupation, accessibility, availability, penetration, and trust.
Findings: The results of the descriptive analysis revealed that the level of financial inclusion is high in terms of access to finance, which is denoted by the number of account ownership in formal financial institutions, however, in terms of usage, it is quite low in the selected sample. Logistic regression analysis indicated that income, accessibility, availability, and penetration are the major determinants of financial inclusion in urban low-income families.
Originality: This research fills the long-standing gap in the literature by analyzing financial inclusion in urban low-income segment in Sri Lanka. Thus, it emphasizes the financial inclusion/exclusion is not only a rural phenomenon, and the urban poor need urgent attention compared to the rural sector as they are the most vulnerable in terms of financial needs.
Policy Implications: Therefore, the research urges that specially designed programmes and low-cost financial products and services are necessary for the urban poor to enhance their income factor and achieve greater financial inclusion among them.