Drivers and Barriers to Financial Inclusion in Peru: a Demand-side Approach

Date of Award


Document Type

Honors Thesis (Open Access)


Colby College. Economics Dept.


Patrice M. Franko

Second Advisor

Michael Donihue


Despite a highly conducive microfinance environment, Peru's financial inclusion indicators pale in comparison to other countries with similar income levels in the Latin American region. To date, most research has examined financial inclusion from a supply-side perspective, which measures access and usage of formal financial services by banking outreach indicators, number of borrowers, and availability of other financial services in a given area. This approach alone, however, is often insufficient to nuance the degree of financial exclusion faced by segments of the population. This research integrates demand-side indicators into the analysis of financial inclusion in Peru. Importantly, the metric employed measures usage of financial services rather than just access. For the quantitative analysis, the latest national household survey available, ENAHO 2013, is used to build a probit model that predicts the likelihood of being banked for all working-age adults in the sample. The findings suggest that financial exclusion is associated with rural residency, low income level, informal employment status, and low education level. The model also shows that being a female is associated with an increase in the probability of being banked. This positive effect, however, decreases by almost half for female heads of household. Finally, given the identified barriers to financial inclusion, I explore potential pathways to expand usage of formal financial services, highlighting the role of technology and government to people (G2P) transfers.


financial inclusion, financial access, individual finance, household finance

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