THE DEMAND SIDE OF FINANCIAL INCLUSION: TWO-STEP CLUSTER ANALYSIS ON FINANCIAL BEHAVIOR, LITERATION, AND PREFERENCE OF BOP

Abstract

This paper analyzes the behavior and preference in doing the financial activity. We also measured financial literation, surveyed 100 people, and conduct two-step cluster analysis to identify 3 groups (very low, low, and medium). Basic financial behavior is high and the same between groups. The percentage of savings, experience, and frequency of using banking financial facilities are significantly different. The financial behavior of the groups is significantly different based on the activity on saving for emergency funds and pension plans. This is in line with the different focus on saving purpose across groups. For preference, most people prefer non-formal financial facilities. Banking, a formal financial facility, is only chosen by less than 10%. Literacy of the families are also low and doesn’t differ across groups. There is a slight trend that groups with lower economic resources have less engagement with banking facilities. This is the reason for low perceived literation rate, leading to low banking facilities utilization. As a conclusion, there is a low engagement of formal financial service, especially for the most reluctant group. Hence, causing low literation. Therefore causing low usage of the formal financial facility, regardless of the high intensity in doing the basic financial activity.