Assessment of Financial Inclusion of Russia’s Northern Regions

Abstract

Multidimensional assessment of financial inclusion is crucial for understanding both the financial aspect of people’s lives and the state’s overall financial situation. The northern territories play a significant role in modern Russia, and it is important to study their financial inclusion. The aim of this study is to compare financial inclusion in the northern regions of Russia between 2000 and 2022 and identify the main trends and factors influencing financial accessibility in these areas. To achieve this goal, we need to identify and analyze the main factors that affect financial accessibility in the northern regions and create a rating based on these factors. This will help us better understand the current situation and make informed decisions about future policies. The approach proposed in this paper, which is based on a two-stage principal component analysis (PCA), allows us to get rid of subjective processes in the weighing of indicators and form a comprehensive assessment of financial well-being. This method involves endogenous assignment of weights and the creation of a composite index. The Kaiser criterion is used to identify the main components. As a result of our study, we have determined that the most significant factors influencing financial well-being are the number of operating credit institutions, their branches, and funds (deposits) held by legal entities and individuals, both in rubles and foreign currency. We have also developed financial accessibility indices that allow us to conduct rating assessments of regions and identify significant changes over time. The results of the study will help us to evaluate the effectiveness of the current policy and provide a basis for developing targeted measures to achieve convergence in financial accessibility in northern Russia.