Does financial inclusion reduce informal savings? Evidence from Mexico

Financial inclusion policies often assume that expanding access to formal saving instruments reduces reliance on informal mechanisms by lowering barriers to formal financial participation. However, informal saving arrangements may persist because they provide social, insurance, and commitment functions not fully replicated by formal institutions. Using nationally representative data from Mexico’s 2018, 2021, and 2024 Financial Inclusion Surveys, this paper tests these competing hypotheses. Instrumental-variable probit and ordered probit estimates reveal substantial coexistence between formal and informal saving, with substitution occurring only gradually as financial engagement deepens and varying across population groups and regions.