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on Financial Literacy and Education |
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Issue of 2025–02–10
thirteen papers chosen by Viviana Di Giovinazzo, Università degli Studi di Milano-Bicocca |
| By: | Carlos Cantú; Jon Frost; Tirupam Goel; Jermy Prenio |
| Abstract: | To successfully manage their financial obligations and have confidence in their financial future (financial health) people need to access and use financial services (financial inclusion). Yet inclusion alone may not be sufficient: financial health can suffer if the quality of use of financial services is poor (eg issues with provision such as scams or a lack of financial literacy and know-how on the part of the consumers). Public policy can boost financial health by promoting financial consumer protection, advancing financial literacy and enacting foundational policies like sound regulation and open finance. |
| Date: | 2024–03–28 |
| URL: | https://d.repec.org/n?u=RePEc:bis:bisblt:85 |
| By: | Ozili, Peterson K |
| Abstract: | The objective of this study is to present a theoretical framework that explains the digital agency at work in digital financial inclusion. The digital agency theory of financial inclusion examines the problems and solutions linked to delegating financial inclusion outcomes to a digital agent. The theory also examines the various kinds of incentives and monitoring arrangements that can be deployed by the financial inclusion principal to ensure that the digital agent achieve the specified financial inclusion outcome. The digital agency theory of financial inclusion states that the financial inclusion principal will employ the services of a digital agent who will use appropriate digital technologies to achieve the financial inclusion outcome specified by the financial inclusion principal under a contractual agreement that motivates the digital agent to act in the best interest of the financial inclusion principal. The theory has broad applicability for digital financial inclusion. This study contributes to the emerging theoretical literature on financial inclusion by presenting a digital agency perspective on how to accelerate digital financial inclusion using digital agents. |
| Keywords: | financial inclusion, digital agent, digital financial inclusion, digital technologies, incentives, digital agency theory of financial inclusion, monitoring |
| JEL: | G21 G23 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123296 |
| By: | Ozili, Peterson K |
| Abstract: | The literature has examined the relationship between financial inclusion and financial stability, but no studies have examined the relationship between financial inclusion and financial crisis. This study examines the effect of financial inclusion on financial crisis using data from 28 countries from 2006 to 2017. Three stylised facts were established based on real world observation. One, the level of financial inclusion, in terms of number of bank depositors, decreases during domestic financial crisis. Two, the level of financial inclusion, in terms of ATM penetration, does not decrease during global and domestic financial crises. Three, the level of financial inclusion, in terms of number of bank branch, decreases during global and domestic financial crises and the contraction is stronger during a domestic financial crisis. Using the panel regression, logit and probit regression estimation methods, the empirical results show that low levels of financial inclusion, measured by fewer bank depositors and fewer bank branches, increase the likelihood that a financial crisis will occur. Low levels of financial inclusion, measured by fewer bank depositors, increase the likelihood that a financial crisis will occur in low financial-inclusion countries. In contrast, greater ATM penetration increases the likelihood that a financial crisis will occur in low financial-inclusion countries. The interaction analyses show that all indices of financial inclusion have a joint positive impact on financial crisis, implying that high levels of financial inclusion increases the likelihood that a financial crisis will occur. |
| Keywords: | Financial crisis, financial inclusion, index, bank branches, ATM, bank depositors. |
| JEL: | G21 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123290 |
| By: | Ozili, Peterson K |
| Abstract: | The study examines the effect of financial inclusion on bank stability, and the effect of bank stability on financial inclusion from 2011 to 2020. The study analyses 33 countries which are divided into Asian countries, African countries, European countries, and countries in the region of the Americas and using the panel regression method. It was found that high levels of financial inclusion have a significant positive impact on bank stability. The regional results show that financial inclusion improves bank stability in African countries and in countries in the region of the Americas while financial inclusion impairs bank stability in European countries. The analysis for the impact of bank stability on financial inclusion shows that bank stability has a significant effect on financial inclusion. The regional analysis shows that greater bank stability decreases financial inclusion in European and African countries while greater bank stability increases financial inclusion in countries in the Americas region. The results suggest that the effect of financial inclusion on bank stability, and the effect of bank stability on financial inclusion, depends on how financial inclusion and bank stability are measured and the region examined. |
| Keywords: | financial inclusion, bank stability, capital adequacy ratio, capital buffer, financial inclusion index, automated teller machines, deposits, commercial banks |
| JEL: | G21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123301 |
| By: | Ozili, Peterson K |
| Abstract: | In explaining the cause of financial exclusion, dissatisfaction with the formal financial system stands out as a possible cause of financial exclusion according to the dissatisfaction theory of financial inclusion. This paper revisits the dissatisfaction theory of financial inclusion and extends the theory by providing an elaborate discussion of (i) the relationship between customer dissatisfaction and financial inclusion using a grid, (ii) the sources of customer dissatisfaction and (iii) ways to deal with customer dissatisfaction. The theory argues that previously banked adults who left the formal financial system and have become unbanked again can be brought back to the formal financial sector through persuasion if the element of dissatisfaction has been removed or resolved. The theory is significant because it explains one of the major reasons why people leave the formal financial system despite the availability of formal financial services and ease of access to financial services in the financial system. |
| Keywords: | financial services, access to finance, financial inclusion, dissatisfaction, digital financial inclusion |
| JEL: | G21 G28 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123294 |
| By: | Ozili, Peterson K |
| Abstract: | The relationship between financial inclusion and exchange rate has not received any attention in the literature. This study investigates the effect of the official exchange rate on the level of financial inclusion. A sample of 17 countries were analysed from 2012 to 2020. Four financial inclusion indicators were used in the analysis: the number of ATMs per 100, 000 adults variable, the number of bank accounts (or depositors) per 1, 000 adults variable, the number of commercial bank branches per 100, 000 adults variable, and a financial inclusion index. The correlation result shows that financial inclusion and exchange rate are negatively correlated while the regression result shows that a weakening official exchange rate or currency depreciation has a significant positive impact on financial inclusion through increase in the number of bank depositors (or bank accounts) and increase in the number of commercial bank branches. The findings support the argument that currency depreciation will lead people to take more loans which will increase bank profitability and encourage banks to expand to new locations to acquire new depositors, thereby increasing financial inclusion. The implication of the study is that currency depreciation is beneficial effect for financial inclusion. It is recommended that policymakers should determine the right level of currency depreciation (or devaluation) that is needed to support national financial inclusion efforts and they should manage the exchange rate around that level. |
| Keywords: | financial inclusion, exchange rate, bank branch, depositors, depreciation, devaluation |
| JEL: | F13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123292 |
| By: | Ozili, Peterson K |
| Abstract: | In this article, I propose the vulnerable group theory of financial inclusion. The theory begins with the premise that vulnerable people are often left behind in society, they suffer the most from economic hardship and crises, and they are at risk of being excluded from the formal financial sector. The theory therefore proposes that financial inclusion efforts should be targeted at all vulnerable people and groups in society. Bringing vulnerable people into the formal financial sector will give them access to available formal financial services, which they can use to earn income and acquire assets that they can use to take themselves out of the vulnerability bracket. The study also identifies the vulnerable groups in need of financial inclusion and proposes a vulnerability grid. Several avenues to expand the theory are suggested. |
| Keywords: | Access to finance; development; financial exclusion; theory; financial inclusion; unbanked adults; vulnerable groups. |
| JEL: | G01 Q01 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123291 |
| By: | Ozili, Peterson K |
| Abstract: | This paper investigates the general level of interest in financial inclusion information using global data. Descriptive statistics and correlation analyses were used to assess the global interest in financial inclusion information. Using Google Trends monthly data from 2004 to 2021, the results show that the term ‘financial inclusion’ was more popular on the web in year 2017 than in any other year. Secondly, the highest level of interest in the term ‘financial inclusion’ by internet users was recorded in non-crisis months particularly after the global financial crisis but before the COVID-19 pandemic while the lowest interest in the term ‘financial inclusion’ by internet users was recorded in crisis months particularly during the global financial crisis and during the COVID-19 period. Thirdly, web search for information about financial inclusion was more popular in Zimbabwe, Rwanda, Fiji, Uganda and Zambia, while news search for information about financial inclusion was more popular in Fiji, India, Malaysia, Kenya, Singapore and Nigeria. This suggests that there was more interest in the term ‘financial inclusion’ among internet users in developing countries than in developed countries. Also, there is a negative correlation between interest in financial inclusion information and the level of country development. |
| Keywords: | Google Trends, financial inclusion, web search, development, internet. |
| JEL: | G21 G23 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123298 |
| By: | Shakeel, Jovera; Munir, Shehzil; Mirza, Schaff; Abdullah, Khan |
| Abstract: | The impact of digital literacy on financial outcomes has been well-explored. However, the onset of AI necessitates a pressing need for more granular, cross-country analyses that incorporate local variations in digital infrastructure and socioeconomic conditions. Using data from three sources in 82 countries, we employ a Directed Acyclic Graph (DAG) to examine both the direct and indirect effects of digital literacy on financial well-being. Our study uses two econometrics models, Ordinary Least Squares Regression (OLS) and Structural Equation Model (SEM), along with the machine learning approach of Random Forests. Our results confirm our initial hypothesis that digital literacy has a positive impact on financial well-being through financial inclusion. Through our models, we find that the indirect link through financial inclusion dominates the direct impact of digital literacy on financial well-being, as it accounts for socioeconomic, institutional, and individual factors. |
| Keywords: | Digital literacy; Financial access; Economic outcomes; Human capital; Income distribution; Financial inclusion; Financial literacy; Economic development; Technological change; Data analysis |
| JEL: | C13 C38 C45 D31 D83 G21 G23 J24 O15 O16 O33 |
| Date: | 2024–12–26 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123374 |
| By: | Ozili, Peterson K |
| Abstract: | The study investigates the impact of financial inclusion, financial stability, bank nonperforming loans, inflation, macroeconomic management quality and the unemployment rate on economic growth in Nigeria. The data are analyzed using the ordinary least squares regression, generalized linear model regression, robust least squares regression, and the quantile regression methods. The sample period is from 2007 to 2022. The findings reveal that financial inclusion, inflation rate and macroeconomic management quality are significant determinants of economic growth in Nigeria. Bank nonperforming loans, unemployment rate, international trade and climate change have an insignificant effect on economic growth in Nigeria. Also, financial inclusion, inflation rate, financial stability, macroeconomic management quality and the unemployment rate are significant determinants of economic growth in good economic years in Nigeria. The implication of the findings is that the well-known catalysts of economic growth, such as financial inclusion and financial stability, are not positive catalysts of economic growth in Nigeria during good economic years. Therefore, it is recommended that policymakers should find the right level of financial inclusion, financial stability and unemployment that stimulate economic growth in Nigeria. |
| Keywords: | Nigeria, financial inclusion, financial stability, nonperforming loans, bank, inflation, macroeconomic management quality, unemployment rate, economic growth, international trade, climate change. |
| JEL: | E31 O4 O55 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123293 |
| By: | John Theal; Pavel Dvorak |
| Abstract: | We propose an index of digital financial participation to benchmark the level of engagement/participation of EU citizens in an increasingly digitalized financial system. Drawing on data from Eurostat, we adopt a number of variables that reflect households’ and individuals’ digital skills, digital access, digital device usage as well as other factors to first construct a series of sub-indices that measure different dimensions of digital financial participation. In a second and final step, we combine these composite sub-indices into an overall composite indicator of Digital Financial Participation for EU countries. The information contained in the weights of the sub-indicator variables, as well as the weights of the sub-indicators in the final composite indicator provide potentially useful information for policymakers to assess the potential barriers to digital financial participation and inclusion in the EU. We also construct the indicator using the multi-directional Benefit of the Doubt approach to obtain directional improvement vectors that can help to guide policymakers in fostering participation in digital financial activities and digital financial inclusion. |
| Keywords: | Composite indicator, benefit of the doubt, data envelopment analysis, financial inclusion, digital inclusion, payments, digitalization, performance benchmarking |
| JEL: | C14 C43 C44 I30 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:bcl:bclwop:bclwp191 |
| By: | Bogdan Marza; Renate-Doina Bratu; Razvan Serbu; Sebastian Emanuel Stan; Camelia Oprean-Stan |
| Abstract: | In today's world, marked by social distancing and lockdowns, the development of digital financial services is becoming increasingly important, but there is little empirical work documenting the most important factors that contribute to the process of financial and digital inclusion. Because the speed with which states adapt to digital financial services is critical, we must ask how prepared states are for this transition and how far they have progressed in terms of financial and digital inclusion. In this context, the goal of this article is, on the one hand, to propose a financial responsibility process framework capable of raising awareness of the most important harmonized key levels of financial and digital inclusion process that, when properly managed, can lead to achieving an optimal level of financial responsibility, and, on the other hand, to assess the financial and digital inclusion process of two different age groups of individuals who are active in the financial environment (15-34 and 35-59 age groups). The Analytical Hierarchy Process AHP and Fuzzy AHP approaches are proposed as a framework for assessing the mechanism of financial and digital inclusion in five East Central European countries. The findings reflect differences between the analyzed countries in terms of the key levels of financial and digital inclusion (where digital and financial education are the most important levels), with Croatia, Czech Republic, and Poland being the most integrated and Romania being the least. According to the findings, as a country or region's level of financial and digital inclusion increases, so does its level of financial responsibility. This research can be a useful tool in raising awareness about the importance of directed behavior for financial responsibility, particularly for policymakers. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2501.10001 |
| By: | Chimbutane, Feliciano (Eduardo Mondlane University); Karachiwalla, Naureen (IFPRI, International Food Policy Research Institute); Herrera-Almanza, Catalina (University of Illinois at Urbana-Champaign); Leight, Jessica (International Food Policy Research Institute); Lauchande, Carlos (Universidade Pedagogica Maputo) |
| Abstract: | Motivated by extremely low levels of basic reading skills in sub-Saharan Africa, we experimentally evaluate two interventions designed to enhance students' early-grade literacy performance in rural Mozambique: a relatively light-touch teacher training in early-grade literacy along with the provision of pedagogical materials, and reacher training and materials in conjunction with community-level reading camps. Using data from 1, 596 third graders in 160 rural public primary schools, we find no evidence that either intervention improved teachers' pedagogical knowledge or practices or student or teacher attendance following two years of implementation. There are some weak positive effects on student reading as measured by a literacy assessment, primarily observed in a shift away from scores of zero, and these effects are consistent across arms. Our findings are consistent with the growing consensus that more intensive school- and/or community-based interventions are required to meaningfully improve learning. |
| Keywords: | teacher training, primary school, literacy, randomized control trial, Mozambique |
| JEL: | I25 J24 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17611 |