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on Financial Literacy and Education |
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Issue of 2025–08–18
nine papers chosen by Viviana Di Giovinazzo, Università degli Studi di Milano-Bicocca |
| By: | C S Mohapatra (National Council of Applied Economic Research); Depannita Ghosh (National Council of Applied Economic Research) |
| Abstract: | This paper proposes a multidimensional strategy for advancing financial inclusion in India as a cornerstone of the nation’s Viksit Bharat@2047 vision. It argues that inclusion must evolve from a metric of access to a transformative tool of economic citizenship—anchored in sustained literacy, institutional trust, equitable access, and user empowerment. India has made remarkable progress in expanding financial services. With over 54 crore Jan Dhan accounts, widespread use of the Unified Payments Interface (UPI), and targetted government schemes such as PMMY, APY, and PMSBY, formal financial access has increased across geographies and demographics. However, this infrastructural reach has not always translated into meaningful engagement. Inactive accounts, persistent gender and rural gaps, limited digital literacy, and deep-seated mistrust continue to hinder effective inclusion, especially among women, persons with disabilities, and low-income households. This paper conceptualises a shift from infrastructural inclusion to functional and resilient inclusion. It proposes four interdependent pillars as the foundation for long-term financial inclusion: (a) Sustained digital and financial literacy: financial literacy must be continuous, contextualised, and adaptive across life stages—delivered in local languages and formats tailored to diverse user needs; (b) Trustworthy institutions and transparent service delivery: building trust requires fair, culturally sensitive, and linguistically accessible services supported by strong grievance redress mechanisms and algorithmic accountability; (c) Inclusive technology design: digital tools must be accessible by default, incorporating universal design principles to serve users with disabilities, low literacy, or limited connectivity; and (d) Community-led financial ecosystems: community institutions such as SHGs, cooperatives, and panchayats must be embedded in policy design and service delivery to ensure credibility, ownership, and sustainability. The paper offers a comprehensive framework involving coordinated governance among regulators (RBI, SEBI, IRDAI, PFRDA, and IEPFA), enhanced financial literacy convergence, and rights-based legal safeguards. It advocates for embedding equity through targetted policy instruments, such as a National Disability Financial Inclusion Strategy, a Unified Inclusion Dashboard, and localised outreach models. The paper concludes by emphasising that financial inclusion for Viksit Bharat must be a sustained institutional commitment, rooted in participation, protection, provisioning, and permanence. It is not merely a vehicle for economic growth, but a democratic imperative for building a just and resilient financial future. |
| Keywords: | Financial Empowerment, Digital Financial Literacy, Vulnerable Communities, Community-based Literacy, Digitalization |
| JEL: | O16 G10 G28 D14 I38 |
| Date: | 2025–06–03 |
| URL: | https://d.repec.org/n?u=RePEc:nca:ncaerw:183 |
| By: | Ozili, Peterson K; Obiora, Kingsley I; Onuzo, Chinwendu |
| Abstract: | Large language models have gained popularity, and it is important to understand their applications in the financial inclusion domain. This study identifies the benefits and risks of using large language models (LLMs) in the financial inclusion domain. We show that LLMs can be used to (i) summarize the key themes in financial inclusion communications, (ii) gain insights from the tone of financial inclusion communications, (iii) bring discipline to financial inclusion communications, (iv) improve financial inclusion decision making, and (v) enhance context-sensitive text analysis and evaluation. However, the use of large language models in the financial inclusion domain poses risks relating to biased interpretations of LLM-generated responses, data privacy risk, misinformation and falsehood risks. We emphasize that LLMs can be used safely in the financial inclusion domain to summarise financial inclusion speeches and communication, but they should not be used in situations where finding the truth is important to make decisions that promote financial inclusion. |
| Keywords: | financial inclusion, large language models, LLM, algorithm, risk, benefit, communication, speech, artificial intelligence, digital financial inclusion |
| JEL: | G20 G21 G23 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125562 |
| By: | Ozili, Peterson K |
| Abstract: | This study examines the effect of capital outflows, induced by geopolitical shocks, on financial inclusion and digital financial inclusion in emerging markets and developing economies. Several measures of financial inclusion and digital financial inclusion were analysed for 17 emerging markets and developing economies from 1999 to 2023. The data were estimated using the median quantile regression and generalized linear model regression methods. The findings reveal that capital outflows, induced by geopolitical shocks, have a negative effect on financial inclusion and digital financial inclusion. Greater capital outflows, induced by geopolitical shock, decrease the level of financial inclusion through a contraction in the number of commercial bank branches in emerging markets and developing economies. Also, greater capital outflows, induced by geopolitical shock, decrease the level of digital financial inclusion through a decrease in the number of people using the internet to access commercial bank branch services and automated teller machine services. Political stability, GDP growth, population growth, unemployment, tax revenue and regulatory quality are significant determinants of financial inclusion and digital financial inclusion. The social implication is that geopolitical shocks and capital outflows adversely affect society by limiting access to essential financial services. The managerial implication is that financial managers will constantly need to anticipate geopolitical risk, its effect on financial services and develop safeguards to cushion its effect on financial service providers and customers. |
| Keywords: | Geopolitical risk, shocks, financial inclusion, digital financial inclusion, capital outflow, foreign direct investment, financial inclusion index, bank branch, depositors, automated teller machines, fintech |
| JEL: | G21 G23 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125567 |
| By: | Ozili, Peterson K |
| Abstract: | Forced displacement poses a challenge to development. It displaces men, women, and children from their places of residence, making them strangers in another community and country. In the host country, they often lack legal identity. As a result, they cannot access basic formal financial services because financial service providers won’t serve them without formal legal identification. This puts forcibly displaced persons in a vulnerable situation. Financial inclusion for forcibly displaced persons, if it can be achieved, can give them access to basic financial services, which they can use to build resilience and cope with the humanitarian crises that accompany forced displacement. This study identifies some strategies to increase financial inclusion for forcibly displaced persons. It also highlights some challenges that may be encountered in advancing financial inclusion for forcibly displaced persons. The insights offered in this article are useful for development policymaking. It is also useful to academics, policymakers, and practitioners involved in activities, projects, or programs that are aimed at restoring the livelihoods of vulnerable people. |
| Keywords: | Crisis, financial inclusion, forcibly displace people, resilience, vulnerable group theory of financial inclusion, vulnerable people |
| JEL: | G20 G21 G23 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125563 |
| By: | Maretha Roseline Syahnie (Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada); Muhammad Ryan Sanjaya (Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada) |
| Abstract: | MSMEs, also known as micro, small, and medium-sized enterprises, are the backbone of the economy in developing countries. Empirical studies indicate that SMEs generally face obstacles, particularly in financing. This study focuses on two main aspects: indexing financial inclusion using principal component analysis (PCA), and analyzing credit and financial inclusion using vector autoregression (VAR) for forecasting. Through a two-stage indexing methodology, the study emphasizes the importance of geographical reach in financial inclusion availability compared to demographic reach, with availability being the most crucial dimension compared to accessibility and usage. VAR models and forecasting were developed for the period from March 2012 to July 2022 in Indonesia, incorporating other variables, such as accessto credit, credit risk, and real GDP. The use of VAR demonstrates consistency, accuracy, and reliability in producing predictions that closely approximate reality, providing a critical basis for policymakers. |
| Keywords: | Micro, small, and medium enterprises (MSMEs) financing, principal component analysis (PCA), financial inclusion index, credit, vector autoregression (VAR), forecasting, Indonesia |
| JEL: | C32 E44 G21 O16 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:gme:wpaper:202407007 |
| By: | Rodríguez-Pose, Andrés; Sandu, Alexandra |
| Abstract: | In this paper we investigate what determines access to banking in Central and Eastern Europe (CEE). The research uses different waves of the OeNB Euro Survey – covering over 91, 000 individuals during the period 2012–2020 – and pooled and multilevel logit models to analyse how the interplay of trust in institutions, socio-economic attributes and geographic contexts shapes access to bank accounts, savings deposits and loans across 10 CEE countries. The findings reveal significant disparities in banking inclusion across products: while institutional trust enhances access to current accounts and savings deposits, its impact on loans is weaker. Socio-economic factors and geographical contexts, particularly at the local NUTS3 level, also matter enormously for financial inclusion. National and local economic conditions are key in shaping variations in financial inclusion/exclusion across CEE. |
| Keywords: | banking access; institutional trust; financial inclusion; Central and Eastern Europe; multilevel analysis |
| JEL: | G21 O16 R11 |
| Date: | 2025–07–28 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128413 |
| By: | Fiona Paine; Antoinette Schoar; David Thesmar |
| Abstract: | This paper tests how people’s moral values influence their views of debt contracts. We ask participants to make decisions about debt contracts in different hypothetical situations (vignettes). We separately measure their moral values using the Moral Foundations Questionnaire (Graham et al., 2009). We have three main sets of findings. First, differences in moral values strongly explain the cross-section of participants’ debt decisions. Participants with more conservative values show more support for credit score-based loan pricing, stricter forms of collateral, and tougher bankruptcy resolution. Second, when we randomly change the economic costs and benefits of debt within our vignettes, we find that participants change their answers in the direction predicted by economic theory. Third, participants’ beliefs of the functioning of the credit market strongly correlate with their moral values. Participants with conservative values are more likely to believe that strict enforcement and risk-based loan pricing provide incentives and are economically efficient. More liberal participants believe that insurance against unlucky shocks are important. Consistent with moral values being distinct from Bayesian beliefs, financial literacy does not attenuate moral values in shaping beliefs about what is economically efficient. |
| JEL: | G4 G50 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34092 |
| By: | C S Mohapatra (National Council of Applied Economic Research); Manu Prathap (National Council of Applied Economic Research); Depannita Ghosh (National Council of Applied Economic Research) |
| Abstract: | Unclaimed property (UP), including dormant financial and tangible assets, remains an overlooked area in global financial systems due to weak enforcement, fragmented regulations, and low public awareness. However, its growing volume and economic implications have prompted many countries to reform legal frameworks to enhance transparency and recovery. This cross-country study investigates the administrative and legal structures governing UP across selected systemically important jurisdictions, including India, the US, Canada, the UK, Australia, and emerging economies. The research examines dormancy periods, statutory provisions, post-dormancy procedures, and claim settlement processes, revealing a stark contrast between centralised, digital frameworks in developed economies and fragmented, often manual systems in developing ones. Unclaimed assets represent significant idle capital, which if reintegrated, could boost economic productivity and individual financial well-being. The study highlights the urgent need for harmonised legal standards, proactive due diligence, digital claim infrastructure, and targeted awareness campaigns. These steps are essential not only for efficient asset recovery but also for reducing financial opacity, improving institutional accountability, and fostering inclusive economic growth. |
| Keywords: | Dormancy Period, Escheatment, Financial Regulation, Claim Settlement, Digital Infrastructure, Institutional Framework, Financial Inclusion, Asset Recovery, Public Finance. |
| JEL: | G18 G21 K23 H55 O57 H26 |
| Date: | 2025–07–03 |
| URL: | https://d.repec.org/n?u=RePEc:nca:ncaerw:184 |
| By: | Ozili, Peterson K |
| Abstract: | This article presents a literature review of the post-2020 bank non-performing loans (NPLs) research around the world and suggests directions for future research. Using the thematic and bibliometric literature review methodologies, we find that significant NPL research has emerged from the European, Asian, and African regions while fewer research has emerged from the Asia-Pacific, North America, Latin America and Caribbean regions as well as from SAARC and OECD countries. The new NPL determinants in the recent literature are corporate governance, fintech, financial inclusion, country risks, regulatory quality, political risks, shadow banking activity, the COVID-19 pandemic, public/external debt, country risks, real house prices, and the independence of the central bank. The common regional NPL determinants are corruption, GDP, debt, loan growth, inflation, capital adequacy ratio, lending rate, competition, the regulatory environment, and GDP growth. The common theories used in the recent literature to explain the behavior of NPL are agency theory, stakeholder theory, information asymmetry theory, and moral hazard theory while the common empirical methodologies used are the panel regression and system GMM regression methods. The implication is that financial regulators, bank supervisors and banking scholars should pay attention to the new emerging determinants of NPL. They should also understand the effect of NPL on financial/banking stability so that safeguards can be put in place to minimise the adverse effect of non-performing loans. More research is needed to provide insights into this area. |
| Keywords: | Banks, NPL, non-performing loans, research, determinants, literature review, world |
| JEL: | G21 G28 G29 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125217 |