The effect of financial literacy on financial inclusion: evidence from Uganda

Abstract

While a significant portion of the global population remains financially excluded, most empirical studies and policy interventions for increasing financial inclusion appear to focus predominantly on supply-side determinants to financial inclusion as opposed to a combination of supply and demand factors. This undermines efforts to include certain segments of the global population. Recent efforts to assess the effectiveness of demand-side factors like financial literacy appear to apply only prescriptively without tangible empirical evidence to support its efficacy - presumably due to a lack of reliable data sources at the one end, and/or due to the subjective nature of the concept itself. This presents a gap in the literature pertaining to the role financial literacy plays towards promoting formal financial inclusion globally. The study contributes to the existing body of knowledge by investigating whether financial literacy affects financial inclusion using the FinScope (2018) dataset of Uganda as a unit of analysis. It applies Principal Component Analysis (PCA) and theoretical underpinnings from literature, to construct a composite financial literacy index which is then regressed against a measure of financial inclusion in Uganda. Outputs from the logistic and probit regressions confirm unequivocally that; (1) financial literacy significantly and positively affects financial inclusion in Uganda even in the presence of other variables like age, gender, income and education, (2) individuals who make financial ends meet, plan for their financial future, seek financial advice before choosing financial products and/or are receptive towards the evolution of technology, are ‘ceteris paribus’, more likely to be financially included than not, (3) technological advancement and the use of mobile money enhance financial inclusion in Uganda and (4) mobile money use appears to enhance the financial literacy of individuals. Income, education and age vary positively with financial inclusion while adult males are more likely to be financially included than females. These findings provide policy implications for stimulating financial inclusion in Uganda particularly in the aspects of promoting financial education and financial product awareness for women, leveraging technology and the use of mobile money services.

Hoewel ʼn beduidende gedeelte van die wêreldbevolking finansieel uitgesluit bly, blyk die meeste empiriese studies en beleidsintervensies vir verhoogde finansiële insluiting hoofsaaklik te fokus op aanbodkant-bepalers van finansiële insluiting – in teenstelling met ʼn kombinasie van aanbod- en vraagfaktore. Dit ondermyn pogings om sekere segmente van die wêreldbevolking in te sluit. Dit wil voorkom of onlangse pogings om die doeltreffendheid van aanbodkant-faktore soos finansiële geletterdheid te assesseer, slegs voorskriftelik geld, sonder tasbare empiriese bewyse ter ondersteuning van die doeltreffendheid daarvan – vermoedelik vanweë ʼn gebrek aan betroubare databronne en/of die subjektiewe aard van die konsep self. Daar is dus ʼn leemte in die literatuur met betrekking tot die rol wat finansiële geletterdheid speel in die bevordering van formele finansiële insluiting wêreldwyd. Die studie dra tot die bestaande kenniskorpus by deur te ondersoek of finansiële geletterdheid finansiële insluiting affekteer. Die FinScope (2018) datastel van Uganda word as ʼn ontledingseenheid gebruik. Daarvolgens word Principal Component Analysis (PCA) en teoretiese ondersteuning uit die literatuur toegepas om ʼn saamgestelde finansiëlegeletterdheid-indeks te ontwikkel, waarvolgens regressie dan teen ʼn maatstaf van finansiële insluiting in Uganda plaasvind. Uitsette van die logistieke en probit-regressies bevestig onomwonde dat; (1) finansiële geletterdheid ʼn beduidende en positiewe uitwerking op finansiële insluiting in Uganda het, ten spyte van ander veranderlikes soos ouderdom, geslag, inkomste en opvoeding, (2) individue wat finansieel uitkom met wat hulle het, vir hul finansiële toekoms beplan, finansiële advies vra voordat hulle finansiële produkte kies en/of ontvanklik teenoor tegnologiese omwenteling is, ‘ceteris paribus’, ʼn groter kans het om finansieel ingesluit te word al dan nie, (3) tegnologiese vooruitgang en die gebruik van mobiele geld finansiële insluiting in Uganda bevorder (4) die gebruik van mobiele geld klaarblyklik individue se finansiële geletterdheid verbeter. Inkomste, opvoeding en ouderdom wissel op positiewe wyse met finansiële insluiting, terwyl volwasse mans eerder finansieel ingesluit sal word as vrouens. Hierdie bevindinge impliseer beleidsimplikasies vir die stimulering van finansiële insluiting in Uganda, veral met betrekking tot die bevordering van finansiële opvoeding en finansiële produkbewustheid onder vroue, hefboomfinansieringstegnologie en die gebruik van mobielegelddienste.

Njengoba ingxenye enkulu yenani labantu emhlabeni ikhishwe inyumbazane ngasemkhakhei wezimali, izinhlelo eziningi zocwaningo oluphathekayo kanye nemizamo yemigomo ehlose ukufaka iningi labantu kwezezimali ibonakala igxile kakhulu kwizimpawu ezingasohlangothini oluthumelayo zokufakwa kweningi ngasezimalini, okuyinto esuke iphambane nenhlanganisela yemithelela yezinga lokufunekayo kanye nezinga lokutholakalayo. Lokhu akuyishayi indiva imizamo yokufaka izingxenye ezithile zenana labantu bonke bomhlaba. Imizamo yakamuva nje yokuhlola ukusebenza kahle kwemithelela engasohlangothini lokufunekayo okunjengokufundiswa ngezimali kubonakala kusebenza kuphela ngendlela enqunyiwe, ngaphandle kobufakazi obuphathekayo obuxhasa ukuzikhandla – kungumqondo wenxa wokwentuleka kwemithombo yedatha eyethembekayo Kanye/noma ubunjalo begama ngokwalo. Lokhu kuveza isikhala kumbhalo wobuciko mayelana nendima edlalwa wukufundiswa ngezimali ekuthuthukisweni kwezinga lokufakwa kwabantu emkhakheni wezimali emhlabeni wonke. Ucwaningo lufake igalelo kwiphiko elikhona lolwazi ngokuphenya ukuthi mhlawumbe ukufundiswa ngezimali kuthinta ukufakwa ngakwezezimali. Uhlelo lwesethi yedatha yakwa-FinScope (2018) yase Uganda isetshenziswe njengeyunithi yohlaziyo. Lokhu kusebenza ohlelweni lwe-Principal Component Analysis (PCA) nasohlelweni lwezincazelo zomqondo wombhalo wobuciko, ukwakha uhlelo olukhulu lwenkomba yokufundiswa ngezimali, ephinda iphindiselwe emuva mayelana nomzamo wokufakwa ngasezimalini ezweni lase-Uganda. Imiphumela yegalelo evela ku-logistic naku probit regressions kuqinisekisa ngaphandle kokuzaza ukuthi; (1) ukufundiswa ngezimali futhi kunomthelela omuhle kuhlelo lwezokufakwa kwezezimali e-Uganda, ngisho nanoma kukhona ezinye izinto ezinjengeminyaka, ubulili, imali engenayo kanye nezinga lemfundo, (2) abantu abanemizamo yokwenza imali, bahlelela ikusasa labo lezimali, bafuna iseluleko sezimali ngaphambi kokukhetha imikhiqizo yemali Kanye/noma basesimeni sokwamukela inguquko yobuchwepheshe bethekinoloji phecelezi bakwi ‘ceteris paribus’, basethubeni eliphezulu lokufakwa kwezezimali, kunokuthi bangafakwa nakancane, (3) Intuthuko yethekinoloji Kanye nokusetshenziswa kwemali ethunyelwa ngobuchwephesha bethekinoloji kuqinisa uhlelo lokufakwa kwezezimali e-Uganda (4) ukusetshenziswa kwemali ethunyelwa nge-inthanethi kubonakala kuqinisa uhlelo lwezokufundisa kwabantu ngezimali. iholo, imfundo kanye neminyaka kwehluka kahle kakhulu mayelana nohlelo lokufakwa kwezezimali, kanti abantu abadala besilisa banethuba eliphezulu lokufakwa kwezezimali ukwedlula abantu besimame. Lolu lwazi olutholakele luchaza inhloso yomgomo yokuvuselela uhlelo lokufakwa ngakwezezimali e-Uganda, ikakhulu mayelana nokwexwayiswa Kanye nothuthukiswa kohlelo lokufundiswa ngezimali phakathi kwabesifazane, ukuphakanyiswa kobuchwepheshe Kanye nokusetshenziswa kwezinsiza zemali ethunyelwa ngobuchwepheshe be-inthanethi.