Does financial literacy inevitably lead to access to finance services? Evidence from rural Ghana

Abstract

This study examined the determinants of financial literacy (FL) and its impact on access to financial services (AFS), using data collected from rural Ghana. A two-stage residual inclusion model is utilized to address the selection bias issue. The results showed that FL is affected by household heads’ age, gender, education, asset ownership, homeownership, and economics education. The results revealed that FL is significant and positively related to AFS, but its square shows an inverse relation with saving mobilization. This indicated a non-linear relationship between FL and AFS. Moreover, we find that FL has a larger AFS impact for households with high-income and male household heads relative to their counterparts. The study recommended that the government can initiate the creation of a rural committee to educate rural residents on financial issues through radio broadcasting and meetings. Our findings highlighted the importance of FL on AFS in enhancing the welfare of rural households.

Gender and financial literacy in Ghana

“…Even so, widows (who lost their husbands) or single women know little about concepts relevant for day-to-day financial decisions (Bucher-Koenen et al, 2017). Previous studies on financial literacy in Ghana have focused on access to finance (Twumasi et al, 2021), retirement planning (Sarpong-Kumankoma, 2021), gender differences after retirement (Adam et al, 2018) and investment decision-making (Ayaa and Peprah, 2021). Sarpong-Kumankoma (2021) reports that only about 27% of adults in formal employment in Ghana are able to correctly answer three simple questions on inflation, interest compounding and risk diversification.…”

“…, 2017). Previous studies on financial literacy in Ghana have focused on access to finance (Twumasi et al. , 2021), retirement planning (Sarpong-Kumankoma, 2021), gender differences after retirement (Adam et al.…”

The effect of information technology (IT) on household income among farmers in Ghana: How does access to financial services serve as a mediator

“…Access to IT is a determinant for AFS; thus, it is considered a channel to promote household access to financial services (AFS). Studies (e.g., Andoh et al, 2015;Ankrah Twumasi et al, 2022;Thomas and Spataro, 2018) have shown that many individuals are reframing from formal financial services because of poor financial knowledge and skills. However, the information needed to enhance financial education is now available on the radio, television programs, and the Internet.…”

“…First, access to IT is considered a channel for information acquisition, including financial skills and knowledge information, enabling individuals to overcome some barriers that prohibit them from using financial services and products. People's ability to participate in the financial market improves when they have access to knowledge about financial services (Ankrah Twumasi et al, 2022). Following the above discussion, the relevant question underlying the theoretical un-derpinning is how can IT vis-à-vis access to financial services improve farmers' income?…”

“…Second, people are mostly convinced to partake in financial services when they have friends and relatives operating in the financial market. It is believed that precautional measures are important for individuals when patronizing the financial market to prevent wrong financial decision (Ankrah Twumasi et al, 2022;Bucher-Koenen et al, 2017). On the other hand, people gain confidence to participate in the financial market if they know a professional or have a connection to someone in the financial market.…”