Financial literacy and savings decisions by adult financial consumers in Zimbabwe

Abstract

We use survey data from a sample of 4000 adult financial consumers in Zimbabwe to analyse the determinants of financial literacy and its effect on individual's savings decisions. Results show that women have lower financial literacy than men. Furthermore, individuals' residing in rural areas exhibit lower financial literacy compared with urban financial consumers. Financial literacy and financial services interventions targeting women and rural individuals should be strengthened. Econometric results show that financial literacy positively influences savings behaviour for both rural and urban individuals. Furthermore, financial literacy positively influences informal and formal savings. Policy interventions that foster financial literacy are needed to improve individuals saving behaviours.

Factors shaping the financial capability of low‐income consumers from rural regions of Poland

“…Even though our study is not free of limitations, it still captures a specific mix of financial literacy and financial behaviour of low‐income consumers from rural regions of Poland. Furthermore, consistent with the results reported by Baumann and Hall (), Alsemgeest (), and Murendo and Mutsonziwa (), our results showed that the incorporation of the financial inclusion variable in the financial capability index helped us to capture the specific mix of financial literacy and behaviour of low‐income consumers from rural regions of Poland. Future research needs to further examine the financial and poverty characteristics and how these factors affect the financial capability index variables of low‐income consumers from rural regions.…”

“…Second, correlation and OLS regression analyses showed that financial inclusion is an integral and one of the most important variables next to desirable financial behaviour in Xiao’s financial capability index, supporting H2 (Atkinson et al, ; Murendo & Mutsonziwa, ; Nicolini et al, ). Thus, our results confirmed a previous study by Kempson et al (, p. 8) who stated that “external factors that can affect how the internal capacity manifests itself into actual behaviours include financial resources, social norms and obligations, financial infrastructure, and existing financial consumer protection mechanisms”.…”

“…The values of the Cronbach’s alpha coefficient were used to examine the reliability of the latent variables. It ranges between 0.76 and 0.78; the total of scale reliability was 0.78, indicating a satisfactory level of internal consistency among the items (Murendo & Mutsonziwa, ; Rószkiewicz, ; Sevim et al, ).…”

“…Second, by including in the financial capability index only those variables that were derived from a factor analysis and were not selected in an arbitrary manner (Moulton, Loibl, Samak, & Collins, ; Rószkiewicz, ; Shim, Serido, Bosch, & Tang, ; Taylor, ; Xiao, Chen, & Sun, ; Xiao & O’Neill, ). Third, by extending the financial capability index proposed by Xiao, Chen et al () and Xiao and O’Neill () to also include the financial inclusion variable, which has a highly important role in the personal finance management of low‐income consumers (Hira, ; Holzmann, Mulaj, & Perotti, ; Murendo & Mutsonziwa, ; Nicolini, Cude, & Chatterjee, ; Sherraden, ; Sherraden & Grinstein‐Weiss, ).…”

“…In this view, financial knowledge and skills have only an instrumental value, whereas the desirable financial behaviour is a consequence of the interaction between internal and external determinants of capability (Kempson et al, ). Thus, if financial inclusion is in fact a highly important contributor to financial capability, then it should also be a part of Xiao’s composite measure (Grinstein‐Weiss, Guo, Reinertson, & Russel, ; Murendo & Mutsonziwa, ).

H2: The incorporation of the financial inclusion variable in Xiao’s financial capability index has a positive impact on the explanation of the specific combination of financial literacy and financial behaviour of low‐income consumers from rural regions of Poland .

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