Financial Literacy as a Driver of Financial Inclusion in Kenya and Tanzania

Abstract

Efforts are being exerted in many developing countries to promote financial inclusion by increasing individuals’ access to financial products and services. However, literature suggests that increasing the supply of financial products and services per se may not help in expanding financial inclusion unless concerted efforts are exerted in enhancing financial literacy. This is because financially literate individuals are more likely to appreciate the value of financial services and hence take up financial products. This paper reports the link between financial literacy and inclusion using data from a demand side financial inclusion survey conducted in Kenya and Tanzania in 2016 covering a total of 6029 individuals. Results from our instrumental variable regression analysis confirmed that financial literacy is a strong driver of financial inclusion. This implies that efforts to promote financial inclusion need to be accompanied with financial literacy campaigns in both countries.

Nigeria

“…At the same time, the focus on mobile money has led to a smaller gender gap in financial inclusion among mobile money users in Kenya-half of the gap found for the banked population, see Fanta and Mutsonziwa (2021). That study also finds that in Kenya and Tanzania financial literacy is strongly linked to an increased level of financial inclusion, corroborating that financial literacy campaigns are critical.…”

Digital finance: a developing country perspective with special focus on gender and regional disparity

“…They may also be able to make more choices about how they use their time, whether for employment, leisure, income-generating activities or education (Field et al, 2016;Bandiera et al, 2013;Akter et al, 2016), and gain more substantive autonomy over their lives in decisions ranging from employment and marriage to whether to use contraception (Holloway et al, 2017;Suri and Jack, 2016;Pitt et al, 2006;de Brauw et al, 2014). However, a sizable amount of studies show that there exists a gender gap in ownership of accounts and usage of savings and credit products (Swamy, 2014;Zins and Weill, 2016;Inoue, 2019), where the barriers identified are low financial literacy, lack of money to open account, preferences toward informal service providers over banks, bank's location, legal discrimination, lack of protection from harassment, including at the workplace, marital status, intra-household resource allocation dynamics along with the gender norms imposed by the society (Demirgu ¨c,-Kunt et al, 2013;Fanta and Mutsonziwa, 2016;Ghosh and Vinod, 2016;Del echat et al, 2018;Spencer et al, 2018;Mothobi and Grzybowski, 2017;Potnis, 2015); unfamiliarity of women with technology, their lack of education, low rates of ownership of mobile phones (Munyegera and Matsumoto, 2016), let alone low adoption of mobile money account (Scharwatt and Minischetti, 2014;Madre, 2018).…”

A bibliometric analysis of digital financial literacy

“…Financial literacy facilitates better financial decision-making (Shen et al, 2018). Young individuals are less financially literate (Fanta and Mutsonziwa, 2021). DFL will certainly become a more important component of education in the current digital era.…”