Abstract
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.
Highlights
The majority of the rural population in most countries worldwide depends on agriculture as a main primary occupation
We assumed that the i th household head would improve his/her financial education behavior after analyzing the expected utility gain derived from financial literacy
Following the definition of financial inclusion elaborated by the World Bank and existing literature, we developed a measurement for access to financial services (AFS), the dependent variable
Summary
The majority of the rural population in most countries worldwide depends on agriculture as a main primary occupation. The inability of most rural dwellers to escape the vicious cycle of poverty could be attributed to the low access to financial services (AFS), colossal debt due to low-income generation, and improper financial management (GREENSPAN, 2005; KOOMSON et al, 2020; NORVILITIS et al, 2006). With these issues raised, it is worth investigating the determinants of access to financial services of Ghanaian rural dwellers to curtail their financial services’ hindrances
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