Does financial literacy improve financial inclusion? Cross country evidence

While financial inclusion is typically addressed by improving the financial infrastructure, we show that a higher degree of financial literacy also has a clear beneficial effect. We study this effect at the cross-country level, which allows us to consider institutional variation. Regarding “access t...

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Bibliographic Details
Published inWorld development Vol. 111; pp. 84 - 96
Main Authors Grohmann, Antonia, Klühs, Theres, Menkhoff, Lukas
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier 01.11.2018
Elsevier Ltd
Pergamon Press Inc
Subjects
Economic impact
Finance
Financial development
Financial inclusion
Financial institutions
Financial literacy
Financial services
Infrastructure
International comparisons
Literacy
Subgroups
Financial literacy
Financial institutions
O1 (economic development)
G2 (financial institutions)
Financial inclusion
Financial development
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Summary:While financial inclusion is typically addressed by improving the financial infrastructure, we show that a higher degree of financial literacy also has a clear beneficial effect. We study this effect at the cross-country level, which allows us to consider institutional variation. Regarding “access to finance”, financial infrastructure and financial literacy are mainly substitutes. However, regarding the “use of financial services”, the effect of higher financial literacy strengthens the effect of more financial depth. The causal interpretation of these results is supported by IV-regressions. Moreover, the positive impact of financial literacy holds across income levels and several subgroups within countries.
Bibliography:ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 14
ISSN:0305-750X
1873-5991
DOI:10.1016/j.worlddev.2018.06.020