The Mediating Role of Access to Financial Services in the Effect of Financial Literacy on Household Income: The Case of Rural Ghana

Abstract

The aim of alleviating poverty has a necessary implication on rural households’ economic development. The study investigates the mediating role of access to financial services (AFS) in the effect of financial literacy (FL) on household income using survey data collected from four regions in Ghana. Using the multi-stage sampling technique, 572 respondents were randomly selected for the study. The findings of this study reveal that financial literacy has a robust, increasing effect on household income. Again, the results depict that AFS mediates the positive effect of FL on household income. An interesting moderating effect of social networks is also revealed in the study. This study adds to the existing literature on rural development by exploring how financial education and inclusions contribute to poverty alleviation and provides policy implications to improve rural households’ well-being.

Effect of financial services access on health services utilisation among rural older adults in Ghana

“…The organisational membership variable showed a statistically significant positive association with AFS, suggesting that being a member of an organisation was significantly associated with more access to financial services. This could be because during union meetings, members have the chance to meet financial experts, who may educate them on the benefits of accessing financial services and how to access them (Ankrah Twumasi et al, 2022).…”

“…In other words, internet accessibility and the use of information and communication technology, specifically in deprived areas, potentially exposes older adults to the available financial services within their localities and the processes of accessing such services. However, internet connection in most rural communities in Ghana is rather unstable and very costly (Ankrah Twumasi et al, 2022). Hence, improving internet coverage in rural locations and making it more affordable may enhance AFS and ultimately, improve health services use.…”

“…Previous studies (Ankrah Twumasi et al, 2022; Li, Gan, et al, 2020; Li, Ma, et al, 2020; Miyata et al, 2009) have addressed endogeneity problems through several econometric techniques, including regression adjustment (RA) estimator, propensity score matching (PSM), inverse probability‐weighting with regression adjustment (IPWRA) and inverse‐probability weighting (IPW). However, these methods only consider respondents' observed characteristics; hence, estimated results are prone to inconsistencies (Ma & Abdulai, 2016; Ma et al, 2020).…”

“…Thus, at least one variable included in the vector of independent variables () in Equation () must be exempted from the independent variables () in Equation (). We followed previous literature (Ankrah Twumasi et al, 2022; Koomson et al, 2020) to adopt the variable, distance (the distance from the respondent's residence to the nearest financial institution), as the study's instrumental factor. We used the Pearson correlation coefficient to consider the validity of the selected IV.…”

The Role of Financial Information Literacy in Strategic Decision-Making Effectiveness and Sustainable Performance among Agribusiness Entrepreneurs in Nigeria

“…Twumasi et al [68] empirically investigated the impact of financial literacy on household income among rural dwellers in Ghana using a sample of 572 respondents. The outcomes suggest that financial literacy has a direct significant positive effect on rural dwellers' access to financial products and services.…”