Does financial literacy inevitably lead to access to finance services? Evidence from rural Ghana

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.