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The Relative Impact of Income and Financial Literacy on Financial Inclusion in Nigeria

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Olubanjo Adetunji at Lagos Business School
Olubanjo Adetunji
Olayinka David-West at Lagos Business School
Olayinka David-West
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Abstract

This study uses survey data of over 22 000 respondents in Nigeria, to provide evidence for the impact of two key drivers of financial inclusion: financial literacy and income levels. The study shows that financial literacy significantly determines savings patterns with formal and informal financial institutions; however, income only drives the frequency of informal savings. The results also highlight the demographic groups suitable for financial literacy and other interventions aimed at improving financial access. The findings will support the market segmentation capabilities of financial services providers and also guide regulators in formulating policies that will improve and deepen financial access.
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THE RELATIVE IMPACT OF INCOME AND
FINANCIAL LITERACY ON FINANCIAL
INCLUSION IN NIGERIA
OLUBANJO MICHAEL ADETUNJI
1
*and OLAYINKA DAVID-WEST
2
1
Sustainable and Inclusive Digital Financial Services (SIDFS) Initiatives, Lagos Business School,
Pan-Atlantic University, Lagos, Nigeria
2
Management Information System Department, Lagos Business School, Pan-Atlantic University,
Lagos, Nigeria
Abstract: This study uses survey data of over 22 000 respondents in Nigeria, to provide evidence
for the impact of two key drivers of financial inclusion: financial literacy and income levels. The
study shows that financial literacy significantly determines savings patterns with formal and informal
financial institutions; however, income only drives the frequency of informal savings. The results
also highlight the demographic groups suitable for financial literacy and other interventions aimed
at improving financial access. The findings will support the market segmentation capabilities of
financial services providers and also guide regulators in formulating policies that will improve and
deepen financial access. © 2019 John Wiley & Sons, Ltd.
Keywords: income; financial literacy; financial services; financial access; financial inclusion
1 INTRODUCTION
Research into the drivers of access to financial services is becoming increasingly important
in developing countries as access to finance has been closely linked to economic growth
(Adenuga & Omotosho, 2013; Akinlo & Egbetunde, 2010; Ghirmay, 2004; Hassan,
Sanchez, & Yu, 2011; Inoue & Hamori, 2016; Murinde, 2012). Using annual data from
37 sub-Saharan African countries, Inoue and Hamori (2016) show that financial access
has a positive impact on economic growth. On the one hand, a country’s monetary
authority is better able to stabilise price as more people have access to formal financial
*Correspondence to: Olubanjo Michael Adetunji, Sustainable and Inclusive Digital Financial Services (SIDFS)
Initiatives, Lagos Business School, Pan-Atlantic University, Km 22, Lekki-Epe Expressway, Ajah, Lagos,
Nigeria.
E-mail: oadetunji@lbs.edu.ng
© 2019 John Wiley & Sons, Ltd.
Journal of International Development
J. Int. Dev. 31, 312–335 (2019)
Published online 17 February 2019 in Wiley Online Library
(wileyonlinelibrary.com) DOI: 10.1002/jid.3407
... Several studies have shown that financial literacy is one of the main determinants of financial inclusion. The results show a positive and significant relationship between financial literacy and financial inclusion (Adetunji & David-West, 2019;Ferrada & Montaña, 2022;Morgan & Long, 2020;Rastogi & E, 2018). Financial literacy helps in understanding complex financial products; people who buy them gain more knowledge and as a result increase their financial literacy level to a greater extent. ...
... Initiatives designed to enhance comprehension of financial management within the context of sharia demonstrate a substantial influence of augmented knowledge on the effectiveness and sustainability of the company. (Adetunji & David-West, 2019) Religious knowledge significantly influences the propensity to engage in transactions in accordance with sharia. Religious knowledge establishes a spiritual and ethical foundation that shapes individuals' inclinations towards sharia-compliant interactions. ...
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