Essays on Financial Inclusion, Financial Literacy, Financial Inclusion Inequality and Poverty in Ghana

Abstract

ABSTRACT Access to financial services is crucial for economic activities and reduces poverty irrespective of gender and location. However, the analyses of financial inclusion, financial inclusion inequality and financial literacy on poverty have been neglected. This thesis examines the effects of financial inclusion, financial literacy and financial inclusion inequality on poverty in Ghana. Specifically, the study seeks to determine variations in financial inclusion between males and females, in urban and rural areas and assess whether these gaps have increased over time. Again, the study evaluates the combined and relative effects of financial inclusion and financial literacy on household poverty in Ghana. Finally, the study investigates the effect of financial inclusion inequality on poverty at the district level. The study adopts the counterfactual decomposition, Ordinary Least Square (OLS), Instrumental Variable (IV), and ordered logit estimation techniques. Financial inclusion inequality is calculated using the Generalized Entropy class of inequality measures with data from the Financial Inclusion Insight National survey (2015) and Ghana Living Standard Survey Rounds 6 and 7 (2013/14 and 2016/17). The study finds the existence of financial inclusion gaps with the gender gap reducing by 6.0 percent between 2013 and 2017 and conversely increasing by 42.0 percent between urban and rural areas over the same period. Again, the study finds that financial inclusion and financial literacy reduce multidimensional poverty by 15.4 and 0.9 percent respectively. However, the combined effect reduces multidimensional poverty by 18.9 percent. Finally, the study shows that a one percent increase in financial inclusion inequality presents a 17.9 percent likelihood for a household head to be poor. The study recommends that the Bank of Ghana should revise the capital requirement for financial institutions downwards to encourage financial institutions to operate in rural areas. Also, the Ministry of Communication and Digitalisation should review the existing national telecommunication policy to improve coverage in rural areas. Again, the Management of the District Assembly should liaise with the National Commission for Civic Education to promote financial inclusion at the district level.