Impact of Financial Literacy, Cognitive Abilities and Demographics Characteristics on Financial Inclusion
DOI:
https://doi.org/10.56976/rjsi.v5i2.95Abstract
This study aims to assess the relationship between cognitive ability, financial literacy, and financial inclusion of women in Gwadar. A cross-sectional research design was employed, with quantitative data collected through questionnaires. A total of 306 samples were analyzed using partial least squares structural equation modeling (PLS-SEM). The findings reveal that cognitive ability and financial literacy significantly impact women's level of financial inclusion. Moreover, both cognitive ability and financial literacy directly influence financial inclusion, considering control variables and demographics. This study highlights the importance of enhancing cognitive ability and financial literacy among women for supporting financial inclusion. Policymakers, financial institution managers, and advocates of financial inclusion can benefit from understanding these relationships. To promote financial literacy effectively, advocates should assess the cognitive abilities of communities and incorporate them into the development of interventions. This research contributes to the literature on financial inclusion by examining the relationship between cognitive ability, financial literacy, and financial inclusion among rural women in Gwadar, offering valuable insights in the context of a developing country.
References
Abid, M., & Ashfaq, A. (2015). CPEC: Challenges and opportunities for Pakistan. Journal of Pakistan Vision, 16(2), 142-169.
Adegbite, O. O., & Machethe, C. L. (2020). Bridging the financial inclusion gender gap in smallholder agriculture in Nigeria: An untapped potential for sustainable development. World Development, 127, 104755. https://doi.org/https://doi.org/10.1016/j.worlddev.2019.104755
Agarwal, S., & Mazumder, B. (2013). Cognitive abilities and household financial decision making. American Economic Journal: Applied Economics, 5(1), 193-207.
Ali, M., Hashmi, S. H., Nazir, M. R., Bilal, A., & Nazir, M. I. (2021). Does financial inclusion enhance economic growth? Empirical evidence from the IsDB member countries. International Journal of Finance & Economics, 26(4), 5235-5258. https://doi.org/https://doi.org/10.1002/ijfe.2063
Allgood, S., & Walstad, W. B. (2016). The effects of perceived and actual financial literacy on financial behaviors. Economic inquiry, 54(1), 675-697.
Arner, D. W., Buckley, R. P., Zetzsche, D. A., & Veidt, R. (2020). Sustainability, FinTech and financial inclusion. European Business Organization Law Review, 21(1), 7-35.
Atkinson, A., & Messy, F. A. (2012). Measuring financial literacy: Results of the OECD/International Network on Financial Education (INFE) pilot study.
Azeez, N. A., & Akhtar, S. J. (2021). Digital Financial Literacy and Its Determinants: An Empirical Evidences from Rural India. South Asian Journal of Social Studies and Economics, 8-22.
Banks, J., & Oldfield, Z. (2007). Understanding pensions: Cognitive function, numerical ability and retirement saving. Fiscal studies, 28(2), 143-170.
Basu, J. P. (2006). Microfinance and women empowerment: An empirical study with special reference to West Bengal. Mumbai, India: Indira Gandhi Institute of Development Research. 54(1), 675-697
Beck, T., Demirgüç-Kunt, A., & Levine, R. (2007). Finance, inequality and the poor. Journal of economic growth, 12(1), 27-49.
Beck, T., Demirgüç-Kunt, A., & Levine, R. (2009). Financial institutions and markets across countries and over time-data and analysis. World Bank policy research working paper(4943).
Becker, J.-M., Ringle, C. M., Sarstedt, M., & Völckner, F. (2015). How collinearity affects mixture regression results. Marketing Letters, 26(4), 643-659.
Bhanot, D., Bapat, V., & Bera, S. (2012). Studying financial inclusion in north‐east India. International Journal of Bank Marketing. 46(7), 615-637.
Bhatti, A., & Rehman, S. U. (2019). Impact of Social risk, Government and Psychological Factors with Moderator Cultural Factors on Online Shopping Behavior in Pakistan. Pakistan Journal of Humanities and Social Sciences, 7(1), 31-44. https://doi.org/10.52131/pjhss.2019.0701.0070
Bongomin, G. O. C., Munene, J. C., Ntayi, J. M., & Malinga, C. A. (2017). Financial literacy in emerging economies: Do all components matter for financial inclusion of poor households in rural Uganda? Managerial Finance. 6(2), 61-79.
Bongomin, G. O. C., Munene, J. C., Ntayi, J. M., & Malinga, C. A. (2018). Nexus between financial literacy and financial inclusion: Examining the moderating role of cognition from a developing country perspective. International Journal of Bank Marketing. 4(2), 15-29.
Bongomin, G. O. C., & Ntayi, J. M. (2020). Mobile money adoption and usage and financial inclusion: mediating effect of digital consumer protection. Digital Policy, Regulation and Governance. 5(2), 37-42.
Braunstein, S., & Welch, C. (2002). Financial literacy: An overview of practice, research, and policy. Fed. Res. Bull., 88, 445.
Chin, W. W. (2010). How to write up and report PLS analyses. In Handbook of partial least squares (pp. 655-690). Springer.
Cohen, J. (2013). Statistical power analysis for the behavioral sciences. Academic press.
Cole, S. A., & Shastry, G. K. (2009). Smart money: The effect of education, cognitive ability, and financial literacy on financial market participation. Harvard Business School Boston, MA.
Deb, M. (2018). Store attributes, relationship investment, culture, religiosity and relationship quality. International Journal of Retail & Distribution Management, 46(7), 615-637. https://doi.org/10.1108/IJRDM-10-2017-0225
Demir, A., Pesqué-Cela, V., Altunbas, Y., & Murinde, V. (2022). Fintech, financial inclusion and income inequality: a quantile regression approach. The European Journal of Finance, 28(1), 86-107. https://doi.org/10.1080/1351847X.2020.1772335
Demirgüç-Kunt, A., & Klapper, L. (2012). Financial inclusion in Africa: an overview.
Drexler, A., Fischer, G., & Schoar, A. (2014). Keeping it simple: Financial literacy and rules of thumb. American Economic Journal: Applied Economics, 6(2), 1-31.
Engels, C., Kumar, K., & Philip, D. (2020). Financial literacy and fraud detection. The European Journal of Finance, 26(4-5), 420-442.
Erdfelder, E., Faul, F., & Buchner, A. (1996). GPOWER: A general power analysis program. Behavior Research Methods, Instruments, & Computers, 28(1), 1-11. https://doi.org/10.3758/BF03203630
Filipiak, U., & Walle, Y. M. (2015). The financial literacy gender gap: A question of nature or nurture? (No. 176). Discussion Papers.
Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of marketing research, 18(1), 39-50.
García, R., & Tessada, J. (2013). The E ect of Education on Financial Market Participation: Evidence from Chile.
Gentina, E., Shrum, L. J., Lowrey, T. M., Vitell, S. J., & Rose, G. M. (2018). An Integrative Model of the Influence of Parental and Peer Support on Consumer Ethical Beliefs: The Mediating Role of Self-Esteem, Power, and Materialism. Journal of Business Ethics, 150(4), 1173-1186. https://doi.org/10.1007/s10551-016-3137-3
Ghazal, S. (2014). Component numeracy skills and decision making.
Gold, A. H., Malhotra, A., & Segars, A. H. (2001). Knowledge management: An organizational capabilities perspective. Journal of management information systems, 18(1), 185-214.
Hair, Howard, M. C., & Nitzl, C. (2020). Assessing measurement model quality in PLS-SEM using confirmatory composite analysis. Journal of Business Research, 109, 101-110.
Hair, Sarstedt, M., Ringle, C. M., & Gudergan, S. P. (2017). Advanced issues in partial least squares structural equation modeling. Sage publications.
Hair, J. F., Ringle, C. M., & Sarstedt, M. (2011). PLS-SEM: Indeed a silver bullet. Journal of Marketing theory and Practice, 19(2), 139-152.
Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review. 20(1), 85-99.
Han, R., & Melecky, M. (2013). Financial inclusion for financial stability: Access to bank deposits and the growth of deposits in the global financial crisis. World Bank policy research working paper(6577).
Hastings, J. S., Madrian, B. C., & Skimmyhorn, W. L. (2013). Financial Literacy, Financial Education, and Economic Outcomes. Annu. Rev. Econ, 5, 347-373.
Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the academy of marketing science, 43(1), 115-135.
Horn, J. L., & McArdle, J. J. (2007). Understanding human intelligence since Spearman. Factor analysis at, 100, 205-247.
Hussain, J., Mahmood, S., & Scott, J. (2019). Gender, microcredit and poverty alleviation in a developing country: The case of women entrepreneurs in Pakistan. Journal of international development, 31(3), 247-270.
Huston, S. J. (2010). Measuring financial literacy. Journal of consumer affairs, 44(2), 296-316.
Iftikhar, M. N., Xie, L., Shakeel, K., Jamali, S., Khan, M., Cheema, K. H., & Shahid, M. (2019). The institutional and urban design of Gwadar City. International Growth Centre IGC, 138. 18(1), 185-214.
Jacob, K., Hudson, S., & Bush, M. (2000). Tools for Survival: An Analysis of Financial Literacy Programs. Chicago: Woodstock Institute.
Jamison, J. C., Karlan, D., & Zinman, J. (2014). Financial education and access to savings accounts: Complements or substitutes? Evidence from Ugandan youth clubs (No. w20135). National Bureau of Economic Research.
Kadoya, Y., & Khan, M. S. R. (2020). What determines financial literacy in Japan? Journal of Pension Economics & Finance, 19(3), 353-371.
Kalim, D. (2020). Gwadar port: serving strategic interests of Pakistan. South Asian Studies, 31(1), 22-37.
KANDARI, P., BAHUGUNA, U., & SALGOTRA, A. K. (2021). Socio-Economic and Demographic Determinants of Financial Inclusion in Underdeveloped Regions: A Case Study in India. The Journal of Asian Finance, Economics and Business, 8(3), 1045-1052.
Kazemikhasragh, A., & Buoni Pineda, M. V. (2022). Financial inclusion and education: An empirical study of financial inclusion in the face of the pandemic emergency due to Covid‐19 in Latin America and the Caribbean. Review of Development Economics. 5, 347-373.
Kim, D.-W., Yu, J.-S., & Hassan, M. K. (2020). The influence of religion and social inequality on financial inclusion. The Singapore Economic Review, 65(01), 193-216.
Kline, R. B. (2011). Convergence of structural equation modeling and multilevel modeling.
Kline, T. (2005). Psychological testing: A practical approach to design and evaluation. Sage.
Kofman, P., & Payne, C. (2021). Digital Financial Inclusion of Women: An Ethical Appraisal. In L. San-Jose, J. L. Retolaza, & L. van Liedekerke (Eds.), Handbook on Ethics in Finance (pp. 133-157). Springer International Publishing. https://doi.org/10.1007/978-3-030-29371-0_34
Le, T.-H., Chuc, A. T., & Taghizadeh-Hesary, F. (2019). Financial inclusion and its impact on financial efficiency and sustainability: Empirical evidence from Asia. Borsa Istanbul Review, 19(4), 310-322. https://doi.org/https://doi.org/10.1016/j.bir.2019.07.002
Li, A., Gao, L., Chen, S., Zhao, J., Ujiyad, S., Huang, J., . . . Bryan, B. A. (2021). Financial inclusion may limit sustainable development under economic globalization and climate change. Environmental Research Letters, 16(5), 054049.
Literacy, F., & Protection, C. (2009). Overlooked Aspects of the Crisis. OCDE, June.
Lusardi, A. (2015). Financial literacy skills for the 21st century: Evidence from PISA. Journal of consumer affairs, 49(3), 639-659.
Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of economic literature, 52(1), 5-44.
Lusardi, A., Mitchell, O. S., & Curto, V. (2010). Financial literacy among the young. Journal of consumer affairs, 44(2), 358-380.
Madanaguli, A. T., Kaur, P., Bresciani, S., & Dhir, A. (2021). Entrepreneurship in rural hospitality and tourism. A systematic literature review of past achievements and future promises. International Journal of Contemporary Hospitality Management. 65(01), 193-216.
Mandell, L. (2008). Financial literacy of high school students. Handbook of consumer finance research, 163-183.Mason, C., & Wilson, R. (2000). Conceptualising fi-financial literacy. Occasional paper, 7.
Molina-García, A., Diéguez-Soto, J., Galache-Laza, M. T., & Campos-Valenzuela, M. (2022). Financial literacy in SMEs: a bibliometric analysis and a systematic literature review of an emerging research field. Review of Managerial Science, 1-40.
Mudzingiri, C., Muteba Mwamba, J. W., & Keyser, J. N. (2018). Financial behavior, confidence, risk preferences and financial literacy of university students. Cogent Economics & Finance, 6(1), 1512366.
Munoz-Murillo, M., Alvarez-Franco, P. B., & Restrepo-Tobon, D. A. (2020). The role of cognitive abilities on financial literacy: New experimental evidence. Journal of Behavioral and Experimental Economics, 84, 101482.
Nanda, S., & Jena, S. K. (2020). Success Of Financial Inclusion–A Myth Or A Reality? Technology, 11(12), 1680-1691.
Nandru, P., Byram, A., & Rentala, S. (2016). Determinants of financial inclusion: Evidence from account ownership and use of banking services. International Journal of Entrepreneurship and Development Studies, 4(2), 141-155.
Nazir, H. (2021). Impact Assessment of Gwadar Port on China-Pakistan Economic Corridor: A Case Study. Journal of Art, Architecture and Built Environment, 4(1), 69-95.
Niazi, M. K. S., & Malik, Q. A. (2020). Socio-Demographics, Risk Propensity, and Investment Diversity Moderating Role of Financial Literacy. ITJEMAST 11 (1) 2020, 3.
Nwagwu, D. I. (2020). Driving sustainable banking in Nigeria through responsible management education: The case of Lagos Business School. The International Journal of Management Education, 18(1), 100332. https://doi.org/https://doi.org/10.1016/j.ijme.2019.100332
Okello Candiya Bongomin, G., Munene, J. C., Mpeera Ntayi, J., & Akol Malinga, C. (2018). Nexus between financial literacy and financial inclusion: Examining the moderating role of cognition from a developing country perspective.
Okello, G. C. B., Ntayi, J.M. and Munene, J.C. . (2016). Institutional frames for financial inclusion of poor households in Sub-Saharan Africa. International Journal of Social Economics, 43 (11), 1096-1114. https://doi.org/dx.doi.org/10.1108/IJSE-06-2014-0110
Olson, P. D., Zuiker, V. S., Danes, S. M., Stafford, K., Heck, R. K., & Duncan, K. A. (2003). The impact of the family and the business on family business sustainability. Journal of business venturing, 18(5), 639-666.
Ozili, P. K. (2021). Financial inclusion research around the world: A review. Forum for Social Economics, 50(4), 457-479. https://doi.org/10.1080/07360932.2020.1715238
Pícha, K., & Navrátil, J. (2019). The factors of Lifestyle of Health and Sustainability influencing pro-environmental buying behaviour. Journal of Cleaner Production, 234, 233-241. https://doi.org/https://doi.org/10.1016/j.jclepro.2019.06.072
Pinto, P., Hawaldar, I. T., & Pinto, S. (2020). Impulse buying behavior among female shoppers: Exploring the effects of selected store environment elements. https://doi.org/10.21511/im.16(2).2020.05
Podsakoff, P. M., MacKenzie, S. B., Lee, J.-Y., & Podsakoff, N. P. (2003). Common method biases in behavioral research: a critical review of the literature and recommended remedies. Journal of applied psychology, 88(5), 879-895.
Popkova, E. G., & Parakhina, V. N. (2019). Managing the global financial system on the basis of artificial intelligence: possibilities and limitations. In The Future of the Global Financial System: Downfall or Harmony 6 (pp. 939-946). Springer International Publishing.
Powell, M., & Ansic, D. (1997). Gender differences in risk behaviour in financial decision-making: An experimental analysis. Journal of economic psychology, 18(6), 605-628.
Putri, G., Rahadi, R. A., & Tiara, A. R. (2020). A conceptual study on the impact of parental influence in improving financial literacy of university students. Asia Pacific Journal of Social Science Research, 5(1), 12-20.
Ramakrishnan, D. R. (2012, June). Financial literacy and financial inclusion. In 13th Thinkers and writers Forum.
Raza, M. S., Tang, J., Rubab, S., & Wen, X. (2019). Determining the nexus between financial inclusion and economic development in Pakistan. Journal of Money Laundering Control, 22(2), 195-209. https://doi.org/10.1108/JMLC-12-2017-0068
Remund, D. L. (2010). Financial literacy explicated: The case for a clearer definition in an increasingly complex economy. Journal of consumer affairs, 44(2), 276-295.
Rudeloff, M., Brahm, T., & Pumptow, M. (2019). Does gender matter for the use of learning opportunities? Potential explanation for the gender gap in financial literacy. Citizenship, Social and Economics Education, 18(3), 128-142.
Sanderson, A., Mutandwa, L., & Le Roux, P. (2018). A review of determinants of financial inclusion. International Journal of Economics and Financial Issues, 8(3), 1-17.
Sarma, M., & Pais, J. (2011). Financial inclusion and development. Journal of international development, 23(5), 613-628.
Sarstedt, M., Ringle, C. M., & Hair, J. F. (2017). Partial least squares structural equation modeling. Handbook of market research, 26, 1-40.
Saviano, M., Nenci, L., & Caputo, F. (2017). The financial gap for women in the MENA region: a systemic perspective. Gender in Management: An International Journal. 4(1), 112-124.
Sinha, G., Tan, K., & Zhan, M. (2018). Patterns of financial attributes and behaviors of emerging adults in the United States. Children and youth services review, 93, 178-185.
Tenenhaus, M., Vinzi, V. E., Chatelin, Y.-M., & Lauro, C. (2005). PLS path modeling. Computational statistics & data analysis, 48(1), 159-205.
Van Raaij, W. F. (2016). Understanding consumer financial behavior: Money management in an age of financial illiteracy. Springer.
Vovchenko, N., Galazova, S. S., Danchenko, E., Ivanova, O. B., & Kostoglodova, E. D. (2018). Improvement of financial literacy as a crucial factor of economic development. European Research Studies Journal.XXI (Special Issue 1), 16-24
Ward, A. F., & Lynch Jr, J. G. (2019). On a need-to-know basis: How the distribution of responsibility between couples shapes financial literacy and financial outcomes. Journal of Consumer Research, 45(5), 1013-1036.
Weston, R., & Gore Jr, P. A. (2006). A brief guide to structural equation modeling. The counseling psychologist, 34(5), 719-751.
Willis, L. E. (2009). Evidence and ideology in assessing the effectiveness of financial literacy education. San Diego L. Rev., 46, 415-425.
Yushita, A. N. Y. (2017). The importance of financial literacy for personal financial management. Nominal Journal/Vi Volume Number, 1, 45-57.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Noureen Umer, Hadi Hassan Khan, Muhammad Zada, Wahab Ahmed , SM Nabeel Ul Haq
This work is licensed under a Creative Commons Attribution 4.0 International License.
