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Do Women’s Financial Literacy Accelerate Financial Inclusion? Evidence from Pakistan

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Abstract

Financial literacy is crucial to financial inclusion and facilitates access to and use of formal financial services and products. This study aims to investigate the role of financial literacy in improving financial inclusion among Pakistan’s women (a country characterized by a high gender gap and lower financial inclusion). A positivist philosophy was adopted and a survey design using a self-administered structured questionnaire was used to collect data from a sample of working women and university graduates. Initially, a pilot test was conducted on a sample of 80 respondents to confirm the reliability and validity of the questionnaire used. Final sample of 478 respondents was analyzed using inferential descriptive statistics and covariance-based structural equation modeling (CBSEM). The findings demonstrate that different aspects of financial literacy, i.e., savings management practice, debt management practice, investment management practice, and financial planning management practice, have a significant positive impact on financial inclusion among women. The findings are supported by theories of behavioral finance (i.e., self-efficacy and goal setting theory) and institutional theory. The study contributes to the existing literature on the relationship between financial literacy and financial inclusion and has implications for policymakers and practitioners in the financial sector in Pakistan.

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Notes

  1. National Financial Inclusion Strategy (NFIS) program.

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Authors and Affiliations

  1. School of Accounting, Yunnan Technology and Business University, Kunming, China

    R. M. Ammar Zahid

  2. Management Sciences Department, Virtual University of Pakistan, Lahore, Pakistan

    Safia Rafique

  3. Department of Banking and Finance, University of the Punjab, Gujranwala Campus, Gujranwala, Pakistan

    Muzammil Khurshid

  4. Department of Business Management, University of Baltistan, Skardu, Pakistan

    Wajid Khan

  5. Department of Economics, University of Malakand, Chakdara, Pakistan

    Ikram Ullah

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  1. R. M. Ammar Zahid
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Correspondence to Wajid Khan.

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Appendices

Appendix 1

National Financial Inclusion Strategy (NFIS)

The vital aim of SBP is to trail financial inclusion as tool for inclusive economic growth in Pakistan. The stated vision for Pakistan’s financial inclusion is to advance access and usage of quality financial services among individuals and firms. In the year 2015, SBP approved a broad NFIS, in 2015. Under the NFIS, the aim is to ensure adults to be financially included by 2020 from the level of 23 to 50%, in order to achieve widespread financial inclusion by supporting digital financial services and increasing sector lending like agriculture, SME, Islamic banking, and low cost house financing on priority basis.

Major initiatives taken by SBP under national financial inclusion strategy are mentioned:

  • Asaan (Easy) Mobile Account (AMA) scheme

  • Rationalization of NADRAs verification cost for micro insurers:

  • Interoperability of BB agents

  • Digital Financial Services (DFS)—Innovation Challenge Facility (ICF)

  • Study on identification of issues/challenges in digitization of G2P & P2G payments

  • Women’s financial inclusion.

Government of Pakistan has highlighted NFIS as share of its hundred days and fixed following significant objectives to be attained by 2023 such as to increase use of digital payments (65 million on the go digital transaction account out of which 20 million accounts of women). The next is toward improve deposit base (deposit/GDP ratio 55%) and encourage SME finance, and agricultural finance share of Islamic banking (25%of the banking industry and grow branches of Islamic banks to 30%of the banking industry).

National Financial Literacy Program (NFLP)

Pakistan’s Government has acknowledged the need to complement ongoing financial inclusion programs with increased efforts to improve financial literacy. As one of the SBP’s leading programs, the National Financial Literacy Program offers elementary financial education to unbanked and low-income groups, particularly youth and women. “The program is sponsored by the Asian Development Bank’s in 2017 ‘Improving Access to Finance Facility’ and is being effected in different stages to fulfill its objective of reaching one million recipients in five years.” A committed toll-free NFLP helpline and dedicated website have been developed to make easier for the public to access program details.

The NFLP aims at allowing the public to make smarter and more secure decisions on the use of financial and related services. It will also improve competition, lift innovations, and increase financial sector productivity in order to deliver better financial services for financially sophisticated people. The rate of financial literacy in Pakistan can be seen as only 13% of Pakistani adults keep very small formal bank accounts. The National Institute of Banking and Finance has launched the National Youth Financial Literacy Program to improve and increase the financial literacy programs in Pakistan.

The program’s basic aim is to provide important financial literacy education to Pakistani youth and school-going children in order to improve their ability to handle money and understand financial issues. The program is targeted at 3 age groups (school-going children: 9–12 years of age; adolescent: 13–17 years of age; youth: 18–29 years of age) across 45 selected districts with Gilgit Baltistan and Azad Jammu and Kashmir. NIBAF (NFLP-Y) aims to reach 1.6 million children, adolescents, and young people during 5 years, 2018–2023, through classroom training, comprising 0.6 million with digital education policy.

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Zahid, R.M.A., Rafique, S., Khurshid, M. et al. Do Women’s Financial Literacy Accelerate Financial Inclusion? Evidence from Pakistan. J Knowl Econ (2023). https://doi.org/10.1007/s13132-023-01272-2

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