FINANCIAL LITERACY AND FINANCIAL INCLUSION EFFECTS ON STABILITY AND COMPETITIVENESS INDICATORS IN THE BANKING SECTOR: CROSS COUNTRY EVIDENCE FOR AFRICA AND THE WORLD

JOÃO Jungo (), Mara Madaleno () and Anabela Botelho ()
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JOÃO Jungo: Research Unit on Governance Competitiveness and Public Policies (GOVCOPP), Department of Economics Management, Industrial Engineering and Tourism (DEGEIT), University of Aveiro, Campus Universitário de Santiago, 3810-193 Aveiro, Portugal
Mara Madaleno: Research Unit on Governance Competitiveness and Public Policies (GOVCOPP), Department of Economics Management, Industrial Engineering and Tourism (DEGEIT), University of Aveiro, Campus Universitário de Santiago, 3810-193 Aveiro, Portugal
Anabela Botelho: Research Unit on Governance Competitiveness and Public Policies (GOVCOPP), Department of Economics Management, Industrial Engineering and Tourism (DEGEIT), University of Aveiro, Campus Universitário de Santiago, 3810-193 Aveiro, Portugal

Global Economy Journal (GEJ), 2021, vol. 21, issue 02, 1-30

Abstract: Financial inclusion has allowed financial products with very high-interest rates and complex conditions to become increasingly affordable. Financial inclusion programs, which aim to reach all social strata, strongly expose financial institutions to risk and particularly credit risk. That said, additional interventions such as financial education of those included are needed. We aim to examine the impact of financial literacy and financial inclusion of households on bank performance. Specifically, we want to examine the impact of financial literacy on credit risk, competitiveness among banks and financial stability. The FGLS estimation results suggest that financial literacy and financial inclusion reduce credit risk and enhance the stability of banks, and regarding competitiveness, our results were inconclusive as they show different effects for each competitiveness indicator, although they point to improved competitiveness in some cases. This research allows policymakers to understand that individual financial attitudes can be reflected in the general welfare of financial institutions and encourages the intensification of programs aimed at improving household financial literacy.

Keywords: Financial literacy; financial inclusion; competitiveness; credit risk; banking stability; feasible generalized least squared estimation (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S2194565921500093

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