Impact of Financial Literacy on Access to Financial Services in Kenya

Transcription

1 Impact of Fnancal Lteracy on Access to Fnancal Servces n Kenya Mwang Isaac Wachra Research Department, Central Bank of Kenya Box Narob, Kenya. Evelyne N. Khu Research Department, Central Bank of Kenya Box: Narob, Kenya. Abstract The man thrust of ths study s to establsh the mpact of fnancal lteracy on access to fnancal servces n Kenya usng the 2009 Natonal Fnancal Access (FnAccess) survey data. Usng a multnomal logt approach to explan access the the four major fnancal servce access strands, the study found that fnancal lteracy remans low n Kenya. Besdes, regresson results ndcate that households access to fnancal servces s not based on levels of fnancal lteracy but rather on factors such as ncome levels, dstance from banks, age, martal status, gender, household sze and level of educaton. However, the study establshed that the probablty of a fnancally llterate person remanng fnancal excluded s sgnfcantly hgh callng for ncreased nvestment n fnancal lteracy programs to reverse the trend. The study recommends the development of a currculum on fnancal educaton and admnster t n local, mddle level and hgher learnng nsttutons. Key words: Fnancal educaton, multnomal logt, Fn Access 1.0 Introducton Fnancal lteracy remans an nterestng ssue n both developed and developng economes, and has elcted much nterest n the recent past wth the rapd change n the fnance landscape. OECD (2005), defnes fnancal lteracy as the combnaton of consumers /nvestors understandng of fnancal products and concepts and ther ablty and confdence to apprecate fnancal rsks and opportuntes, to make nformed choces, to know where to go for help, and to take other effectve actons to mprove ther fnancal well-beng (Mller et al., 2009). Fnancal lteracy helps n empowerng and educatng consumers so that they are knowledgeable about fnance n a way that s relevant to ther lves and enables them to use ths knowledge to evaluate products and make nformed decsons. It s wdely expected that greater fnancal knowledge would help overcome recent dffcultes n advanced credt markets. Fnancal lteracy prepares consumers for tough fnancal tmes, through strateges that mtgate rsk such as accumulatng savngs, dversfyng assets, and purchasng nsurance. Fnancal lteracy facltates the decson makng processes such as payment of blls on tme, proper debt management whch mprove the credt worthness of potental borrowers to support lvelhoods, economc growth, sound fnancal systems, and poverty reducton. It also provdes greater control of one s fnancal future, more effectve use of fnancal products and servces, and reduced vulnerablty to overzealous retalers or fraudulent schemes. Facng an educated lot, fnancal regulators are forced to mprove the effcency and qualty of fnancal servces. Ths s because fnancally lterate consumers create compettve pressures on fnancal nsttutons to offer more approprately prced and transparent servces, by comparng optons, askng the rght questons, and negotatng more effectvely. Consumers on ther part are able to evaluate and compare fnancal products, such as bank accounts, savng products, credt and loan optons, payment nstruments, nvestments, nsurance coverage, so as to make optmal decsons. 42

2 Centre for Promotng Ideas, USA Greenspan (2002) argues that fnancal lteracy helps to nculcate ndvduals wth the fnancal knowledge necessary to create household budgets, ntate savngs plans, and make strategc nvestment decsons. Proper applcaton of that knowledge helps households to meet ther fnancal oblgatons through wse plannng, and resource allocaton so as to derve maxmum utlty. (Hlgert, Hogarth, & Beverly, 2003) asserts that fnancal knowledge appears to be drectly correlated wth self-benefcal fnancal behavor. However, Sceptcs (Lyons, Palmer, Jayaratne, & Scherpf, 2006) queston the effectveness of fnancal educaton n mprovng fnancal lteracy. Van Rooj, Lusard, and Alesse, 2007) n a study of Dutch adults, establshed that households wth low levels of fnancal lteracy are more lkely than others to base ther behavor on fnancal advce from frends and are less lkely to nvest n stocks. Mountng evdence shows that those who are less fnancally lterate are lkely to face more challenges wth regard to debt management, savngs and credt, and are less lkely to plan for the future. Regulators of fnancal servces, have a responsblty to help consumers of fnancal servces n makng nformed fnancal decsons so as to promote consumer protecton, publc awareness, and mantanance of market confdence. On the other hand, nformaton assymetry between fnancal servce provders (FSPs) and potental users leads to weakened fnancal markets. It also denes consumers an opportunty to fully apprecate ther rghts and responsbltes, the fnancal rsks they may be exposed to, and any other nformaton related to the fnancal products. Fnancal lteracy not only benefts consumers but also FSPs. Fnacally lterate consumers pose less rsk to the fnancal system due to ther responsble use of fnancal servces whch help to underpn fnancal market stablty, and contrbute to ncreased savngs, wder economc growth and development. 1.1 Problem Statement For most famles, decson makng processes are manly nformed by the household heads most of whom are men. The queston posed however, s whether the decsons and choces made are guded by fnancal lteracy or other factors. Of nterest to ths study s to establsh the decson makng process of households, whether the wfe, husband, chldren or any other channel makes the decsons. Lterature on the lnkage between household behavor and the potental effect of fnancal educaton efforts on that behavor remans scanty. Campbell (2006) argues that decsons to ncrease human captal by undertakng hgher levels of educaton, for example, are subject to varyng rates of return due to a number of factors, ncludng one s expected lfespan upon completon of a degree program. In order to understand the lnk between household fnancal decsons and fnancal lteracy, there s need to understand households effectve numeracy strength, as well as the connecton between fnancal lteracy and access to credt servces. 1.2 General Objectves Ths study seeks to establsh the level of fnancal lteracy n kenya and ts mpact on access to credt Specfc Objectves ) To determne the level of effectve lteracy and numeracy n Kenya ) To determne the source of fnancal advce among households wth access to credt servces ) To measure the mpact of fnancal lteracy on access to credt n Kenya especally wth respect to the decson makng process 2.0 Lterature Revew Fnancal lteracy s yet to receve enough attenton although there has been growng attenton n the recent past. Levels of fnancal lteracy across the world remans very low, although there s not much lterature to support ths asserton. However, OECD countrylevel survey data confrms ths vew, wth consumers consstently performng poorly on tests of fnancal lteracy. Bernhem and Garrett (2003) and Vtt, et al. (2000) establshed that 75 percent of consumer fnancal lteracy programs started n the late 1990s or Campbell (2006) argues that wth fnancal educaton poor fnancal decsons are lkely to be reconcled wth economc theory gven that households have been found to make sub optmal decsons whch devate from what economc theory suggests. Campbell posts that households wth hgher educaton levels (hgh school, college, graduate school) are lkely to be more actve n captal markets due to reduced nformaton assymetry. 43

3 Through regresson evdence, hgher educaton levels were found to be sgnfcantly related to equty ownershp by households. Educated Swedsh households were found to dversfy ther portfolos more effcently than less educated households. In concluson, poorer and less educated households were found to have a hgher probablty of makng mstakes than wealther and better educated households. Hlgert, Hogarth and Beverly (2003) n a Federal Reserve Bulletn for cash-flow management, credt management, savngs, and nvestment found a very strong and sgnfcant lnk between knowledge and behavor across the range of personal fnance actvtes. The Survey of Consumers results on 18 fnancal management behavors was used to construct a fnancal practce ndex for each of the four areas of fnancal actvty. In regard to learnng experences and effectve ways to learn personal fnancal management sklls meda and vdeo presentatons were rated hghest, whle nformatonal semnars and formal courses were rated lowest. Personal experence, frends and famly were the man sources of knowledge whle formal educaton lke hgh school educaton and educatonal sessons ether ton the job or outsde of a school envronement was rated lower across all fnancal practces and skll levels. Unfortunately, the study does not provde conclusve evdence that fnancal lteracy leads to sound personal fnance decsons. Usng a recursve model wth lnks from fnancal knowledge to fnancal behavors to credt outcomes, Courchane and Zorn (2005) establshed that behavor whch s nfluenced by knowledge had a drect postve relatonshp wth credt outcomes. Whle mstakes n makng personal fnance decsons s consdered real, the study argued that lack of knowledge about key personal fnance ssues contrbutes to these mstakes, callng for knowledge acquston to counter ths. Bayer, Bernhem and Scholz (1996) commentng on the KPMG retrement benefts survey conducted n 1993 and 1994 concluded that employers tend to offer tranng on a remedal bass when partcpaton s consdered to be too low. Bernhem and Garrett (1996), n a survey sponsored by Merrll Lynch n 1994 on the mpact of employerprovded educaton on stock varables (total net worth and total value of retrement assets) and flow varables (total savngs and savngs for retrement purposes) found fnancal educaton to have less mpact on both the stock and the flow varables gven that employers tend to provde fnancal educaton n remedal stuatons. Regresson analyss where each of the four varables lsted above entered the equaton as a dependent varable, revealed a strong postve and sgnfcant mpact of employer-provded fnancal educaton and retrement wealth, total savngs and retrement savngs. Whereas the relatonshp between fnancal educaton and total wealth was postve, the coeffcent was not sgnfcant. Workplace fnancal educaton was found to be an mportant factor for the total savngs rate, but not total wealth. Hra and Lobl (2005) n a sample of employees of a large nsurance company establshed that fnancal lteracy mproves workers expectatons about ther future fnancal stuaton. Muller (2002) on the 1992 Health and Retrement Survey establshed that retrement educaton ncreases the probablty of a 40 year old to save a lump sum dstrbuton from a retrement account by 27% though t does not ncrease the lkelhood of fnancally vulnerable groups (women, non-college grads and those wth lower ncomes) savng ther dstrbutons. In any case, these groups are sgnfcantly less lkely to save a lump sum dstrbuton once exposed to retrement educaton. Clancy, Wess and Schrener (2001) on the mpact of fnancal educaton on the use of Indvdual Development Accounts (IDAs) establshed that each addtonal hour of fnancal educaton n the range of 1-6 hours led to an ncrease n monthly deposts n an IDA account of $1.24 and an ncrease of $0.56 for each addtonal hour n the 15 range of 7-12 total hours of educaton. Stll on the Health and Retrement Survey (HRS), Lusard (2003) nvestgated the effect of retrement semnars on savngs and wealth. A drect postve lnk was found between educaton level and permant ncome. Retrement educaton was found to ncreases lqud wealth (savngs) by approxmately 18 percent overall. The semnal work on the mpact of fnancal educaton by Bernhem et al. (2001) revealed that mddle age ndvduals who took a personal fnancal management course n hgh school saved more than those who ddn t pursue the course. (Lusard and Mtchell (2007a) observed that households wth low levels of fnancal lteracy tend not to plan for retrement, acqure fewer assets, borrow at hgher nterest rates (Lusard and Tufano (2008); Stango and Znman (2006), and partcpate less n the formal fnancal system relatve to ther more fnancally lterate counterparts (Alesse et al., (2007); Hogarth and O Donnell (1999). 44

4 Centre for Promotng Ideas, USA Conceptual Framework and Data analyss Access to fnancal servces whch forms our outcome varable takes the value of 1, 2, 3 or 4 f the choce formal (banks), sem formal SACCOs and MFIs), nformal (nformal lenders, employer, buyer of harvest, ASCAs, ROSCAs excludng frends and famly) or no strand s taken, respectvely to capture the multple outcomes. Predctng the probablty that any of the alternatve strands, j s chosen, however, depends on a vector of explanatory varables X, and a vector of unknown parameters β. Ths study s motvated by McFadden s random utlty model (RUM). The utlty functon s expressed as follows; U = U x, z ( ) j j j j An ndvdual faced wth two or more choces wll compare the dfferences n utlty of the avalable alternatves so as to choose that whch yelds the hghest dfference s utlty. An Indvdual s assumed to choose alternatve A f U A > U B.; V x ; β + ε > V x ; β + ε ( ) ( ) ( ; β ) ( ; β ) ( ε ε ) A A A B B B V x V x let A A B B B A (, β ) = A ( A; β ) B ( B; β ) = ( B A ) = UB ( xb, zb ) VB ( xa; β ) UA ( xa, za ) VA ( xa; β ) * = (, ). g x V x V x η ε ε C g x β η Where: U represents the utlty derved by ndvdual, from choce of alternatve j j x j represents the observed characterstcs of ndvdual and alternatve j chosen z j represents the unobserved characterstcs of ndvdual and alternatve j chosen, C s the latent varable whch ncorporates both the observable ( ) * n utlty. β represents the estmated coeffcents of the explanatory varables g x β and the unobservable ( ( ; ) + s the utlty derved from choce of alternatve A where ( ) V x β ε A A A determnstc porton of the utlty estmated whle εa s the unknown utlty. A A ; ( ; ) + s the utlty derved from choce of alternatve B where ( ) V x β ε B B B determnstc porton of the utlty estmated whle εb s the unknown utlty. (, ) η ) dfferences V x β s the observable or V x β s the observable or B B ; g x β s the observable dfference n utltes from choce of alternatve A and not B. η (Eta) s the unobservable dfference arsng from the omsson of other varables. The errors εa andε B arse from omtted varables, measurement errors and specfcaton errors arsng from the functonal choce. 3.1 Multnomal logt model The fnacal servces seekng behavour of an ndvdual s captured as a multple choce problem and estmated usng multnomal logt. The multnomal logstc regresson model has been used to estmate the sgnfcance factors that determne the probablty of an ndvduals choce of fnancal servce access strand. The errors n ths model are assumed to be dentcally and ndependently dstrbuted (d) across both alternatves and ndvduals. The assumpton that error terms are extreme value or Gumbel dstrbuted closely approxmates the normal dstrbuton hence producng closed form solutons (Greene, 2003). In addton, the model ensures that the estmated probabltes le between 0 and 1 (Menard, S. 1995, p.13), unlke the lnear probablty model. In dscrete choce models whch nclude multnomal logt, estmated probabltes are consdered to be lnear n ther parameters, ensurng that an ncrease n magntude of an ndependent varable, wll ncrease or decrease the probablty of choosng any of the optons or not. 45

5 * C = β 0 + β 1r + β 2Y + β 3 A + β 4 G + B5 A _ G + β 6 M + β 7 E + β 8 D + β 9 H H ε * C s the latent varable on the observed choce and ranges between 1 to 4. Where; 1- formal strand, 2-sem formal strand and 3-nformal strand. Excluded category s used as the base category. The lkelhood functon wll be specfed as follows Where; L = where; = 1 j= 1 p j p yj j = 3 e j β ' jx e β ' jx pj s the probablty that the th ndvdual chooses alternatve j. y s the choce of alternatve j by the th ndvdual. j Maxmzng the log lkelhood functon yelds the multnomal densty functon expressed below. Ths functon gves the predcted probabltes for each outcome. 3 y1 y2 y3 y j j= 1 f ( y) = p p p = p 4.0 Fndngs and Conclusons The study establshed that access to fnancal servces vares across the varous access strands. The emprcal results of ths study are represented n Table 1 below. A strong relatonshp between the endogenous and exogenous varables was establshed gong by the Pseudo-R 2 statstc (19.49%) whch ndcates a strong relatonshp whenever t falls above 20%. Dscrete choce models rarely acheves a maxmum value of 1. In partcular the probablty of an adult Kenyan accessng formal and sem formal fnancal servces whch are relatvely cheaper and more sustanable compared to the usurous and frequently resource starved servces of the nformal sector stood at 6.24% and 39.35% respectvely n For the nformal strand, the probablty stood at 27.72% n 2009down from 35.7% n 2006 whle for those who are totally excluded from any form of fnancal servce, the probablty stands at 26.69%. Rsng fgures of people ncluded n the formal and sem formal strands could also be explaned by the ncrease n moble bankng servces lke MPESA whch uses the bankng platform to operate. 4.1 Econometrc Analyss Analyss of the mpact of fnancal lteracy on access to fnancal servces assumes a dscrete choce approach gven the dcreteness of the access outcomes. Gven that the estmated coeffcents n such models cannot be used n drawng nference except for the sgns, the study focuses on the marhnal effects to explan change n probabltes. The analyss s based on the four man access strands namely; formal, sem formal, nformal, and excluded category. Solutons were arrved at after 17 teratons wth a log lkelhood statstc of and a lkelhood rato statstcwth 30 degrees of freedom of Pseud R2 (0.1999) shows that the expalnatory power of the ncluded varables s 20% of the varatons n access to fnancal servces. 4.2 Changes n Probablty Varyng probabltes on access to fnancal servces were observed for each access strand. The study establshed that probablty of accessng fnancal servces from the sem formal strand takes the lons share (39.35%) followed by excluded strand (26.69%), nformal strand (27.72%) and formal strand (6.24%). Ths shows that the wder populaton s yet to embrace the mmense role played by formal fnancal servce provders (commercal banks) whch could be explaned by varous factors rangng from fnancal llteracy, poor percepton about the cost of accessng fnancal servces among others. Interestng enough sem formal strand (SACCOs, MFIs, Government, Hre Purchase) attracts the bggest percentage of the populaton, an ndcaton that seekers of fnancal servces stll value the organzatonal structures put n place gven that SACCOs and MFIs apply more relaxed rules and requrements as compared to banks. 46

6 Centre for Promotng Ideas, USA Interestng enough, fnancal lteracy whch formed the man thrust of ths paper emerged overwhelmngly nsgnfcant n explanng access to fnancal servces across the formal, sem formal and nformal strands. Al that can be sad about fnacal lteracy s that t s postvely related to access to fnancal servces. The message comng out of ths analyss s that whereas educatng the publc on the varous fnancal servces, decson makng among households appear not to factor n the role of nformaton. Households appear to rely on other factors other than nformaton n makng ther choces. Interestng enough, fnancal lteracy was sgnfcant at 90% confdence level n explanng excluson from the fnancal servces market. Results ndcate that knowledge about fnancal servces reduces the probablty of an ndvdual remanng excluded by 2.24% an ndcaton that wth ncreased senstzaton, more people can be pulled out of the excluded strand. In lne wth CAMPARI framework used by banks to determne credt worthness of potental borrowers, age exhbted a quadratc relatonshp n the formal, sem formal and nformal strands, rsng fast ntally before startng to ncrease at a decreasng rate and fnally the slope turnng negatve. Ths shows that fnancal servces provders consder the elderly people to be less credt worthy. The reverse s true for the excluded category who appear to be locked out from the fnancal markets at mddle age after whch they are exposed to fnancal servces at advanced age. However, ther access s stll lmted by ther dwndlng ncomes and strength and any further ncrease n age only ncreases ther access by a mere 0.02%. Increase n ncome lowers the probablty of accessng fnancal servces from the nformal strand by 0.1% and ncreases probablty for sem formal strand by the same margn. For the formal strand the probablty ncreases by 0.09%. On the other hand ncrease n ncome by Ksh. 1 lowers the probablty of remanng excluded by 0.03% a sgn that ncome plays a crucal role n enhancng access to fnancal servces. The same apples to ncrease n educaton levels where where ncrease by one level hgher rases access to sem formal servces by 14.1% and 0.9% for formal, whle access to nformal strand reduces by 6.6%. Educaton serves to enlghten people on the varous fnancal servces avalable whle at the same tme creatng awareness on how best to manage the avalable servces. Increase n educaton by one level lowers the probablty of remanng excluded by 8.5%. The 2009 survey reveled that an ncrease n household sze by one person ncreases the probablty of accessng loan from the nformal strand or remanng excluded by 0.6% and 1.4% respectvely. On the other hand, probablty of access to formal or sem formal fnancal servces by 0.12% and 1.8% respectvely. Most people prefer smaller famles due to resource constrants whch lmt ther access to vtal servces when the famly s large gven that they have to frst trve to rase the basc necesstes before consderng other engagements lke nvestments. Men appeared to have a 5.4% and 0.3% hgher probablty of accessng fnancal servces from sem formal and formal strands respectvely as compared to women. On the contrary, women had a 10.7% hgher probalty of accessng nformal fnancal sevces than men. Ths could be ratonalsed by the many programs by nformal servce provders that target women. Most men are not actvely nvolved n such actvtes and therefore rely heavly on fomal and sem formal fnancal servces. The probablty of men comng out of the excluded category s consdered to be hgher than that of women. Results ndcate that women have a 4.9% lower probablty of pullng out of the excluded category compared to men. Martal status was found to be nsgnfcant n explanng access to formal and sem-formal fnancal servces. Informal servce provders prefer lendng to marred persons or non sngle persons somethng whch could be attrbuted to ncreased level of trust as one moves from one stage of lfe to another. However, the probablty of pullng out of the excluded category reduced by 4.5%. Dstance from or nearness to a bank contnues to pose a major challenge on access to fnancal servces. Fndngs revealed that ncrease n the dstance from a bank lower the probablty of accessng fnancal servces by 6.7% and 0.6% for sem formal and formal strands respectvely. However, such dstance lengths makes t necessary for seekers of fnancal servces to go for nformal alternatves whch are nearer than commercal banks. It only ncreases the probablty of one remanng fnancally excluded by 5.9%. 4.3 Conclusons Whereas there are clams that exposng the publc to fnancal lteracy sklls serves to create awareness on the usefulness of varous fnancal servces and ways as to how they can be managed to yeld optmal results, lttle success has been regstered. 47

7 Ths s smlar to sentments echoed n OECD studes whch have concluded that fnancal lteracy remans low n most countres. Ths study has establshed that fnancal ncluson among the fnancally lterate lot remans low mplyng that fnancal lteracy s yet to acheve ts ntended objectves. However, except for the coeffcents remanng non sgnfcant, there s a postve lnk between fnancal lteracy and access to fnancal servces among the formal, nformal and sem formal strands. Ths was contary to fndngs by Hlgert, Hogarth and Beverly (2003) who found the lnk between fnancal educaton and household behavour beng not only postve but also sgnfcant. Households choce of fnancal servces appear to be motvated by factors other than fnancal lteracy. There s need to change the percepton of households that nformal fnancal servces are cheaper compared to formal ones. The study revealed that households perceptons about nterest rates are msnformed and wrong. Most of them thnk that nterest rates charged n the nformal strand are lower than those charged n the formal and sem formal strand whch s not the case n the Kenyan context. Informal lenders charge hgher nterest rates to cover the costs they ncur to reduce the dstance between them and potental clents. They also charge more to cushon themselves aganst default rsks especally when t comes to lendng gven that most of them rely on guarantors and dont often ask for collateral. The study further establshed that dstance of seperaton from a bank contnues to pose a bg challenge on access to formal fnancal servces. Households have been observed to shft ther preference for formal and sem formal fnancal servces towards nformal servces. Age exhbts a quadratc relatonshp on access to fnancal servces n all starnds except n the excluded category where at advanced age, access to fnancal servces appear to start ganng momentum. Formal and sem formal nsttutons dont appear to factor n martal status when desgnng ther fnancal servces. Lack of sgnfcance of ths varable n explanng access explans ths fact. However, nformal servce provders rely heavly on ths gven that marred persons appear to have hgher levels of responsblty hence are more trusted. Ths s explaned by the postve coeffent whch mples that a marred person has a 3.48% hgher probablty of accessng fnancal servces than a non marred person. On the same note, the probablty of a marred person remanng fnancaly excluded reduces by 4.40%. In terms of gender, women appear to have a % hgher probablty and a 5.08% lower probablty of accessng fnancal servces from the nformal and sem formal strands respectvely compared to ther male counterparts. Increase n household sze has a tendency of lockng households from access to fnancal servces. Ths s ratonalsed by the reduced probablty when household sze ncreases by one person of 1.8% and 0.18% n sem formal and nformal strands respectvely. Havng a large famly ncreases the probablty of a household remanng fnancally excluded by 1.40% whle pobablty of seekng fnancal servces from the nformal strand ncreases by 0.60%. Increase n ncome s hghly sgnfcant n explanng access to fnancally servces n all strands. Regresson results potray a postve relatonshp between ncrease n ncome and formal and sem formal access to fnancal servces whle a negatve relatonshp exsts for nformal access and the excluded category. Someone whose ncome ncreases by Ksh. 1 s hghly lkely to substtute nformal servces wth formal or sem formal servces gven that they are n a better poston to rase any collateral that may be requred. A shllng ncrease n ncome reduces the probablty of an ndvdual remanng fnancally excluded by 0.03%. 4.4 Recommendatons Fnancal lteracy s one term that has receved much attenton n the recent past due to the wde publcty t has been recevng both locally and nternatonally. Its wdely beleved that ncrease n fnancal lteracy would help ndvduals make nformed decsons regardng fnancal servces. Gven ts low mpact n Kenya, ths study recommends that more nvestments be pumped towards fnancal lteracy programs so as to ncrease ts effectveness whch can only be measured through ts mpact on access to fnancal servces. The government should be n the forefront n developng a currcullum on fnancal educaton at local, mddle and hgher learnng nsttutons. It should also launch campagns to create awareness. 48

8 Centre for Promotng Ideas, USA Gven the crtcal role that ncome contnues to play n rasng access to fnancal servces, the governement must ensure that a conducve envronment exsts or people to carry on wth ncome generatng actvtes wthout nterference. Ths wll also help pull more people from the excluded category and the nformal starnd towards the formal and sem formal strands. Whle we contnue to apprecate varous ntatves lke agency bankng towards reducng the dstance from fnancal servce provders, the government should ensure that the campagn s strengthened to brng more people towards formal and sem formal strands.. Ths wll also help n ncreasng fnancal ncluson n the country. 4.5 Areas for further Research More studes on fnancal lteracy should be encouraged so as to establsh the dynamcs about fnacal educaton and ts outcomes. Ths wll also help to state the depth to whch fnancal servce provders should Mller et al (2009) 5.0 References Bayer, P., Bernhem, B. D., & Scholz, J.K. (1996). The Effects of Fnancal Educaton n the Workplace: Evdence from a Survey of Employers. Natonal Bureau of Economc Research, Bernhem, B.D. & Garrett, D.M. (1996). The Determnants and Consequences of Fnancal Educaton n the Workplace: Evdence from a Survey of Households. Natonal Bureau of Economc Research, Bernhem, B.D., & Garrett, D.M. (2003). The Effects of Fnancal Educaton n the Workplace: Evdence from a Survey of Households. Journal of Publc Economcs, 87(7/8), Campbell, J.Y. (2006). Household Fnance. Natonal Bureau of Economc Research Retreved March , from Clancy, M., Wess, M.G. & Schrener,M.(2001). Fnancal Educaton and Savngs Outcomes n Indvdual Development Accounts. Workng Paper, 01(2). Retreved March 14, 2012, from Washngton Unversty of St. Lous, Center for Socal Development Web ste: Greenspan, A. (2002). Fnancal Lteracy: A Tool for Economc Progress. The Futurst, 36, (4) : Hlgert, M. A., Hogarth, J. M., & Beverly, S. G. (2003). Household fnancal management: The connecton between knowledge and behavor. Federal Reserve Bulletn, 89, Hra, T.K., & Cäzla L. (2005). Understandng the Impact of Employer-provded Fnancal Educaton on Workplace Satsfacton. 39(1). Hogarth, J. M. & O Donnell, K.H. (1999). Bankng Relatonshps of Lower-Income Famles and the Governmental Trend Toward Electronc Payment. Federal Reserve Bull, 86(1): James E. Q. (2009). The Case for Fnancal Lteracy n Developng Countres: Promotng access to fnance by empowerng consumers. Retreved February 20, 2012, from Mller, M., Godfrey, N., Levesque, B. & Stark, E. (2009). The Case for Fnancal Lteracy n Developng Countres: Promotng Access to Fnance by Empowerng Consumers. World Bank, DFID, OECD, and CGAP jont note, Washngton, DC: World Bank (Retreved February 18, 2012, from fles/professonal%3abusness-project-resources/fnancal%20lteracy.pdf Kotlkoff, L. & Bernhem, B. (2001). Household fnancal plannng and fnancal lteracy, n Essays on savngs, bequests, altrusm, and lfecycle plannng. Cambrdge, MA: MIT Press. Lusard, A. (2003). Savng and the Effectveness of Fnancal Educaton. Penson Research Councl Workng Paper 14. Retreved February 16, 2012, from Lusard, A. & Mtchell,O. (2007). Fnancal Lteracy and Retrement Plannng: New Evdence from the Rand Amercan Lfe Panel. MRRC Workng Paper, 157. Lusard, A. & Tufano, P. (2008). Debt Lteracy, Fnancal Experence and Over-ndebtedness. Harvard School Workng Paper. Retreved March 15, 2012, from Lyons, A. C., Palmer, L., Jayaratne, K.S.U., & Scherpf, E. (2006). Are we makng the grade? A natonal overvew of fnancal educaton and program evaluaton. The Journal of Consumer Affars, 40, Marsha, C., & Zorn, P. (2005). Consumer Lteracy and Credtworthness. Retreved March 06, 2012, from Menard, S.W. (1995). Appled Logstc Regresson Analyss: Quanttatve Applcatons n the Socal Scences. Thousand Oaks,CA: Sage Publcatons, Inc. Muller, L. A.(2003, June). Does Retrement Educaton Teach People to Save Penson Dstrbutons? Socal Securty Bulletn, 64(4). OECD (2005). Improvng Fnancal Lteracy: Analyss of Issues and Polces. Pars: OECD Publshng. Van Rooj, M., Lusard, A., & Alesse, R. (2007). Fnancal lteracy and stock market partcpaton. Natonal Bureau of Economc Research Workng Paper, Cambrdge, MA: NEBR. 49

9 Table 1: Correlaton Coeffcents age ncome gender educaton fnexp martalstat hhsze bnktrans_l~h agesq fnperc_n~w Table 2: Multnomal Logt Regresson Results Sem-formal (0.3935) Formal(0.0624) Informal(0.2772) Excluded(0.2669) Varable dy/dx dy/dx z dy/dx z dy/dx z dy/dx z Mean Age Income 7.34E E E E Gender Educaton Fnlt* Martalstat Hhsze Dstance Agesq E E Bankrate_low*