293 14. Inclusive finance, financial literacy and livelihood activities of households in Ghana Mohammed Amidu, Joshua Yindenaba Abor and Haruna Issahaku INTRODUCTION Financial inclusion has become a priority for policymakers and the banking sector for promoting financial sector development and ensuring sustainable long-term economic growth. The goal of financial inclusion is to provide affordable financial services to all sections of society to improve their standard of living. This is an integral part of inclusive growth as it not only assures financial sector development but also spreads affordable financial services for the betterment of all members of the society. Financial intermediaries channel funds from savers to borrowers and by so doing provide funds for investment. Helms (2006) and Choudhury (2015) suggest that financial inclu- sion is a livelihood-intervention strategy that can halt the cycle of poverty and improve welfare among the vulnerable and lower-income population in developing countries. Much attention has been given to financial education in the literature due to the unpredictable nature of the economy coupled with the rising availability of complex financial instruments and the need for prudent financial decisions. Financially literate individuals have control over financial tools and are able to make sound decisions on their usage. Financial literacy has become a neces- sity because financially literate individuals will understand how financial institutions operate and know how to manage their money, and are equipped with a range of analytical skills (Beal and Delpachitra, 2003). Furthermore, they are in control of their financial affairs and know how to be financially responsible. It has therefore been established that financial literacy promotes good decisions, which in turn leads to better planning and management of life events such as education and retirement, among others, thereby promoting sustainable livelihoods. More so, studies have shown that financially literate Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development294 individuals are also financially included (Chikalipah, 2017; Grohmann et al., 2018; Okello et al., 2017). A corollary of the above is that both financial inclusion and financial literacy have been extensively covered in the literature. A number of studies show that the level of financial literacy is related to the nature of financial inclusion (Berry et al., 2018; Grohmann et al., 2018; Kaiser and Menkhoff, 2017). Financial inclusion also facilitates the flow of sustainable, efficient and effective financial systems and eventually leads to the financial stability of the society. Similarly, studies have shown the positive effects of financial literacy on sustainable livelihoods (Mukokoma et al., 2018; Okello et al., 2017). Thus, it can be argued that a sustainable livelihood depends on the rela- tionship between financial inclusion and financial education, and this is what this chapter seeks to investigate. Although various studies have analysed the variables of interest and have established relationships (see Berry et al., 2018; Cole et al., 2011; De Kokor and Jentzsch, 2013; Grohmann et al., 2018; Kaiser and Menkhoff, 2017; Lusardi and Mitchell, 2014; Miller et al., 2015; Sekita, 2011; Sharma, 2016; Van Rooji et al., 2012), there are some gaps. These prior studies have failed to exploit how the relationship between financial inclusion and financial literacy can impact on the sustainable livelihood activities of households, or examine livelihood activities of individuals who are finan- cially included by way of financial education. This chapter therefore seeks to answer these empirical questions. Do individuals who are financially included have financial knowledge? If so, how does inclusive finance and financial knowledge impact on sustainable livelihood activities? By providing answers to these research questions, the current chapter fills the gaps by empirically analysing the interactions among financial inclusion, financial education and sustainable livelihoods by sampling 1,966 households in Ghana. Particularly, we test for two main hypotheses: first, financial education increases the level of financial inclusion; second, the interaction between financial education and financial inclusion has an overall positive impact on sustainable livelihood activities. The contribution of this chapter is twofold: first, it adds to existing literature by examining and documenting the level of livelihood activities of an individ- ual who is financially included but insulating himself or herself from financial education/knowledge. We achieve this by empirically analysing the overall impact of the relationship between financial inclusion and financial education on livelihood activities from the context of a developing country, Ghana, where financial education and financial inclusion are relatively low. Such a study is relevant within such a context because of the magnitude of problems and consequential effects associated with exclusive finance and financial illit- eracy on sustainable development and growth. Second, this study specifically Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive finance, financial literacy and livelihood activities 295 focuses on Ghana, which has recently adopted a policy on inclusive finance and growth. LITERATURE REVIEW: THEORY The theoretical principle underlying financial inclusion, literacy and livelihood can be described in terms of either the sustainable livelihood approach (SLA), finance-growth theory (FGT), or the stakeholder and legitimacy theory (SLT). The theoretical review underpinning the SLA suggests that educated individ- uals, households or groups are likely to have better sustainable livelihoods, whereas the less literate population in society are likely to be financially excluded, thereby depriving them of sustainable livelihoods. Specifically, the theory suggests that the asset capacity and vulnerability to/risk of poverty of the individual, group or household (I/G/H) are based on their current financial provision and participation and the individuals’ level of literacy. More so, the theory elaborates that governments and households may adopt financial inter- vention strategies that will indirectly ensure financial inclusion as a way of improving livelihoods. According to the SLA, the livelihood of the individual is dependent on different assets/capital. These assets include human, physical, social, natural and financial capital. For an improved livelihood, there is a need for adequate understanding of these different assets so as to know the right intervention to take in the event of shocks (Morse and McNamara, 2013). The level of livelihood is directly related to the level of financial literacy, the strengh of the individual asset base, the ability of the individual to cope with risk and the nature of the intervention employed in events of vulnerability. The FGT posits that growth and equal income distribution are ensured when the I/G/H are financially included (Gimenez et al., 2012). Thus, for improved livelihoods, there should be equal financial participation and provision, which will influence access to financial systems, increase savings and enhance growth. Studies on financial inclusion show that it improves the creation of wealth by decreasing financial risk and transaction costs, increasing savings, and hence improving the liquidity position of the I/G/H (Masiyandima et al., 2017; Park and Mercado, 2015). Thus it is pertinent to adopt financial inclu- sion as a tool in livelihood strategies geared towards poverty alleviation or reduction. Finally, Parmar et al. (2010) provide the understanding that, according to the SLT, organisations will only embark on projects or programmes to improve financial inclusion and subsequently better the livelihoods of individuals in society provided they fall within their legal, ethical and legitimate span of operation. Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development296 METHODOLOGY Sampling and Data Collection Methods Ghana is the area of study. As at 2018, the country had 10 administrative regions with each region containing several administrative districts. There are currently 216 districts. Estimates from the Ghana Statistical Service indicate that the total population of Ghana stands at 27 million. In terms of the financial system, Ghana can boast of 23 universal banks, 144 rural and community banks, 57 non-bank financial institutions and some microfinance institutions and finance houses. The study adopts the most comprehensive and credible sample frame available in Ghana today, which has been used by the Ghana Statistical Service for the 2010 Population and Housing Census and, more recently, the Ghana Demographic and Health Survey (GDHS) in 2014. A two-stage sampling procedure is employed. This sampling design ensures that we capture indicators across the national level and along urban and rural locations. In the first stage, 60 districts are selected across all the 10 regions of Ghana using Probability Proportional to Size. Population is used as the indica- tor of size. In the second stage, taking a cue from the 2014 GDHS, we selected 1,966 individual households. The data were collected in 2018. Analytical Models and Estimation Strategy Empirically, we specify five main indicators of bank-enabled financial inclu- sion: (a) ownership of a bank account; (b) the use of a bank account to save; (c) frequency of usage of a bank account, defined in terms of three or more withdrawals a month; (d) access to bank credit, defined in terms of having secured a loan from a bank in the past year; and (e) usage of an account to make payments. Each of these variables is a dummy variable with 1 signifying the possession of a financial inclusion attribute, while 0 signals otherwise (exclusion). We adopt the empirical strategy used by Allen et al. (2016) for this study. We use the following model to estimate the link between banks and financial inclusion: Y X Rj j j j1 1 1 1 * ' '� � �� � � Y if Yj j1 1 1 0� � * Y if Yj j1 1 0 0� � * (14.1) Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive finance, financial literacy and livelihood activities 297 where Y j1 * , the dependent variable, represents account ownership. It is a binary variable which equals 1 if the individual owns an account and 0 if otherwise. The subscript j refers to the individual. X j ' is a vector of individual household-level characteristics such as age, marital status, educational attain- ment, locality, and so on, and financial characteristics such as risk aversion, and saving and investment behaviour. Rj ' β is an index score of how finan- cially literate a respondent is. In line with the use and application of financial literacy-related indexes in previous research, the higher (lower) the overall score for financial literacy, the higher (lower) the level of financial literacy of a person. The index includes being able to answer correctly (with possible answers provided): calculating or understanding (1) the value of shares; (2) the future value of shares; (3) simple interest; (4) interest plus the principal (amount); (5) the relationship between return and risk; (6) relationship between inflation and cost of living; (7) diversification and/or spreading of risk. Answering each of the questions correctly is scored 1, and 0 otherwise. A total score of 7 is an indication of a higher financial literacy, and a score of 0 indi- cates that the person has no knowledge of financial matters. Financial literacy is projected to relate positively with financial inclusion. ε j is a normally dis- tributed random error term with zero mean and constant variance. All variables used in the models, their definitions and measurements are shown in Table 14.1. Equation (14.1) is estimated as a probit model using the maximum like- lihood estimation procedure. To estimate the determinants of the use of an account to save (Y j2 * ), we employ the following model: Y X Rj j j j2 2 2 2 * ' '� � �� � � Y if Yj j2 2 1 0� � * Y if Yj j2 2 0 0� � * (14.2) Y j2 * is the dependent variable, which is binary in nature. It is assigned the value 1 if the individual uses the account to save, and 0 otherwise. All other variables are as defined under equation (14.1) above. However, because the individual uses an account to save only when the individual owns an account, there would be a self-selection problem if we estimate equation (14.2) alone. We employ a binary probit (biprobit) model to estimate equations (14.1) and (14.2) together, where equation (14.1) is the selection equation and equation (14.2) Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development298 the decision equation (the decision to save after owning an account). The main advantage of using the biprobit estimation method is that it is able to overcome the endogeneity problem that arises from sample selection bias. Because the dependent variables in the two equations are binary, the tradi- tional Heckman two-step approach cannot be applied here. Following Allen et al. (2016), we estimate equations (14.1) and (14.2) simultaneously using the maximum likelihood estimation procedure. Equations similar to (14.2) are equally specified for frequency of withdrawals, access to credit and usage of accounts for payments separately. Each of these equations is then also estimated simultaneously with equation (14.1). Again, we take notice that the individual is able to withdraw from an account, save or obtain bank credit, or use an account to make payments only when account ownership has been observed. The study also aims to evaluate the livelihood/welfare implications of financial inclusion as mediated by financial literacy (FinLit). In this case, we employ welfare methodology to investigate whether the effect of financial inclusion on livelihood activities is dependent on the financial knowledge of the person. The indicators of livelihood/welfare at the household level will include changes in income level (continuous), enhanced ability to finance educational needs (dummy), ability to possess an asset (index) and poverty reduction (dummy). The assumptions underlying the use of these measures are that, first, if an individual is financially included by way of financial literacy, it would lead to an enhancement of livelihood activities, which would further improve upon the income-earning capacity of such an individual. And a higher income is expected to enable households to satisfy their needs. Second, we assume that if financial inclusion is useful, it should help the individual to live above the poverty line. We therefore model the effect of financial inclusion on income/employment (our measure of livelihood) as follows: W f V G U Dik ik ik ik ij= ( , , , ) (14.3) where Wik � is our measure of livelihood, subscript i represents the household, subscript k (k = 1, 2) represents the two proxies of livelihood (employment status and income), D is a dummy equal to 1 if a household is financially included and 0 otherwise, subscript j (j = 1, 2, 3, 4, 5) represents the five dimensions of financial inclusion and V, G and U respectively are vectors of socioeconomic, geographic and community-specific characteristics hypothe- sised to influence livelihood activities measured as the income/employment opportunities of the individuals. Because income is a continuous variable, we estimate (14.3) using two-stage least squares (2SLS). The rationale is that the 2SLS approach is able to deal with the problem of endogeneity identified Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive finance, financial literacy and livelihood activities 299 earlier. Where unemployment (that is, the absence of livelihood activities) is the dependent variable, we estimate (14.3) using a robust probit. This is because our analysis shows a one-way relationship running from financial inclusion to unemployment. Thus, endogeneity is not present in the unemploy- ment model. Table 14.1 Variables and their definitions Variable Definition Measurement Personal/household characteristics Gender Gender of respondent 1 = if male; 0 = otherwise Age Age range of respondent Years Marriage status Marital status of respondent 1 = if married; 0 = otherwise Urban Place of residence (Urban or Rural) 1 = if urban; 0 = otherwise Region Residence in a particular region 1 = if yes; 0 = otherwise HHSize Number of people in the respondent’s household Number of persons Education Educational status of respondent 1 = if formally educated; 0 = otherwise Religion Religion of respondent 1 = if Christian; 0 = otherwise Livelihood/income activities Employment status Employment status of respondent 1 = if yes; 0 = otherwise MonthlyInc Monthly household income range of respondent Ghana cedis Financial inclusion Accto Account ownership by respondent 1 = if yes; 0 = otherwise Saving Usage of account for savings 1 = if yes; 0 = otherwise Upmt Usage of account for payments 1 = if yes; 0 = otherwise Freqwith Withdraws money at least once a month 1 = if yes; 0 = otherwise Credit Access to credit by respondent 1 = if yes; 0 = otherwise Financial behaviour CreditD Dummy variable for ownership of credit card 1 = if yes; 0 = otherwise SaIB Good saving and investment behaviour of respondent 1 = if yes; 0 = otherwise Risk Respondent is risk-averse 1 = if yes; 0 = otherwise Financial literacy (index score of how financially literate a respondent is) Stock value Understanding the value/price of stocks/ shares Correct answer = 1; wrong = 0 Future stock Understanding the future value of the stocks/ shares Correct answer = 1; wrong = 0 Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development300 Variable Definition Measurement Personal/household characteristics Simple interest Understanding simple interest Correct answer = 1; wrong = 0 Amount Understanding interest plus the principal Correct answer = 1; wrong = 0 Risk and return Relationship between return and risk Correct answer = 1; wrong = 0 Inflation and cost of living Relationship between inflation and cost of living Correct answer = 1; wrong = 0 Risk diversification Simple understanding of diversification and/ or spreading of risk Correct answer = 1; wrong = 0 Financial literacy index Total score = 7 ECONOMETRIC RESULTS Summary of Descriptive Statistics Table 14.2a presents the frequency distribution for the sample for the study. About 63% of the respondents are males. The data also show that the majority of the respondents (about 89%) are in the labour force, which is segregated into ages between 19 and 60. Most of the respondents have also acquired some form of formal education, with 49% having tertiary education and 44% having elementary and secondary education. The typical household size for the sample is either between 5 and 6 (about 33%) or between 3 and 4 (about 31%). Most of the respondents are in rural settlements (about 60%). Table 14.2b shows the frequency distribution of the financial inclusion vari- ables. The evidence is that most of the respondents own a bank account; about 26% do not. It is not surprising that the savings behaviour of the respondents is low, comprising 30% of the sample. Access to credit (about 39%) is quite low. The frequency of withdrawal is almost the same as the use of accounts for payments, with the former being about 79% and the latter 76%. Considering the livelihood variables for the study, we realise in Table 14.2c that most of the respondents (76%) are employed and earn a living, but the sample also shows that most of the respondents earn below GHS 8,000 per month (about USD 1,375 in June 2021). Putting the earnings in perspective, we realise that about 92% of the households have a monthly income of up to GHS 10,000. Table 13.2d shows that the average monthly income for a house- hold is about GHS 8,917. Financial literacy has a standard deviation of about 1.65, which suggests that a respondent on average could score either 6 or 3. The evidence in Table 14.2c also reveals that about 59% of the respondents claim that bank charges are expensive; only 19% perceive the charges to be moderate. Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive finance, financial literacy and livelihood activities 301 Table 14.2a Frequency distribution of demographics Freq. Percent Cum. Gender Female 722 36.89 36.89 Male 1,235 63.11 100 Age Less than 18 years 164 8.37 8.37 Between 19 and 35 years 1,137 58.04 66.41 Between 36 and 45 years 431 22 88.41 Between 46 and 60 years 182 9.29 97.7 Above 60 years 45 2.3 100 Marriage status Single 1,125 57.22 57.22 Married 841 42.78 100 Education None 101 5.18 5.18 Elementary 268 13.75 18.93 Secondary 594 30.48 49.41 Tertiary 961 49.31 98.72 Other 25 1.28 100 Household size Less than 2 158 8.05 8.05 Between 3 and 4 607 30.94 38.99 Between 5 and 6 643 32.77 71.76 Between 7 and 8 284 14.48 86.24 Above 8 268 13.66 99.9 Missing 2 0.1 100 Urban Rural 1,165 59.56 59.56 Urban 790 40.39 99.95 Missing 1 0.05 100 Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development302 Table 14.2b Frequency distribution of financial inclusion variables Freq. Percent Cum. Account No 509 25.89 25.89 Yes 1,457 74.11 100 Savings No 1,384 70.4 70.4 Yes 580 29.5 99.9 Credit No 1,200 61.04 61.04 Yes 766 38.96 100 Frequency of withdrawal No 1,546 78.64 78.64 Yes 420 21.36 100 Use of account for payments No 1,495 76.04 76.04 Yes 471 23.96 100 Table 14.2c Frequency distribution of livelihood variables Freq. Percent Cum. Employment status Unemployed 465 23.65 23.65 Employed 1,501 76.35 100 Monthly income Less than GHC 8,000 1,523 80.71 80.71 Between GHC 8,000 and GHC 10,000 217 11.5 92.21 Between GHC 11,000 and GHC 15,000 89 4.72 96.93 More than GHC 15,000 56 2.97 99.89 Missing 2 0.11 100 Bank charges Expensive charges 825 54.89 54.89 Very expensive charges 63 4.19 59.08 Normal charges 328 21.82 80.9 Moderate charges 212 14.11 95.01 Very moderate charges 75 4.99 100 Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive finance, financial literacy and livelihood activities 303 Table 14.2d Summary statistics Variable Obs Mean Std. Dev. Min Max Monthly income 1,885 8917.241 2492.78 8000 20000 Financial literacy 1,061 4.146089 1.645565 0 7 Loan price 1,215 0.401359 0.17935 0.033974 1.142394 Fees price 1,215 0.021024 0.022098 0.000047 0.136608 Deposit price 1,215 0.050274 0.036728 0.006831 0.367335 The Effect of Financial Education on Financial Inclusion Table 14.3 contains the results of biprobit estimates of the influence of financial literacy variables on financial inclusion while controlling for socio-demographic and financial characteristics of individuals. For model fitness, the Wald test shows that the independent variables jointly predict financial inclusion significantly at the 1% level, showing that the models have good fit. We conducted our analysis by first examining the most basic measure of financial inclusion – that is, the proportion of the sample population that has a bank or/and mobile money account – and our analysis shows a highly significant and positive relationship between account ownership and financial literacy. The ability to read and understand financial numbers motivates and influences a person to own a bank/mobile money account. Alternatively, indi- viduals who wish to open accounts have some level of financial knowledge, as reported in early studies (Abor et al., 2018a, 2018b; Abu and Issahaku, 2017). Interestingly, the education status of the individual does not explain financial inclusion. Age, on the other hand, has a quadratic impact on account ownership such that at a youthful age individuals are more inclined towards opening accounts but as individuals age and earnings stabilise or decline, the enthusiasm for opening and/or keeping accounts wanes. This is seen in the fact that the coefficient of age is positive while the coefficient for age square is negative in the models where account ownership is the dependent variable. Also, size of household has a positive significant influence on frequency of withdrawal, an indication that large households will withdraw at least once a month as com- pared to individuals in small households. Married individuals have access to more credit, implying that they are more financially included than individuals who are not married. The result on gender and financial inclusion also shows Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development304 that males are more likely to have access to credit and withdraw more than once in a month compared to females. On the relationship between financial behaviour and financial inclusion, the result shows a positive significant relationship between financial behaviour and financial inclusion indicators such as savings, access to credit and usage of accounts for payment. This implies that individuals with a good saving and investment attitude are financially included as they have a higher propensity to save with the banks, obtain credit facilities and also make payments through their bank accounts. More so, individuals who own credit cards withdraw more than once a month and use their accounts to make various payments. Table 14.3 The effect of financial education on financial inclusion Accto (1) Saving ( 2) Accto (3) Credit (4) Accto (5) Frequency of withdrawal (6) Accounts (7) Use account to make payments (8) FinLit 0.142*** -9.7E-05 0.137*** -0.0265 0.133*** -0.035 0.132*** 0.0102 (0.04) (0.03) (0.04) (0.03) (0.04) (0.04) (0.04) (0.03) Age 0.604* 0.457 0.617* 0.268 0.648* 0.0265 0.688** -0.224 (0.35) (0.30) (0.35) (0.29) (0.35) (0.32) (0.35) (0.30) Age2 -0.0964 -0.0784 -0.0995 -0.0327 -0.103* 0.01 -0.108* 0.0255 (0.06) (0.05) (0.06) (0.05) (0.06) (0.05) (0.06) (0.05) LnHHsize -0.226 -0.0724 -0.188 -0.179 -0.193 0.254* -0.206 0.202 (0.18) (0.12) (0.18) (0.12) (0.18) (0.14) (0.18) (0.13) Urban 0.00239 -0.282** -0.0123 0.164 -0.00323 0.183 -0.00212 0.0369 (0.15) (0.11) (0.15) (0.11) (0.15) (0.12) (0.15) (0.11) Marr. status 0.0125 0.0735 0.00807 0.629*** -0.0062 0.146 -0.0303 0.131 (0.18) (0.13) (0.18) (0.13) (0.18) (0.14) (0.18) (0.14) Gender 0.124 -0.134 0.145 0.326*** 0.144 0.354*** 0.141 0.164 (0.14) (0.10) (0.14) (0.10) (0.14) (0.12) (0.14) (0.11) Education 0.327 0.544 0.0216 0.57 0.0761 0.0634 0.0893 -0.165 (0.57) (0.55) (0.66) (0.58) (0.65) (0.63) (0.65) (0.59) Christian 0.238 0.207 0.18 0.0534 0.192 0.197 0.19 0.244 (0.22) (0.17) (0.23) (0.17) (0.23) (0.19) (0.23) (0.18) Sav and Inv 0.237*** 0.206*** 0.0548 0.216*** (0.06) (0.06) (0.06) (0.06) Risk 0.0638 -0.113 -0.05 -0.137* (0.07) (0.07) (0.08) (0.08) Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive finance, financial literacy and livelihood activities 305 Accto (1) Saving ( 2) Accto (3) Credit (4) Accto (5) Frequency of withdrawal (6) Accounts (7) Use account to make payments (8) Credit card 0.280** 0.572*** (0.11) (0.11) Greater Accra 0.13 0.181 0.123 0.171 0.132 0.334* 0.136 0.265 (0.26) (0.17) (0.26) (0.17) (0.26) (0.19) (0.26) (0.17) Western -0.0521 0.14 -0.0633 0.347* -0.0682 0.213 -0.0782 -0.122 (0.29) (0.20) (0.29) (0.20) (0.29) (0.23) (0.29) (0.20) Eastern -0.554** -0.185 -0.562** 0.505*** -0.562** 0.346* -0.566** -0.123 (0.25) (0.19) (0.25) (0.18) (0.25) (0.21) (0.25) (0.19) Volta -0.742*** 0.169 -0.651** 0.401* -0.666** 0.249 -0.662** -0.241 (0.28) (0.21) (0.28) (0.21) (0.28) (0.24) (0.28) (0.22) Ashanti -0.238 0.197 -0.215 0.184 -0.23 -0.105 -0.225 0.173 (0.29) (0.20) (0.29) (0.21) (0.29) (0.25) (0.29) (0.21) Northern 4.51 1.048 3.927 0.221 3.68 -3.905 4.051 6.637 (2051.20) (0.84) (585.20) (0.79) (323.70) (297.2) (825.20) (840.80) Upper West -0.195 -0.208 -0.229 0.057 -0.192 0.282 -0.178 -0.0319 (0.31) (0.23) (0.30) (0.22) (0.30) (0.25) (0.31) (0.23) Upper East 0.211 0.205 0.253 0.358 0.245 0.174 0.263 -0.263 (0.41) (0.25) (0.41) (0.24) (0.41) (0.28) (0.41) (0.27) Constant -0.212 -2.200*** 0.0935 -1.982** 7.44E-05 -2.11** -0.0446 -1.135 (0.80) (0.76) (0.87) (0.78) (0.87) (0.85) (0.86) (0.79) Observation 790 790 790 790 790 790 790 790 Chi2 83.514 83.514 124.811 124.811 73.939 73.939 106.47 106.47 P-values 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Notes: LnHHsize is the log of household size. Standard errors are reported in parentheses. ***, **, and * indicate statistical significance at the 1%, 5% and 10% level respectively. Refer to Table 14.1 for definitions of variables. The Impact of Financial Inclusion on Livelihood Table 14.4 presents the results of the effect of all the five financial inclusion measures on employment status. The results show that all the financial inclu- sion indicators have a positive and significant influence on employment, an indication that a financially included individual stands a better chance of being employed than those who are financially excluded. Alternatively, those who Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development306 are employed are paid through financial services such as bank, mobile money, e-zwich, and so on. Furthermore, financial inclusion encourages access to credit and thus makes capital available for numerous business ventures. The creation of business ventures then increases employment opportunities. More so, the availability of capital then fosters human resource development and builds strong entrepreneurship among individuals. These findings support the results of previous studies on financial inclusion and livelihood (Khaki and Sangmi, 2017; Masiyandima, et al., 2017; Michael and Sharon, 2014). Table 14.4 Impact of financial inclusion on livelihood (employment status) (1) (2) (3) (4) (5) empstatus empstatus empstatus empstatus empstatus Accto 0.550*** (0.0988) Saving 1.505*** (0.537) Freqwith 1.533** (0.612) Upmt 0.908*** (0.251) Credit 1.308*** (0.406) Age -0.0119 -0.177 0.140 0.0942 0.0191 (0.0684) (0.136) (0.122) (0.0840) (0.114) Age2 0.00427 0.0241 -0.0296 -0.00917 -0.0155 (0.0118) (0.0225) (0.0226) (0.0145) (0.0198) LnHHsize 0.00581 -0.00875 -0.0887 -0.0207 0.0596 (0.0279) (0.0502) (0.0575) (0.0369) (0.0512) Urban 0.0468* 0.132*** 0.0162 0.00117 -0.0216 (0.0257) (0.0501) (0.0500) (0.0405) (0.0544) Marr. status 0.0612** 0.0707 -0.00655 -0.00640 -0.149** (0.0270) (0.0519) (0.0472) (0.0356) (0.0740) Gender -0.0312 0.0814 -0.0951** -0.0469 -0.0355 (0.0223) (0.0569) (0.0452) (0.0299) (0.0395) Education 0.0887 -0.0256 0.188** 0.277*** 0.0436 (0.0784) (0.142) (0.0932) (0.0727) (0.116) Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive finance, financial literacy and livelihood activities 307 (1) (2) (3) (4) (5) empstatus empstatus empstatus empstatus empstatus Christian -0.0267 -0.0912* -0.108* -0.0633 -0.0308 (0.0288) (0.0546) (0.0578) (0.0387) (0.0491) Risk -0.0159 -0.0227 -0.00623 -0.0268 0.0620 (0.0201) (0.0347) (0.0371) (0.0256) (0.0517) Greater Accra 0.0199 -0.0168 -0.144 -0.0453 -0.0463 (0.0425) (0.0855) (0.109) (0.0703) (0.0872) Western 0.0893* 0.0112 0.0175 0.103 -0.124 (0.0457) (0.104) (0.0877) (0.0722) (0.116) Eastern 0.106** 0.115 -0.0494 0.0491 -0.160 (0.0466) (0.0917) (0.0958) (0.0713) (0.118) Volta 0.142** -0.0224 0.00476 0.124 -0.0997 (0.0562) (0.120) (0.108) (0.0773) (0.129) Ashanti 0.0876 -0.0223 0.0699 -0.0114 -0.0230 (0.0536) (0.116) (0.0865) (0.0848) (0.105) Northern 0.0177 -0.0829 -0.134 -0.151* -0.345** (0.0585) (0.101) (0.0970) (0.0828) (0.142) Upper West -0.0466 -0.0727 -0.228** -0.0955 -0.223** (0.0500) (0.0895) (0.108) (0.0708) (0.103) Upper East -0.0594 -0.233*** -0.261*** -0.102 -0.287*** (0.0460) (0.0887) (0.0892) (0.0652) (0.0925) Sav and Inv 0.0168 -0.0846 0.0496** 0.00583 -0.0535 (0.0156) (0.0591) (0.0239) (0.0238) (0.0451) Credit card -0.00624 -0.187* -0.118 -0.127** (0.0273) (0.105) (0.0843) (0.0633) Constant 0.211 0.896*** 0.475** 0.329** 0.439* (0.137) (0.283) (0.224) (0.165) (0.228) Observation 1,399 1,399 1,399 1,399 1,399 Chi2 290.488 119.043 116.320 172.812 120.307 P-values 0.000 0.000 0.000 0.000 0.000 Notes: Standard errors are reported in parentheses. ***, **, and * indicate statistical significance at the 1%, 5% and 10% level respectively. Refer to Table 14.1 for definitions of variables. In Table 14.5, we analyse the results of the effect of all the five financial inclu- sion measures on household income. The results show that all the financial inclusion indicators have a positive and significant influence on income. This means that when individuals are financially included they have some sources of livelihood which yield a high income. This can be explained in several Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development308 ways. First, an individual with bank accounts can use them for financial transactions and also earn interest on them. Second, having access to a savings account gives an individual a chance of obtaining credit from financial provid- ers that can be invested in income-generating ventures. More so, individuals can withdraw from their accounts at any time so as to capitalise on business opportunities for more income in future. Again, having a bank account saves time and energy which would have been wasted in long queues to pay utility bills. These findings support earlier studies on the impact of financial inclusion at the micro level (Abor et al., 2018b; Abu and Issahaku, 2017; Swamy, 2014) and at the macro level (Kim et al., 2018; Lenka and Sharma, 2017; Sharma, 2016). Table 14.5 Impact of financial inclusion on livelihood (Income) (1) (2) (3) (4) (5) Income Income Income Income Income Accto 0.184*** (0.0574) Saving 0.502** (0.231) Freqwith 0.450** (0.229) Upmt 0.301** (0.121) Credit 0.444** (0.176) Age -0.149*** -0.208*** -0.101** -0.115*** -0.147*** (0.0385) (0.0597) (0.0477) (0.0414) (0.0507) Age2 0.0248*** 0.0322*** 0.0143 0.0206*** 0.0193** (0.00679) (0.00980) (0.00894) (0.00718) (0.00930) LnHHsize 0.0527*** 0.0467** 0.0207 0.0471*** 0.0747*** (0.0134) (0.0201) (0.0228) (0.0158) (0.0217) Urban 0.00927 0.0326 0.00455 -0.00743 -0.0163 (0.0140) (0.0210) (0.0174) (0.0190) (0.0227) Marr. status 0.0249* 0.0262 0.00560 0.00175 -0.0447 (0.0141) (0.0201) (0.0164) (0.0154) (0.0290) Gender -0.0162 0.0168 -0.0330* -0.0231 -0.0176 (0.0125) (0.0228) (0.0176) (0.0147) (0.0164) Education -0.0457** -0.0837* -0.00852 0.0175 -0.0615 (0.0230) (0.0508) (0.0224) (0.0157) (0.0431) Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive finance, financial literacy and livelihood activities 309 (1) (2) (3) (4) (5) Income Income Income Income Income Christian 0.0123 -0.0113 -0.0117 -0.00127 0.0101 (0.0122) (0.0220) (0.0208) (0.0159) (0.0183) Risk -0.00487 -0.00982 -0.00385 -0.00811 0.0263 (0.0107) (0.0132) (0.0139) (0.0118) (0.0236) Greater Accra 0.00453 -0.00531 -0.0431 -0.0200 -0.0248 (0.0313) (0.0408) (0.0426) (0.0363) (0.0394) Western -0.0384 -0.0654 -0.0580* -0.0327 -0.116** (0.0318) (0.0460) (0.0346) (0.0360) (0.0516) Eastern -0.0312 -0.0296 -0.0763** -0.0490 -0.127** (0.0304) (0.0412) (0.0372) (0.0343) (0.0515) Volta -0.0236 -0.0809 -0.0678 -0.0285 -0.110** (0.0328) (0.0530) (0.0430) (0.0373) (0.0559) Ashanti 0.0272 -0.00546 0.0196 -0.00109 -0.0136 (0.0379) (0.0522) (0.0403) (0.0436) (0.0486) Northern -0.0247 -0.0573 -0.0727** -0.0782** -0.152** (0.0289) (0.0411) (0.0339) (0.0358) (0.0598) Upper West -0.0534* -0.0636* -0.105*** -0.0688** -0.118*** (0.0282) (0.0383) (0.0395) (0.0330) (0.0443) Upper East -0.0288 -0.0891** -0.0939*** -0.0414 -0.110*** (0.0294) (0.0386) (0.0332) (0.0324) (0.0402) Sav and Inv 0.00860 -0.0240 0.0199** 0.00527 -0.0148 (0.00865) (0.0243) (0.00876) (0.0117) (0.0190) Credit card -0.00587 -0.0708 -0.0342 -0.0435 (0.0155) (0.0477) (0.0324) (0.0306) Constant 9.119*** 9.366*** 9.202*** 9.154*** 9.192*** (0.0701) (0.123) (0.0783) (0.0763) (0.0923) Observation 1,365 1,365 1,365 1,365 1,365 Chi2 140.023 82.381 111.503 117.743 76.988 P-values 0.000 0.000 0.000 0.000 0.000 Notes: Standard errors are reported in parentheses. ***, **, and * indicate statistical significance at the 1%, 5% and 10% level respectively. Refer to Table 14.1 for definitions of variables. The Impact of Financial Literacy on Livelihood Table 14.6 presents results of the effect of financial literacy on the two liveli- hood indicators (that is, employment status and income). Financial literacy has Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development310 a positive but insignificant effect on livelihood. This means that the acquisition of financial knowledge does not affect the sustainable livelihood of the indi- vidual. This implies that a sustainable livelihood does not depend on financial literacy. This finding, however, does not support the findings of previous studies of Ghosh (2011) at the country level, Okello et al. (2017) at the firm level and Mukokoma et al. (2018) at the individual level of analysis. The coef- ficient of age square has a positive significant influence on income. This means that the level of income obtained by individuals increases proportionally with their age. Size of household, on the other hand, has a positive relationship with the level of income, an indication that large households are more likely to earn more income. Table 14.6 The impact of financial literacy on livelihood (1) (2) empstatus lnincome FinLit 0.0102 0.0224 (0.0281) (0.0208) Age 0.0482 -0.208*** (0.0794) (0.0582) Age2 -0.00834 0.0357*** (0.0141) (0.00985) LnHHsize -0.0355 0.0805*** (0.0310) (0.0205) Urban -0.00175 0.0268 (0.0280) (0.0207) Marr. status 0.0756*** 0.0202 (0.0274) (0.0222) Gender 0.00604 -0.0127 (0.0265) (0.0201) Education 0.0577 0.0148 (0.129) (0.0502) Christian -0.0635* 0.0598*** (0.0340) (0.0226) Sav and Inv 0.0405*** 0.0256*** (0.0143) (0.00993) Credit card -0.0380 0.0266 (0.0264) (0.0179) Risk 0.00448 -0.0111 (0.0218) (0.0117) Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive finance, financial literacy and livelihood activities 311 (1) (2) empstatus lnincome Greater Accra 0.0144 -0.0196 (0.0415) (0.0346) Western 0.0338 -0.0596 (0.0463) (0.0364) Eastern 0.00642 -0.0760** (0.0470) (0.0353) Volta 0.0234 -0.0509 (0.0534) (0.0393) Ashanti 0.0307 0.00468 (0.0504) (0.0428) Northern 0.113** -0.00620 (0.0467) (0.0619) Upper West -0.0748 -0.0888** (0.0636) (0.0365) Upper East -0.00764 -0.0332 (0.0617) (0.0470) Constant 0.684*** 9.092*** (0.182) (0.104) Observation 773 749 Chi2 57.141 79.997 P-values 0.000 0.000 Notes: Lnincome is the log of income. Standard errors are reported in parentheses. ***, **, and * indicate statistical significance at the 1%, 5% and 10% level respectively. Refer to Table 14.1 for definitions of variables. The Sensitivity of Livelihood Activities to Financial Literacy and Financial Inclusion In Table 14.7, we present the robust results on the interaction of financial literacy and inclusion with employment status. From the results, a positive sig- nificant relationship exists between the interaction of financial inclusion indi- cators (that is, account ownership, savings and usage of account) and financial literacy on the one hand, and employment status as a proxy for livelihood on the other. This relationship implies that the ownership of an account resulting from financial education places individuals in a better position to be employed. Also, individuals who have built a saving attitude through the acquisition of financial knowledge also have a propensity for obtaining employment. Finally, individuals who exhibit knowledge of finance through the frequent usage Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development312 of accounts for various transactions also have a better likelihood of being employed than those who do not. Thus, financial literacy alone may not create avenues for employment (see Table 14.6). However, if the individual has an account and uses the account to save, and is financially literate, they stand a better chance of being employed. Savings and investments have a positive significant effect on employment status. This implies that individuals who save and invest are more likely to earn a livelihood through employment. Table 14.7 The sensitivity of livelihood to financial literacy and financial inclusion (employment status) (1) (2) (3) (4) (5) empstatus empstatus empstatus empstatus empstatus FinLit*Accto 0.0436* (0.0238) FinLit*Saving 0.165* (0.0853) FinLit*Freqwith 0.170 (0.115) FinLit*Upmt 0.0559* (0.0315) FinLit*Credit 0.0159 (0.0540) Age -0.00545 -0.0951 0.0387 0.0377 0.0519 (0.0845) (0.130) (0.108) (0.0769) (0.077) Age2 -0.000364 0.0142 -0.00864 -0.00677 -0.008 (0.0148) (0.0231) (0.0190) (0.0141) (0.014) LnHHsize -0.0257 0.00503 -0.0869* -0.0424 -0.035 (0.0317) (0.0496) (0.0506) (0.0311) (0.032) Urban -0.00468 0.0603 -0.0488 -0.00820 -0.001 (0.0293) (0.0504) (0.0494) (0.0306) (0.028) Marriage status 0.0805*** 0.0547 0.0515 0.0673** 0.0747*** (0.0291) (0.0477) (0.0454) (0.0297) (0.027) Gender -0.00571 0.0239 -0.0671 -0.00156 0.0066 (0.0271) (0.0388) (0.0611) (0.0271) (0.026) Education -0.0173 -0.0697 -0.0455 0.0289 0.0705 (0.133) (0.199) (0.160) (0.132) (0.124) Christian -0.0592* -0.0991* -0.103* -0.0713* -0.064* (0.0358) (0.0558) (0.0596) (0.0395) (0.034) Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive finance, financial literacy and livelihood activities 313 (1) (2) (3) (4) (5) empstatus empstatus empstatus empstatus empstatus Risk 0.00957 -0.00967 0.0126 0.0144 0.0032 (0.0225) (0.0294) (0.0277) (0.0229) (0.022) Greater Accra -0.000117 -0.0448 -0.0530 -0.0121 0.0159 (0.0427) (0.0669) (0.0771) (0.0467) (0.042) Western 0.0283 -0.00425 -0.0316 0.0427 0.0335 (0.0477) (0.0744) (0.0799) (0.0502) (0.046) Eastern 0.0133 0.0294 -0.0834 0.0137 0.0075 (0.0476) (0.0691) (0.0878) (0.0505) (0.046) Volta 0.0269 -0.00477 -0.0473 0.0338 0.0237 (0.0547) (0.0825) (0.0903) (0.0553) (0.054) Ashanti 0.0245 -0.0149 0.0438 0.0102 0.0326 (0.0526) (0.0815) (0.0640) (0.0553) (0.0505) Northern 0.0714 -0.271 0.173** -0.0952 0.112** (0.0525) (0.287) (0.0751) (0.126) (0.0499) UpperWest -0.0700 -0.00650 -0.138 -0.0775 -0.0746 (0.0630) (0.0878) (0.0938) (0.0653) (0.0642) Upper East -0.0302 -0.0445 -0.0677 0.00860 -0.00357 (0.0647) (0.0873) (0.0917) (0.0630) (0.0602) Sav and Inv 0.0321** -0.0193 0.0304 0.0205 0.0408*** (0.0152) (0.0381) (0.0215) (0.0189) (0.0143) Credit card -0.0478* -0.0708* -0.102* -0.0849** -0.108 (0.0272) (0.0427) (0.0527) (0.0374) (0.235) Constant 0.712*** 0.956*** 0.970*** 0.771*** 0.711*** (0.182) (0.289) (0.302) (0.191) (0.183) Observation 773 773 773 773 773 Chi2 49.009 20.703 26.787 54.909 60.524 P-values 0.000 0.415 0.141 0.000 0.000 Notes: Standard errors are reported in parentheses. ***, **, and * indicates statistical significance at the 1%, 5% and 10% level respectively. Refer to Table 14.1 for definitions of variables. The results in Table 14.8 show the interaction between financial literacy and inclusion on the level of income. From the results, there is a positive impact of the interaction between financial inclusion indicators (account ownership, savings and usage of account) and financial literacy on income. The positive relationship implies that the ownership of an account resulting from financial education places individuals in a better position to be wealthy. Also, indi- viduals who have built a saving attitude through the acquisition of financial Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development314 knowledge stand a better chance of prospering than those who do not. Finally, individuals who exhibit knowledge of finance through the frequent usage of accounts for various transactions also have a financial advantage over those who do not. Savings and investments have a positive significant effect on income. This implies that individuals who save and invest are more likely to earn more income. Table 14.8 The sensitivity of livelihood to financial literacy and financial inclusion (income) (1) (2) (3) (4) (5) lnincome lnincome lnincome lnincome lnincome FinLit*Accto 0.0374** (0.0167) FinLit*Saving 0.118* (0.0621) FinLit*Freqwith 0.121 (0.0749) FinLit*Upmt 0.0460** (0.0213) FinLit*Credit 0.0381 (0.0380) Age -0.238*** -0.294*** -0.198*** -0.201*** -0.201*** (0.0606) (0.0906) (0.0648) (0.0558) (0.0570) Age2 0.0402*** 0.0494*** 0.0330*** 0.0348*** 0.0349*** (0.0102) (0.0151) (0.0111) (0.00934) (0.00968) LnHHsize 0.0859*** 0.109*** 0.0278 0.0723*** 0.0810*** (0.0214) (0.0371) (0.0396) (0.0217) (0.0209) Urban 0.0251 0.0673* -0.00532 0.0212 0.0284 (0.0214) (0.0387) (0.0311) (0.0219) (0.0208) Marriage status 0.0246 0.00184 0.00409 0.0130 0.0185 (0.0232) (0.0355) (0.0326) (0.0238) (0.0225) Gender -0.0186 0.000816 -0.0583 -0.0164 -0.0113 (0.0209) (0.0271) (0.0421) (0.0210) (0.0198) Education -0.0278 -0.0510 -0.0350 0.0147 0.0424 (0.0454) (0.122) (0.0660) (0.0511) (0.0345) Christian 0.0611** 0.0263 0.0310 0.0507** 0.0589*** (0.0239) (0.0416) (0.0397) (0.0241) (0.0227) Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive finance, financial literacy and livelihood activities 315 (1) (2) (3) (4) (5) lnincome lnincome lnincome lnincome lnincome Risk -0.00719 -0.0239 -0.00428 -0.00270 -0.0145 (0.0129) (0.0188) (0.0175) (0.0140) (0.0119) Greater Accra -0.0298 -0.0598 -0.0652 -0.0375 -0.0154 (0.0356) (0.0526) (0.0516) (0.0377) (0.0338) Western -0.0643* -0.0895 -0.107** -0.0521 -0.0599* (0.0373) (0.0568) (0.0511) (0.0399) (0.0358) Eastern -0.0688* -0.0617 -0.139** -0.0667* -0.0723** (0.0361) (0.0507) (0.0572) (0.0378) (0.0347) Volta -0.0425 -0.0702 -0.101* -0.0364 -0.0509 (0.0406) (0.0591) (0.0601) (0.0421) (0.0393) Ashanti 0.00403 -0.0195 0.0168 -0.00356 0.00860 (0.0438) (0.0614) (0.0474) (0.0456) (0.0424) Northern -0.0307 -0.273 0.0444 -0.165* -0.00930 (0.0645) (0.192) (0.0516) (0.0978) (0.0693) Upper West -0.0894** -0.0496 -0.133*** -0.0950** -0.0866** (0.0373) (0.0603) (0.0490) (0.0391) (0.0363) Upper East -0.0469 -0.0625 -0.0741 -0.00931 -0.0238 (0.0478) (0.0667) (0.0603) (0.0481) (0.0457) Sav and Inv 0.0184* -0.0155 0.0167 0.00975 0.0266*** (0.0111) (0.0275) (0.0153) (0.0137) (0.00989) Credit card 0.0166 -0.00400 -0.0190 -0.0126 -0.142 (0.0186) (0.0316) (0.0354) (0.0256) (0.166) Constant 9.136*** 9.321*** 9.329*** 9.179*** 9.154*** (0.0993) (0.196) (0.173) (0.111) (0.102) Observation 749 749 749 749 749 Chi2 77.220 40.149 52.686 75.188 79.902 P-values 0.000 0.005 0.000 0.000 0.000 Notes: Standard errors are reported in parentheses. ***, **, and * indicate statistical significance at the 1%, 5% and 10% level respectively. Refer to Table 14.1 for definitions of variables. CONCLUDING REMARKS This paper contributes to the literature by providing empirical evidence on how financial literacy affects the relationship between financial inclusion and livelihood activities of people in Ghana. We find the following results: first, financial education increases financial inclusion in Ghana. This outcome is consistent with prior studies. That is, the level of financial knowledge Mohammed Amidu, Joshua Yindenaba Abor, and Haruna Issahaku - 9781800376380 Downloaded from https://www.elgaronline.com/ at 04/25/2024 02:08:06PM via University of Ghana Inclusive financial development316 individuals have accrued on how to manage their finance influences them to own and use their bank account for various transactions. Second, the results show that financial inclusion improves livelihood. However, no relationship exists between financial education and livelihood. Finally, the results also show that livelihood is sensitive to the interaction between financial inclusion and financial literacy. We thus conclude that inclusive finance resulting from the acquisition of financial knowledge promotes sustainable livelihoods in Ghana. Therefore, both financial inclusion and literacy are relevant tools for sustainable development at the individual level. Following the results obtained from this study, domestic policy makers in Ghana are strongly encouraged to be mindful of the fact that financial inclusion when combined with financial literacy can be a powerful tool for fostering sustainable livelihoods. REFERENCES Abor, J. Y., Amidu, M., and Issahaku, H. (2018a). Mobile telephony, financial inclu- sion and inclusive growth. Journal of African Business, 19(3), 1–24. Abor, J. Y., Issahaku, H., Amidu, M., and Murinde, V. (2018b). Financial Inclusion and Economic Growth: What Do We Know? Working Paper Series No.11/2018. Centre for Global Finance. Abu., B. 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