Financial literacy and its determinants: the case of rural farm households in Ghana
ISSN: 0002-1466
Article publication date: 17 August 2021
Issue publication date: 7 July 2022
Abstract
Purpose
This paper aims to examine the determinants of rural dwellers financial literacy in Ghana.
Design/methodology/approach
A cross-sectional primary data set was used to estimate the factors influencing rural farm households' financial literacy using the IV-Tobit model.
Findings
The findings reveal that most rural residents are financially illiterate. The econometrics model results depicted that respondents' socioeconomic and demographic characteristics such as gender, income, age and education significantly affect financial literacy. Again, respondents who are risk seekers and listen or watch education programs are more likely to be financially literate.
Research limitations/implications
The paper examined the determinants of rural dwellers financial literacy in four regions in Ghana. Future research should consider all or many regions for an informed generalization of findings.
Practical implications
This paper provides evidence that rural dwellers are financially illiterate and it would require the policymakers or non-governmental organizations (NGOs) to establish a village or community group that comprises a wide range of bankers and government officials to help rural dwellers acquire some financial skills. Also, the positive relationship between media (whether respondent watches or listens to educational programs) and financial literacy implies that policymakers should focus on improving individuals' financial knowledge through training programs and utilize the media as a channel to propagate financial education to the public.
Originality/value
Although previous studies have examined the determinants of financial literacy, little is known in developing countries and, in particular, rural communities. The authors fill this gap by contributing to the scanty existing literature in developing countries in several ways. First, this is the first study to examine the financial literacy level of rural dwellers in Ghana. Second, to not undermine the credibility of the estimation results, this study addresses the potential endogeneity issue, which other researchers have not adequately recognized. Finally, the study expands the scant literature on the subject and provides critical policy implications that will help policymakers formulate financial market policies that will contribute to rural dwellers financial literacy enhancement.
Keywords
Acknowledgements
The authors gratefully acknowledge financial support Soft-Science Program of Sichuan Department of Sci-Technology (18RKX0773). The authors also extend great gratitude to the anonymous reviewers and editors for their helpful review and critical comments. Finally, the authors want to thank all the rural dwellers who participated in the data collection.
Funding: This work was supported by Sichuan Agriculture University and Soft-Science Program of Sichuan Department of Sci-Technology under the study of Theory, Mechanism and Policy for the Coupling of Modern Agric-Technology Innovation and Financial innovation (18RKX0773)
Conflict of interest: There is no conflict of interest.
Data availability statement: The data are not publicly available due to privacy restrictions but will be available on request.
Consent to participate: Participants’ consent were request and received.
Authors’ contributions: All authors have equal contribution.
Citation
Ankrah Twumasi, M., Jiang, Y., Adhikari, S., Adu Gyamfi, C. and Asare, I. (2022), "Financial literacy and its determinants: the case of rural farm households in Ghana", Agricultural Finance Review, Vol. 82 No. 4, pp. 641-656. https://doi.org/10.1108/AFR-06-2021-0078
Publisher
:Emerald Publishing Limited
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