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Does Financial Literacy Improve Financial Inclusion in Developing Countries? A Nonlinearity and Quantile Regression Analysis

Author

Listed:
  • Abd Rahim Md Jamil

    (School of Business and Economics, Universiti Putra Malaysia)

  • Siong Hook Law

    (School of Business and Economics, Universiti Putra Malaysia)

  • Mohamad Fazli Sabri

    (Faculty of Human Ecology, Universiti Putra Malaysia)

  • Mohamad Khair Afham

    (School of Business and Economics, Universiti Putra Malaysia)

Abstract

This study investigated the nexus between financial literacy and financial inclusion using the cross-section threshold regression model and the quantile regression technique. The sample covered 73 developing countries categorised as lower-middleincome or upper-middle-income economies. The main results of the threshold model revealed that financial literacy had no inverted U-shaped effect on financial inclusion in the sample of developing countries. This situation indicated that financial literacy had a linear or monotone relationship with financial inclusion. The quantile regression model was used to compare the findings in this investigation. The empirical result indicated that the financial literacy variable had a limited impact on the conditional distribution of financial inclusion. However, the coefficient values were much larger at high than low quantiles. This study’s results are necessary for policymakers and financial institutions to implement financial literacy programs targeted at specific behaviours and underserved populations in developing countries.

Suggested Citation

  • Abd Rahim Md Jamil & Siong Hook Law & Mohamad Fazli Sabri & Mohamad Khair Afham, 2023. "Does Financial Literacy Improve Financial Inclusion in Developing Countries? A Nonlinearity and Quantile Regression Analysis," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 60(2), pages 189-214, December.
    • Handle: RePEc:mjr:journl:v:60:y:2023:i:2:p:189-214
    DOI: 10.22452/MJES.vol60no2.3
    as

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    More about this item

    Keywords

    Financial literacy; financial inclusion; threshold estimation; quantile regression estimation;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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