Essays On Financial Inclusion And Benefits Of Simple Financial Innovations

An inclusive financial system has the potential to economically empower low-income individuals by offering them tools for better financial management through increased security, ease of access, and convenience. Understanding the impact of financial initiatives that target the poor is therefore an important area of research, to which my thesis contributes.

Chapter One of my thesis uses nationwide panel data from South Africa to study the impact of extending formal financial access to the poor. I exploited the natural experiment, where about a quarter of the population automatically received a simple bank account through a debit card following a switch in cash transfer distribution methods from cash to card. I find that the debit card decreases the probability of owning a bank account by 20 percentage points for younger adults and increases ownership of store cards by 70 percentage points. This study suggests that simple financial innovations like debit cards are more suitable for the poor compared to conventional products.

Chapter Two looks at the impact of debit cards on intra-household consumption patterns and female bargaining power in the household. I show that debit cards increase women’s control over daily household expenditures by 18 percentage points and children’s schooling decisions for younger women by 19 percentage points, and subsequently, reduce household expenditure on vices such as alcohol and cigarettes by 15 percentage points. This points towards greater control over funds offered by the card.

The final chapter of my thesis is a joint work that uses experimental data from two rural districts in Malawi. We study the impact of mobile money and financial literacy training reinforced by text-message reminders on mobile money knowledge, mobile money use, and financial inclusion among VSLA members. We find that our intervention positively and significantly influenced individuals’ knowledge and use of mobile money and their level of financial inclusion.