The Mediating Role of Access to Financial Services in the Effect of Financial Literacy on Household Income: The Case of Rural Ghana

Abstract

The aim of alleviating poverty has a necessary implication on rural households’ economic development. The study investigates the mediating role of access to financial services (AFS) in the effect of financial literacy (FL) on household income using survey data collected from four regions in Ghana. Using the multi-stage sampling technique, 572 respondents were randomly selected for the study. The findings of this study reveal that financial literacy has a robust, increasing effect on household income. Again, the results depict that AFS mediates the positive effect of FL on household income. An interesting moderating effect of social networks is also revealed in the study. This study adds to the existing literature on rural development by exploring how financial education and inclusions contribute to poverty alleviation and provides policy implications to improve rural households’ well-being.