Citation:

Olatubosun Felix JOLAIYA. "Financial Inclusion and Rural Development in Nigeria" International Research Journal of Economics and Management Studies, Vol. 2, No. 4, pp. 630-637, 2023.

Abstract:

Financial inclusion has become a recurring theme in rural development literature since access to financial services has been projected to drive rural development. However, the empirical studies are conflicting. This study investigated the impact of financial inclusion on rural development in Nigeria. The study modeled the GDP per capita (a proxy for rural development) as a function of the variations in the financial inclusion variables (such as rural savings mobilization, banks' rural credits, and the bank lending rate). The study adopted ex post facto research utilizing time series data on the model variables. The unit root test indicated the variables were stationary and integrated of mixed order 1(0) and 1(1). The ARDL Bounds test indicated a long-run relationship between the treatment variable (financial inclusion) and the response variable (rural development proxy by the GDP per capita). The ECM result, as indicated, showed that 0.064421 or 6.44% of the shortrun errors were corrected during each period. The empirical value of the adjusted coefficient of determination (Adjusted R2 = 0.515300) shows that 55.53% of the total variations in rural GDP per capita (PCI) are explained by variations in the financial inclusion variables (rural savings, banks, rural loans, and the lending rate (interest) rate). The summary of the major findings of the study is: rural savings mobilization as a financial inclusion variable has a significant positive impact on rural development in Nigeria, bank rural credit has a significant positive impact on rural development in Nigeria, and bank lending rate has negative but insignificant impact on the rural development in Nigeria. Based on the findings, the study concluded that financial inclusion has a significant positive impact on rural development in Nigeria. Following the outcome of the various tests carried out and the major findings, the researchers, therefore, recommended that there is need for a strategic policy approach to entrenching the provision of financial services (credit facilities) to rural population as it contributes to improving the performance of the rural development; there is need to improve the ability of rural banks in mobilizing savings, this will further the savings culture of rural dwellers, boost rural investments and impact positively on the rural GDP per capita; in addition, financial institutions should be mandated to devise a special lending rate that enhances the access of rural dwellers to credits and other financial services, this will improve financial inclusion penetration and advance the economic development of the subsector.

References:

[1] Abubakar, H. A. (2015). Entrepreneurship development and financial literacy in Africa. World Journal of Entrepreneurship, Management and Sustainable Development, 11(4), 281-294
[2] Ahungwa, G. T, Haruna, U. and Rakiya, Y.A (2014). Trend analysis of the contribution of agriculture to gross domestic product of Nigeria. Journal of Agriculture and Veterinary Science. 7(1), 50-55
[3] Ajzen, I.; Fishbein, M (1980), Understanding attitudes and predicting social behavior, Englewood Cliffs, NJ: Prentice-Hall
[4] Ali, J. I., Jata, S. and Ekpe, M.J (2016). Financial intermediation and agricultural output in Nigeria: an impact analysis of deposit money bank' credit. International Journal of Agric Economics. 1(1), 16-25.
[5] Anne-Laure (2020). Financial innovations, retrieved online www.innovationsmanagement.com
[6] Appoorva (2021). Payments online with ease. Retrieved online at www.paymentsolutions.com
[7] Ashenafi, F. and Mutsonziwa, K. (2021). Financial literacy as a driver of financial inclusion in Kenya and Tanzania. Journal of Risk and Financial Management 14(561), 1-13
[8] Bagozzi, R. P. (2007). The legacy of the technology acceptance model and a proposal for a paradigm shift. Journal of the Association for Information Systems, 8 (4): 244–254
[9] Berg, G., and Zia, B. (2017). Harnessing emotional connections to improve financial decisions: evaluating the impact of financial education in mainstream media. Journal of the European Economic Association, jvw021
[10] CBN, (2015). Central Bank of Nigeria National Financial Literacy Framework National Financial Literacy Framework
[11] Chuttur, M.Y. (2009), Overview of the Technology Acceptance Model: Origins, Developments and Future Directions. Indiana University, USA, Sprouts: Working Papers on Information Systems, archived from the original on 2013-01-12
[12] Cohen, M. & Nelson, C., (2011). Financial literacy: a step for clients towards financial inclusion. global microcredit summit. Commissioned Workshop Paper, pp.14–17.
[13] Davis, F. D. (1989), "Perceived usefulness, perceived ease of use, and user acceptance of information technology. MIS Quarterly, 13 (3): 319– 340
[14] Davis, F. D.; Bagozzi, R. P.; Warshaw, P. R. (1989), "User acceptance of computer technology: comparison of two theoretical models. Management Science, 35 (8): 982 1003
[15] Demirgüç-Kunt, A., Klapper, L. F., Singer, D., Ansar, S., and Hess, J. (2018). The Global Findex Database 2017: Measuring financial inclusion and the fintech revolution. The WorldBank.
[16] Dewi, V. I., Febrian, E., Effendi, N., Anwar, M., and Nidar, S. R. (2020). Financial literacy and its variables: The evidence from Indonesia. Economics and Sociology, 13(3), 133154.
[17] Enhancing Financial Innovation and Access (EFIA). 2017. Key Findings: EFInA Access to Financial Services in Nigeria 2016 Survey. EFInA: Lagos.
[18] Fan, Z., and Zhang, R. (2017). Financial inclusion, entry barriers, and entrepreneurship: evidence from China. Sustainability, 9(2), 191-203.
[19] FINCA (2021). Financial inclusion issues and challenges. www.finca.org
[20] Grohmann, A., Klühs, T., and Menkhoff, L. (2018). Does financial literacy improve financial inclusion? Cross country evidence. World Development, 111, 84-96.
[21] Hogarth, J. M., and Hilgert, M. A. (2002). Financial knowledge, experience and learning preferences: Preliminary results from a new survey on financial literacy. Consumer Interest Annual, 48(1), 1-7
[22] Huston, Sandra J. (2010). Measuring financial literacy. Journal of Consumer Affairs 44: 296 316
[23] Intermedia. (2016). Wave 3 Report Financial Inclusion Insights Tracker Survey Nigeria. Intermedia: Washington, D.C
[24] Iriobe, O. C. and Iriobe, G. O. (2017). Financial literacy and financial inclusion for entrepreneurship development in Nigeria. West African Journal of Business and Management Sciences 7(1), 63-69
[25] Johnson, E. and Sherraden, M.S., (2007). From financial literacy to financial capability among youth. Journal of Sociology & Social Welfare, XXXIV(3), pp.119–147
[26] Kaiser, T., and Menkhoff, L. (2017). Does financial education impact financial literacy and financial behavior, and if so, when? World Bank Economic Review, 31(3), 611-630.
[27] Klapper, L., and Lusardi, A. (2020). Financial literacy and financial resilience: evidence from around the world. Financial Management, 49(3), 589-614.
[28] Lusardi, Annamaria, and Olivia S. Mitchell. 2014. The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature 52: 5–44.
[29] Michaael,O. B (2016). Achieving Sustainable Economic Development in Nigeria through Financial Inclusion in Agriculture Sector. Journal of Global Economics 4(2)
[30] Moore, G. C. and Benbasat, I (1991). Development of an Instrument to Measure the Perceptions of Adopting an Information Technology Innovation. Information Systems Research. 2 (3): 192–222.
[31] Morshadul, H.,Thi, L. and Ariful, H. (2021). How does financial literacy impact on inclusive finance? FinancInnov 7(40)
[32] Muhammad, S. A., Ali, T., Tariq, E., and Farwa, S. (2015). Impact of individualism and collectivism over the individual's technology acceptancebehaviour: A multi-group analysis between Pakistan and Turkey. Journal of Enterprise Information Management. 28 (6): 747–768.
[33] Njoroge, R. M. (2013). Relationship between financial literacy and entrepreneurial success in Nairobi County Kenya. Unpublished MBA Project). Universityof Nairobi, Nairobi, Kenya.
[34] Okoroafor, O.K., Adeniji, S.O. and Awe, E. (2018). Empirical Analysis of the Determinants of Financial Inclusion in Nigeria. Journal of Finance and Economics, 6(1) .19-25.
[35] Olajide O. T., Akinlabi, B. H. and Tijani, A. A. (2012). Agricultural Resources and Economic Growth. European Journal.
[36] Olaniyi, E. (2017). Back to the Land: Impact of Financial Inclusion on Agriculture in Nigeria. Iran Econ. Rev.21(4), 887.
[37] Olubanjo, M. A. and Olayinka, D. (2019). The relative impact of income and financial literacy on financial inclusion in Nigeria. Journal of International Development J. Int. Dev.(2019)
[38] Ozili, P. K. (2020). Financial inclusion research around the world: a review. Forum for Social Economics, 1-23.
[39] Pikkarainen, T.; Pikkarainen, K.; Karjaluoto, H. (2004), "Consumer acceptance of online banking: An extension of the Technology Acceptance Model. Internet Research Electronic Networking Applications and Policy, 14 (3): 224–235
[40] Priyadharshini, S. H. (2017). From financial literacy to financial well-being: a study of the level of financial literacy of women teaching faculty in educational institutions in Coimbatore region. (Doctoral dissertation, Bharathiar University, Coimbatore).
[41] Remund, David L. (2010). Financial literacy explicated: The case for a clearer definition in an increasingly complex economy. Journal of Consumer Affairs 44: 276–95.
[42] Rieger, M. O. (2020). How to Measure Financial Literacy? Journal of Risk and Financial Management, 13(24), 1-14
[43] Scherer, M. J. (2002), Assistive Technology: Matching Device and Consumer for Successful Rehabilitation, Washington, DC: APA Books.
[44] Scherer, M. J. (2005), Living in the State of Stuck, Fourth Edition, Cambridge, MA: Brookline Books.
[45] Udoka, C. O., Mbat, D. O. and Duke, S.B. (2016). Effects of Bank Credit on Agricultural Production in Nigeria. Journal of Finance and Accounting. 4(1), 1-10.
[46] Venkatesh, V. (2000). Determinants of perceived ease of use: Integrating control, intrinsic motivation, and emotion into the technology acceptance model. Information Systems Research, (11). 342–365
[47] Venkatesh, V.; Davis, F. D. (2000), "A theoretical extension of the technology acceptance model: Four longitudinal field studies. Management Science, 46 (2): 186–204
[48] www.statistica.com/volume-of-atm-transactions-Nigeria
[49] Yaroslava, B., Grigolia, M and Keshelava, D. (2018). Financial inclusion, financial literacy, and financial education in Georgia. No. 849 ADBI Working Paper Series, June 2018

Keywords:

Financial Inclusion, Rural Savings, Rural Credits, Rural Development, ARDL.