The role of financial literacy in promoting financial inclusion

Financial literacy plays an enormous role in enhancing inclusive finance by providing consumers with the skills and knowledge needed to access and utilize formal financial products and services efficiently. As one of the most critical challenges for financial inclusion, this research investigates the effect of financial literacy on financial inclusion in Sub-Saharan East African countries reported by the global Findex data base (2021). In developing African countries majority of the population, especially in rural areas remains out of service from formal financial institution system. Utilizing Data from the World Bank's Global Findex database (2021), the study employs logistic regression to analyze how financial literacy and other related variables impacts financial inclusion (access to formal bank account). The study also includes essential inclusion barriers such as structural obstacles, socio-cultural factors and economic levels to assess their moderating impacts on financial inclusio. The study finds that financial literacy proxied as educational level significantly improves financial inclusion, yet its influence is constrained by contingent barriers for each circumstance of the country. The study revealed that most barriers such as poverty, lack of necessary documentation and distance from formal financial institution are significantly impact financial inclusion. The research also highlights the need for integrated policy interventions that combine financial education with tackling inclusion barriers to provide appropriate financial products and services to the unprivileged population in the country.