Impact of financial literacy on financial inclusion and household financial decisions: exploring the role of ICTs

The objective of this paper is to assess the extent of financial literacy and the impact of access to and use of ICTs (information and communication technologies) on household financial decisions, such as savings, retirement planning, household budgeting, and engagement in financial markets. This study analyzes survey data collected from 409 households belonging to the low- and middle-income brackets across four cities in Pakistan. By employing probit model, it finds that a higher level of (advanced) financial literacy is associated with an increased likelihood of improved savings and household budgeting. However, the overall financial literacy score (basic plus advanced) is associated only with savings decision. Additionally, the results reveal that the ICTs adoption plays a role in influencing decisions related to financial market participation and savings. The results also show that financial literacy, along with ICTs, positively influences financial market participation and retirement decisions. Nevertheless, results suggest mixed impacts of financial literacy and ICTs on financial decisions which lends partial support to the study hypotheses. In conclusion, our results underscore the importance of financial literacy alongside ICT adoption to promote financial market participation and improve household financial management.