in the Masvingo Province of Zimbabwe
FEATURED PAPER
By Norman Marime, Rabson Magweva, Farai Don Dzapasi
Great Zimbabwe University
Masvingo. Zimbabwe
ABSTRACT
Financial literacy has been acknowledged as a key skill for individuals who are entrenched in a progressively composite financial setting. Financial literacy helps individuals make more self-assured and proficient decisions in their lives. That there is a nexus between a financially literate populace and economic growth can never be in doubt. Notwithstanding its importance, many studies specify that much of the world’s population writhes from financial illiteracy.
This study has as its central theme in developing a logistic regression model that explains the influence of demographic factors on financial literacy levels. The study made use of crosssectional data collected from 260 respondents all from Masvingo province, Zimbabwe. This study analyzed the influence of demographic variables, which include age, household income, educational levels, gender and geographical location on financial literacy in Zimbabwe.
The study confirms age and educational levels as significantly influencing financial literacy. However, the study found out that geographical location, income and age do not influence financial literacy in Zimbabwe. Based on the results, the study recommends that financial literacy centres be opened by all banks with focus on the spread of financial literacy, to create awareness about financial products and provision of counselling facilities for customers of banks.
Key phrases: demographic variables; financial literacy; logit regression model; multi-currency era
The banking sector and financial industry at large has been advancing technologically and coming up with complex financial products for the past decades. Despite these innovations, the intended consumers of these products are rarely indicating significant interest in the same. The slow uptake of financial products and services could be as a result of financial illiteracy which is influenced by demographic factors such as age, gender, living standards income, education and geographical location. The level of financial literacy significantly affects investment and financial decision making thereby affecting the economic well-being of the participants and the whole economy at large.
In low income African countries such as Sudan, Kenya and Uganda, financial literacy is limited, resultantly complex financial consumer products are typically accessible only to a small percentage (Lisa & Bilal 2012: Miller, Godfrey, Levesque & Stark2009), noted that developing countries have low levels of financial literacy as indicated, for example, by half of farm labourers surveyed in India who store their cash at home. Financial Scope Botswana Report (2009) shows that financial literacy in most emerging economies is still very low, with 11% of the population in Tanzania using formal financial services, 23% in Zambia, Mozambique 11%, Malawi 26% and Kenya 41%. According to Gono (2013), Zimbabwe’s financial literacy rate has been recorded at 40%.
Financial literacy in Zimbabwe has recently gained the attention of financial institutions, government agencies, grass-roots consumers and community interest groups. Interested stakeholders are concerned with the fact that consumers lack working knowledge on financial concepts and do not have the tools they need to make decisions most expedient to their economic and financial well-being. Such financial literacy insufficiencies have been morbid to the financial system and proved hurtful to the Zimbabwean economy at large. As such, it becomes necessary to expose the demographic factors which affect financial literacy in developing nations such as Zimbabwe. The results of this study will go a long way in aiding interested stakeholders and policy makers when designing their outreach programs to enhance and improve financial literacy among citizens.
Financial literacy is the ability of one person to understand and make use of financial concepts according to Lusardi & Mitchell 2014. In support of this, PISA 2012 defined financial literacy as the knowledge to understand financial concepts and risks. This knowledge includes the basic components of financial products and services for example insurance policies, and pensions schemes. PISA 2012 went on describe financial literacy as the skills, confidence and knowledge an individual possess in order to make effective decisions on different financial contexts in order to better their financial well-being and the society at large. These skills include the ability to compare information, extrapolate and evaluate information in the financial context. Hastings, Madrian, Skimmyhorn2013 referred to financial literacy as the knowledge one has on financial products and concepts and also the mathematical skills of numeracy required for making sound financial decisions and being involved in activities like financial planning.
Calvet, Campbell &Sodini2009 noted that financial literacy is the ability individuals have in their understanding of how money works, how to manage money, how to invest money in order to turn it into more. It had been discovered that financial knowledge was regarded as the ability people have to take necessary actions on issues which affect their financial wealth and financial well-being. Financial knowledge together with financial attitude are considered to be the base for financial literacy.
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How to cite this paper: Marime, N; Mabweva, R.; Dzapasi, F. D. (2020). Demographic determinants of financial literacy in the Masvingo Province of Zimbabwe; PM World Journal, Vol. IX, Issue IV, April. Available online at https://pmworldlibrary.net/wp-content/uploads/2020/03/pmwj92-Apr2020-Marime-Magweva-Dzapasi-demographic-determinants-of-financial-literacy-in-Masvingo.pdf
About the Authors
Norman Marime
Great Zimbabwe University
Masvingo, Zimbabwe
Norman Marime is a lecturer in the Department of Banking and Finance at the Great Zimbabwe University. He holds a Bachelor of Commerce Honours in Finance from Great Zimbabwe University and Master of Science in Finance from National University of Science and Technology, Zimbabwe.
Rabson Magweva
Great Zimbabwe University
Masvingo, Zimbabwe
Rabson Magweva is a lecturer in the Department of Banking and Finance at the Great Zimbabwe University. He holds a Bachelor of Commerce Honours in Finance from Great Zimbabwe University and Master of Science in Finance from National University of Science and Technology, Zimbabwe.
Farai Don Dzapasi
Great Zimbabwe University
Masvingo, Zimbabwe
Farai Dzapasi is a lecturer in the Department of Banking and Finance at the Great Zimbabwe University. He holds a Bachelor of Commerce Honours in Finance and Master of Commerce in Finance from Great Zimbabwe University.
