The impact of financial literacy on financial inclusion : beyond standard financial instruments

In this paper, we explore the relationship between financial literacy and a range of financial inclusion outcomes at the country level. Unlike Grohmann et al. (2018), who consider standard financial instruments as proxies for financial inclusion, we consider further instruments regarding digital payments. Using cross-sectional countrylevel data from the 2014/2015 Global Financial Literacy Survey alongside with other corresponding country-level economic and financial indicators as well as extensive regression analysis, we show that financial literacy is an important determinant of the use of digital payments as well as other standard financial instruments. The results of the quantile regression analysis further show that the effect of financial literacy is not uniform across the distribution of the financial inclusion instruments. Our results confirm the growing importance of financial literacy in the complex world of finance.