Angola's financial system is underdeveloped, with low bank penetration and a lack of access to essential financial services. Through financial literacy and financial inclusion, people can make informed decisions, better manage their money, access financial services, and improve their financial conditions, with the potential to reduce poverty and boost economic growth. The aim of this chapter is therefore to examine the effect of financial literacy and financial inclusion on financial behavior in Angola. The data was collected through a questionnaire administered to 282 Angolan consumers and was analyzed using structural equation modelling. The results indicated that financial literacy has a positive influence on financial behavior and financial inclusion. On the other hand, this study also revealed that financial inclusion does not influence financial behavior. The research contributes to the literature by supporting previous studies on the effect of financial literacy on financial behavior.
TopIntroduction
Financial literacy and financial inclusion have a major impact on financial behavior. Financial literacy is crucial for the survival of every human being in society (Pangestu & Karnadi, 2020). Economies around the world increasingly see financial literacy as a fundamental pillar for the development of financial systems (Jariwala & Sharma, 2016). Financial literacy can be a long-term process and requires a lot of effort at the individual, governmental and institutional levels (Çera et al., 2021). Financial literacy broadly refers to the ability to understand financial concepts and awareness of products and institutions, along with the ability to manage one's own money (Lahiri & Biswas, 2022).
Previous studies have been conducted on financial literacy (Adetunji & David-West, 2019; Lusardi & Mitchell, 2007; Pangestu & Karnadi, 2020). The aim of financial literacy is to impart new knowledge, skills and attitudes that can bring about changes in financial behaviour (Jariwala & Sharma, 2016), by providing consumers with relevant information, fundamental knowledge and appropriate skills to evaluate their savings and investment options, enabling them to understand the implications of alternative decisions that can significantly improve their financial behaviour (Jariwala & Sharma, 2016; Lahiri & Biswas, 2022).
To improve any individual's financial behaviour, without a doubt, one of the most significant processes is to provide financial education and increase financial literacy (Bhandare et al., 2021). Financial education helps in making financial decisions. Therefore, a model that facilitates financial literacy plays an essential role in improving financial behaviour (Bhandare et al., 2021).
Lack of financial literacy and financial inclusion can have a significant impact on people's financial behaviour. The most common impacts include excessive indebtedness; insufficient savings; lack of financial planning; lack of understanding of financial products and socio-economic inequalities.
Studies in behavioural economics suggest that financial behaviour is significantly related to educational level (Jariwala & Sharma, 2016). Furthermore, in order to bring about the desired changes in behaviour, education depends on gathering information, developing skills and motivating people at the right time.
It was found that financial behaviour improves as financial inclusion improves, along with attitude and financial knowledge (Çera et al., 2021). In addition, financial attitude and behaviour positively affect financial advice, while financial knowledge does not affect financial advice (Çera et al., 2021). Attitude involves an individual's judgement about whether the intended behaviour or desired outcome is good or bad and also whether the individual is for or against it (Ajzen, 1991).
Thus, high levels of financial literacy and a positive financial attitude among individuals stimulate greater feelings of empowerment and evaluative judgement when making financial decisions in terms of savings, credit, insurance and remittances (Mindra & Moya, 2017). In addition, financial knowledge has gained significant traction among policymakers, as it is observed that an individual with a higher level of financial knowledge is likely to be good at making financial decisions (Singh, 2022).
On the other hand, financial knowledge plays an important role in how individuals behave in aspects of everyday life that require them to formulate plans and make decisions (Chauhan & Indapurkar, 2020). However, financial knowledge allows us to make more prudent and informed financial decisions (Singh, 2022).
Previous literature has acknowledged that financial education influences individuals' financial behaviour (Chauhan & Indapurkar, 2020; Reyers, 2019; Singh, 2022). On the other hand, most scholars exploring the impact of financial education on financial behaviour have collected data in Asian countries (Bhandare et al., 2021; Iramani & Lutfi, 2021; Jariwala & Sharma, 2016; Pangestu & Karnadi, 2020; Sevriana et al., 2022; Singh, 2022).