Open Access

Can People Trust What They Don‘t Understand? Role of Language and Trust for Financial Inclusion

Aleksandra Nagańska
Aleksandra Nagańska
 and 
Stanisław Cichocki
Stanisław Cichocki
   | Jul 30, 2022
Central European Economic Journal's Cover Image
About this article
Previous Article
Next Article
Cite
Published Online: Jul 30, 2022
Page range: 132 - 157
DOI: https://doi.org/10.2478/ceej-2022-0009
Keywords
© 2022 Aleksandra Nagańska et al., published by Sciendo
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Figure 1

Mean financial inclusion scores vs GDP – access (upper figure) and use (lower figure)Source: Own calculations
Mean financial inclusion scores vs GDP – access (upper figure) and use (lower figure)Source: Own calculations

Figure 2

Quantile regression results – country levelSource: Own calculations.
Quantile regression results – country levelSource: Own calculations.

Probit Model: Determinants of the Lack of Trust

Probit: No account because of lack of trust
Marginal Effect Standard Error
Age 0.001*** 0.000
Female −0.029*** 0.004
Education level
Secondary 0.001 0.005
Tertiary or more −0.016 0.010
Income quantile
Second 20% −0.001 0.007
Middle 20% 0.004 0.007
Fourth 20% −0.002 0.007
Richest 20% 0.020*** 0.007
fin_literacy 0.00038* 0.000
easy_lang 0.005 0.005
lang_div −0.003 0.009
Lgdp 0.017*** 0.002
Inflation −0.006*** 0.000
bank_zscore 0.001*** 0.000
Number of observations 35,150
Mean dependent variable 0.213
Standard deviation of the dependent variable 0.409
Pseudo R-squared 0.013
Chi-square 490.479
p-value 0.000

Instrumental Approach: Determinants of Financial Inclusion

Access score Use score Probit: having an account
Coefficient Standard Error Coefficient Standard Error Marginal Standard Error
Age −0.012*** 0.001 0.012*** 0.000 0.006*** 0.000
Female 0.487*** 0.037 0.147*** 0.015 −0.155*** 0.014
Education level
Secondary −1.067*** 0.050 −0.348*** 0.020 0.284*** 0.019
Tertiary or more −2.292*** 0.063 −0.867*** 0.025 0.863*** 0.028
Income quantile
Second 20% −0.367*** 0.063 −0.149*** 0.025 0.091*** 0.022
Middle 20% −0.651*** 0.062 −0.276*** 0.025 0.170*** 0.022
Fourth 20% −1.006*** 0.061 −0.380*** 0.025 0.278*** 0.023
Richest 20% −1.539*** 0.061 −0.561*** 0.024 0.474*** 0.024
easy_lang 0.724*** 0.053 −0.026 0.022 −0.160*** 0.019
fin_literacy −0.031*** 0.002 −0.034*** 0.001 0.012*** 0.001
Lgdp −0.526*** 0.032 −0.156*** 0.013 0.265*** 0.014
Inflation 0.081*** 0.006 −0.009*** 0.002 −0.019*** 0.002
bank_zscore 0.047*** 0.002 0.004*** 0.001 −0.012*** 0.001
bank_trust −0.921*** 0.052 0.093*** 0.021 0.297*** 0.014
lang_div −0.257***
First stage F statistic 138.955
_cons 12.288*** 0.238 3.929*** 0.095
Number of observations 41,455 41,455 41,455
Hausman–Wu test: p = 0,000 p = 0,006 Wald test: p = 0,000
Weak instruments test: p = 0,000 p = 0,000

Linear Regression: Country Level

Percentage of people aged 15+ having an account at a formal institution Mean access score Mean use score
Coefficient Standard Error Coefficient Standard Error Coefficient Standard Error
credit_info 0.018*** 0.005 −0.100** 0.046 −0.003 0.018
fin_literacy 0.002* 0.001 −0.036*** 0.011 −0.026*** 0.004
lang_div 0.068 0.476 −0.059 0.399 −0.096 0.156
bank_zscore −0.003* 0.001 0.021* 0.012 −0.001 0.005
Lgdp 0.157*** 0.015 −1.029*** 0.123 −0.177*** 0.048
Inflation 0.000 0.004 0.000 0.029 −0.014 0.012
easy_lang −0.023 0.029 0.296 0.244 0.186** 0.095
_cons −0.941*** 0.110 13.51*** 0.923 4.03*** 0.360
Number of observations 120 120 120
Mean dependent variable 0.611 2.719 1.455
Standard deviation of the dependent variable 0.294 2.213 0.704
R-squared 0.79 0.74 0.58
F-test 60.05 45.26 24.65
p-value 0.000 0.000 0.000
RESET test 0.047 0.1356 0.0041
Breusch–Pagan test 0.0345 0.0272 0.2180
Jarque–Bera test 0.0646 0.923 0.7997

Variables and Data Sources

Variable name Indicator Year Data source
Access score Measure of willingness to own one or many financial products. Lower values indicate higher willingness. 2017 Own calculations, Global Findex Database 2017
Use score Measure of willingness to use one or many financial products in the past 12 months. Lower values indicate higher willingness. 2017
inclusion_inst Percentage of population over the age of 15 having an account at a formal financial institution. 2017 Global Findex Database 2017
fin_literacy Percentage of adults who are financially literate. 2015* Klapper et al. (2015)
bank_trust Percentage of adults who have a “great deal” or “quite a lot” of trust towards banks. 2017–2020 World Values Survey (wave 7)
credit_info Index measures the availability and quality of credit information. Scores range from 0 to 8, with higher values indicating better access to information. 2017 World Bank
bank_zscore Bank's Z-score; probability of country's banking system default. 2017
Lgdp Logarithm of gross domestic product per capita, current USD. 2017
Iflation Inflation rate, consumer prices (annual, %). 2016**
lang_div Language diversity; probability of two people – randomly chosen from the population – to have different mother tongues. 2017 SIL
easy_lang Binary variable; takes 1 if banks are required by law to provide parts of information in plain and/or local language and 0 in other cases. 2017 Financial Inclusion Consumer Protection Survey
Female Binary variable; takes 1 if respondent is female and 0 if male. 2017 Global Findex Database 2017
Age Respondent's age. 2017
Education level Respondent's highest level of education; 1= completed primary or less, 2= secondary, 3 = completed tertiary or more. 2017
Income quantile Indicates the income quantile to which given respondent belongs. 2017

Linear Regression: Individual Level—Model III and Model IV

Access score Use score Probit: has an account at financial institution
Model III Model IV Model III Model IV Model III Model IV
Coefficent Standard Error Coefficent Standard Error Coefficent Standard Error Coefficent Standard Error Marginal Effect Standard Error Marginal Effect Standard Error
Age −0.016*** 0.000 −0.014*** 0.000 0.012*** 0.000 0.012*** 0.000 0.002*** 0.000 0.002*** 0.000
Female 0.434*** 0.033 0.465*** 0.034 0.151*** 0.015 0.154*** 0.015 −0.042*** 0.004 −0.046*** 0.004
Education level
Secondary −1.341*** 0.044 −1.268*** 0.044 −0.358*** 0.019 −0.328*** 0.019 0.132*** 0.005 0.119*** 0.005
Tertiary or more −2.411*** 0.056 −2.285*** 0.056 −0.924*** 0.025 −0.860*** 0.025 0.279*** 0.007 0.268*** 0.006
Income quantile
Second 20% −0.340*** 0.057 −0.405*** 0.056 −0.150*** 0.025 −0.150*** 0.025 0.033*** 0.007 0.034*** 0.006
Middle 20% −0.707*** 0.056 −0.722*** 0.056 −0.268*** 0.025 −0.274*** 0.025 0.061*** 0.007 0.064*** 0.006
Fourth 20% −1.057*** 0.056 −1.089*** 0.055 −0.360*** 0.025 −0.377*** 0.024 0.094*** 0.007 0.099*** 0.006
Richest 20% −1.633*** 0.055 −1.676*** 0.054 −0.536*** 0.024 −0.557*** 0.024 0.157*** 0.006 0.162*** 0.006
bank_zscore 0.036*** 0.002 0.035*** 0.002 0.003*** 0.000 0.004*** 0.001 −0.008*** 0.000 −0.002*** 0.000
Lgdp −1.289*** 0.018 −0.729*** 0.026 −0.425*** 0.008 −0.129*** 0.012 0.155*** 0.002 0.101*** 0.003
Inflation −0.013*** 0.004 0.016*** 0.004 −0.010*** 0.002 −0.002 0.002 0.003*** 0.000 0.000 0.000
fin literacy −0.056*** 0.002 −0.033*** 0.000 0.006*** 0.000
credit_info −0.136*** 0.010 0.021*** 0.005 0.015*** 0.001
easy_lang 0.304*** 0.042 0.023 0.019 −0.017*** 0.005
bank_trust 0.074*** 0.010 0.148*** 0.010 0.009* 0.005 0.034*** 0.005 −0.008*** 0.001 −0.013*** 0.001
_cons 16.216*** 0.168 13.502*** 0.208 5.394*** 0.075 3.883*** 0.092
Number of observations 41 455 41 455 41 455 41 455 41 455 41 455
Adjusted R-squared 0.2695 0.2850 0.1668 0.1942 0.2521 0.2682
F-statistic or LR chi2 for probit 1275.31 1102.48 691.25 667.06 13088 13923.93

Linear Regression: Individual Level—Model I and Model II

Access score Use score Probit: has an account at financial institution
Model I Model II Model I Model II Model I Model II
Coefficent Standard Error Coefficent Standard Error Coefficent Standard Error Coefficent Standard Error Marginal Effect Standard Error Marginal Effect Standard Error
Age −0.014*** 0.000 −0.013*** 0.000 0.012*** 0.000 0.012*** 0.000 0.002*** 0.000 0.002*** 0.000
Female 0.474*** 0.021 0.474*** 0.021 0.181*** 0.009 0.164*** 0.009 −0.045*** 0.002 −0.043*** 0.002
Education level
Secondary −1.637*** 0.026 −1.574*** 0.026 −0.295*** 0.012 −0.306*** 0.012 0.157*** 0.003 0.146*** 0.003
Tertiary or more −2.603*** 0.035 −2.500*** 0.035 −0.903*** 0.016 −0.898*** 0.016 0.312*** 0.004 0.301*** 0.004
Income quantile
Second 20% −0.433*** 0.035 −0.426*** 0.035 −0.143*** 0.016 −0.142*** 0.016 0.034*** 0.004 0.034*** 0.004
Middle 20% −0.681*** 0.035 −0.665*** 0.035 −0.227*** 0.016 −0.227*** 0.016 0.056*** 0.004 0.056*** 0.004
Fourth 20% −1.001*** 0.034 −0.998*** 0.034 −0.325*** 0.016 −0.323*** 0.015 0.090*** 0.004 0.090*** 0.004
Richest 20% −1.598*** 0.034 −1.578*** 0.034 −0.465*** 0.015 −0.464*** 0.015 0.151*** 0.004 0.149*** 0.004
bank_zscore 0.031*** 0.001 0.025*** 0.001 0.006*** 0.001 0.002*** 0.000 −0.002*** 0.000 −0.002*** 0.000
Lgdp −1.006*** 0.009 −0.725*** 0.012 −0.296*** 0.004 −0.134*** 0.005 0.123*** 0.001 0.097*** 0.001
Inflation −0.004* 0.003 0.016*** 0.003 −0.017*** 0.001 −0.013*** 0.001 0.002*** 0.000 0.000*** 0.000
fin literacy −0.041*** 0.001 −0.029*** 0.000 0.005*** 0.000
credit_info −0.067*** 0.005 0.006*** 0.002 0.007*** 0.001
easy_lang 0.272*** 0.026 0.128*** 0.011 −0.040*** 0.003
bank_trust
_cons 12.906*** 0.083 12.905*** 0.083 4.092*** 0.037 3.633*** 0.038
Number of observations 110 660 106 021 110 660 106 021 110 660 106 021
Adjusted R-squared 0.2958 0.3110 0.1412 0.1845 0.2901 0.3071
F-statistic or LR chi2 for probit 4226.15 3418.81 1654.39 174.29 42084.85 42171.33

Financial Inclusion Scores Breakdown

Variable name Survey question
Access score
fin3 if has debit card: card in own name
fin7 has credit card
fin24 possibility of coming up with emergency funds
Account has an account
Use score
fin5 used mobile phone or internet to access account at a financial institution
fin6 used mobile phone or internet to check account balance
fin8 if has credit card: used card in past 12 months
fin4 if has debit card: used card in past 12 months
Borrowed borrowed in the past year
Saved saved in the past year
eISSN:
2543-6821
Language:
English
Publication timeframe:
Volume Open
Journal Subjects:
Business and Economics, Political Economics, Economic Theory, Systems and Structures, Microeconomics, Macroecomics, Economic Policy
Journal RSS Feed