Original Research

Investigating the relationship between financial inclusion and financial health in South Africa

Njabulo Ndaba, Johannes Sheefeni, Derek Yu
Journal of Economic and Financial Sciences | Vol 15, No 1 | a714 | DOI: https://doi.org/10.4102/jef.v15i1.714 | © 2022 Njabulo Ndaba, Johannes Sheefeni, Derek Yu | This work is licensed under CC Attribution 4.0
Submitted: 24 October 2021 | Published: 17 May 2022

About the author(s)

Njabulo Ndaba, Department of Economics, Faculty of Economics Management Sciences, University of the Western Cape, Bellville, South Africa
Johannes Sheefeni, Department of Economics, Faculty of Economics Management Sciences, University of the Western Cape, Bellville, South Africa
Derek Yu, Department of Economics, Faculty of Economics Management Sciences, University of the Western Cape, Bellville, South Africa


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Abstract

Orientation: Financial inclusion (FI) and financial health (FH) are important for the country’s economic development, particularly upliftment of people from the lowerend of income distribution.

Research purpose: The study investigated the relationship between FI and FH in South Africa using FinScope data for 2011 and 2016.

Motivation for the study: Whilst there has been an emergence of South African studies on FI, there is a lack of research on FH and its relationship with FI.

Research approach/design and method: FI index and FH index were derived. The study estimates three regressions, the first in which FI is a dependent variable regressed on determinants, the second in which FH is the dependent variable regressed on FI and other determinants, and the third is a bivariate probit regression in which FI and FH are modelled co-jointly.

Main Findings: The proportion of people who were both financially included and enjoyed good FH increased from 45% to 57%. These people were middle-aged white men employed with post-secondary education. The econometric findings also suggested a significantly positive correlation between FI and FH.

Practical/managerial implications: These findings provide valuable information on the design of FI and FH initiatives that specifically focus on the needs of the under-privileged and assist in understanding and making informed decisions on the implementation and provision of appropriate FI and FH measures to targeted individuals.

Contribution/value-addition: This is the first South African study that examined both FI and FH with FinScope data.


Keywords

financial inclusion; financial health; financial development; FinScope; South Africa

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