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Introduction
Financial literacy is a global trend which plays a vital role with substantial impact in economic development particularly in improvement of access to financial service. With this respect, financial technology has become a main target for effective financial literacy among the rural households in Africa. The augmentation of financial literacy due to financial technology has become a major concern in Africa. There are a lot of mechanisms to improve financial literacy of the society such as digital payment and financial technology, saving, borrowing, use of the financial ecosystem and expanding financial access opportunity. In Africa, use of financial services is low due to low levels of financial literacy as well as financial inclusion.
Use of financial technology
Meanwhile, use of financial technology can play a vital role in better improvement through driving the effectiveness of use of financial services. The key question is how use of financial technology is significant in financial service?”. The first answer is that the use of Mobile-money and Digital Finance System (DFS) in their day to day activities can better foster financial literacy in Africa.
Create saving awareness
Although creating awareness about saving is intermingled with an access to financial service. According to the world bank report Global Findex Database of 2021, more than half of young people who have access to formal financial service make savings by using their account. Therefore, using fintech like mobile money can improve the financial literacy of by expanding use of financial service.
Use of borrowing
Use of formal borrowing such as credit cards and mobile money instruments is better for improving financial literacy than informal use of borrowing such as borrowing from family, friends and others. In Africa, use of formal borrowing has significantly fostered over the past decade’s due expansion of financial institutions, technology and globalization.
Availability financial ecosystem
Expansion and application of the financial ecosystem such as banks, money instruments, insurance, and other financial institutions substantially improve the financial literacy of the society.
Improving financial resilience
Financial resilience is the ability of the people to be sufficient financially when they have face with financial difficulty. Although the society can alter this gap adopting the various technique such as part-time working, create strong connection with family a well as friend, use borrowing and drawdown saving
Conclusion
Improving financial literacy is considered as a critical barometer for effective use of financial service in Africa. However, the financial literacy level is low in developing countries. Therefore, use of financial technology products, improving saving practice and borrowing, expansion of the financial ecosystem and improving financial resilience are associated problems maintaining the effectiveness of financial service in Africa through creation of financial literacy.