The Impact of Education on Financial Inclusion in Emerging Countries

Introduction

Developments in each function of the financial system can affect resource allocation, national welfare and economic development by reflecting on savings and investment choices, despite market imperfections and changes in laws, policies, regulations and economies over time. A well-functioning financial system supports the efficient and effective allocation of resources, increases savings and raises the standard of living (Gill and Bhattacharya, 2017). On the other hand, it increases the accumulation of human and physical capital and supports the realization of technological innovations. Poor functioning of the financial system, on the other hand, destabilizes economies as a result of its negative effects by blocking opportunities for economic development (Menyelim et al., 2022).

Financial expansion refers to the growth and rise of financial institutions and organizations as well as more efficient and effective financial goods and services, while financial depth refers to the increase in financial goods and services in national income or the increase in the ratio of financial capital to income with positive financial progress (Shetty and Hans, 2018).

Education is one of the key factors for individuals and societies to achieve their social and economic goals. Moreover, education is vital for human capital, innovation, productivity, technological progress and entrepreneurial activity, which are critical elements of economic growth theories (Breen and Chung, 2015). For this reason, education has been identified by the United Nations as one of the 17 Sustainable Development Goals, and has an important role to play in achieving progress on other Sustainable Development Goals such as decent work and economic growth, industry, innovation and infrastructure, and zero hunger and poverty.

Proponents of human capital theory argue that investing in education generates positive future outcomes not only for the individual concerned but also for the overall economy. Focusing on education, this theory states that households' out-of-pocket spending on education and increased access to educational institutions by the government and the private sector affect educational outcomes. Human capital theory argues that increased investment in people leads to economic and social benefits for individuals and society (Kargbo et al., 2016). At the micro level, households' investment in human capital largely depends on the level of income, the cost of other goods, the health of household members and individual characteristics (Evans et al., 2002).

Theories on the relationship between financial development and human capital focus particularly on the impact of human capital on financial development. It is argued that people with higher levels of human capital, who are more skilled and better educated, are able to take more risks, access information more effortlessly, and save and pledge more (Hakeem and Oluitan, 2012). It is stated that the human capital in question is the most fundamental element in the creation of financial innovations, and that financial innovations will ensure progress and development in the financial direction (Abubakar et al., 2015). Financial innovations that diversify financial intermediaries and products can also increase human capital by channeling savings into placements. Over the period of economic development, financial development is a valuable complement to human capital based on an advanced learning system (Worlu and Onyinyechi, 2016).

An increase in the number of healthy and well-educated individuals with a good level of human capital not only raises the level of financial development, but also increases the general level of welfare and supports economic growth. The positive results of the placements to be realized for the human capital in question can be obtained for many years (Zaidi et al., 2019). Therefore, in developing countries policies to increase productivity and quality in the higher education system should be organized, and activities for the development of human capital should be carried out in order to achieve sustainable economic growth and financial development trends. Skilled people-oriented development strategies should be intensified (Sehrawat and Giri, 2014).