Bridging the Financial Gap: The Impact of Financial Inclusion on Savings and Agricultural Investment in Malawi
Abstract
Vulnerable farmers lack the financial resources to invest in crop production, and financial inclusion can be a financial mechanism useful for increasing their financial resources. However, the empirical evidence of the impact of financial inclusion on agriculture is inconclusive. Thus, this study explores the effects of financial inclusion on savings and agricultural investment for Malawian farmers. The study defines financial inclusion as having access to any type of bank account. As access to a bank account is self-selected, the instrumental variable (IV) approach is applied as the identification strategy to address self-selection bias. This study uses the dataset prepared by Brune et al. (2018), who provided random assistance to open bank accounts. The present study considers financial inclusion (access to a bank account) as the treatment variable and the assistance to open a bank account as the IV to estimate the local average treatment effect. The findings indicate that financial inclusion increases the total savings and agricultural investment of the farmers. This study provides policy implications for the promotion of financial inclusion as a policy tool for providing farmers with more financial resources to invest in crop farming.
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