Effect of Financial Exclusion on Consumption Inequality across Settlement and Employment Types in an Emerging Economy

In the quest to reduce inequality in its various forms, researchers, policymakers, and industry players have embarked on efforts to uncover empirical evidence that could inform policy-driven recommendations. However, few studies have analysed how financial exclusion may influence consumption inequality. This study employed the Ordinary Least Squares (OLS) method to model the relationship between financial exclusion and consumption inequality using the 7th wave of the Ghana Living Standards Survey (GLSS7). Financial exclusion significantly contributes to consumption inequality, with notable variations across different employment types and settlement areas. Non-digital and digital financial exclusion have a more pronounced influence on consumption inequality in rural areas than in urban areas. Additionally, households led by public sector workers and the unemployed experienced greater levels of consumption inequality due to financial exclusion, compared to those led by self-employed or privately employed individuals. This study highlights the role of financial inclusion in addressing consumption inequality and stresses the importance of reducing both digital and non-digital financial exclusion to create a more equitable society. To this end, the study recommends that the National Commission for Civic Education (NCCE) implement financial literacy programmes in local languages, particularly targeting rural areas. The novelty of this study lies in its focus on the employment sector of household heads and its examination of both digital and non-digital financial exclusion, providing a unique perspective on how these forms of exclusion affect consumption inequality across varied demographics.