Can financial literacy bring individuals into the formal banking system?

A recent report out of Pakistan about their low rates of financial literacy caught my eye. Though the report does not outline causal pathways, the authors of the report raise an interesting question: could improving financial literacy actually nudge economic individuals into the formal banking system (Rauf and Ali 2026)? In Pakistan, financial literacy levels are especially low. Only 18% Pakistani adults have no formal bank account according to World Bank Global Findex Database 2025 data. The gender gap in bank accounts in Pakistan is also very pronounced where only 9.5% of women have formal bank acounts.

A famous paper by Dupas and Robinson (2013) shows that women participants in a research project in Kenya significantly benefit from having savings accounts. Though the accounts had relatively high fees, owning accounts helped keep their money protected from outside influences and theft. Though everywhere in the world is different, this suggests that many women around the world would benefit from having a savings account, particularly at low or no cost.

That leaves a lot of room for growth in terms of the financial knowledge of all Pakistani people, not just Pakistani women. And that is where Dollar Scholars comes in to play. Dollar Scholars lessons and website are already available in Urdu, a language spoken throughout Pakistan, and also Pakistan's official language, though there are other linguistic minorities.

But can increasing financial literacy bring people into the banking system? When we think about the problem, and look at the research literature on the formal banking system, we see that low trust in banks or other financial institutions, as well as high fees can also lower individuals' motivation to open or to use their bank account. Simply put, convenience matters for bank customers, and price matters too, not just financial education (Karlan et al. 2014; Cole et al. 2011). That said, all of those things go well together with financial education.

Going forward, there will continue to be many individuals who need help learning how to access a formal bank account. Dollar Scholars is not going away, so we will keep pressing this question of the relationship between individuals, financial education, and formal banking. We plan to reach out to the authors of the report from Pakistan to share information and experiences, and perhaps to collaborate on research or orther adult financial education projects.