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Leading UX in Bangladesh

Financial Education and Economic Empowerment in Urban Bangladesh: Overcoming Barriers to Inclusion

Md. Shahadat Hassan, Wahid bin Ahsan
Department of Human-Centered Design
Userhub

Abstract

This study examines the role of financial education in fostering economic empowerment and reducing poverty among urban low-income populations in Bangladesh. Using a qualitative case study approach, semi-structured interviews with 17 participants provided insights into financial behaviors, literacy gaps, and barriers to financial inclusion. Findings indicate that financial literacy enhances economic decision-making, yet systemic challenges such as institutional distrust and limited accessibility hinder financial education efforts. Informal financial systems remain a primary financial resource, while digital financial services offer potential but face adoption barriers due to digital illiteracy and security concerns. The study emphasizes the need for targeted financial education programs, policy reforms, and digital literacy initiatives to strengthen financial inclusion and resilience.

Keywords: financial education, economic empowerment, poverty reduction, financial literacy, financial inclusion, informal financial systems, digital financial services, Bangladesh, qualitative research, policy implications, financial resilience.

Introduction

Financial literacy is essential for economic participation, enabling informed financial decisions, risk management, and access to opportunities. In developing countries like Bangladesh, it plays a key role in economic empowerment. However, many low-income individuals lack financial education, limiting their ability to save, invest, and engage with formal financial systems, perpetuating poverty (Hasan et al., 2021).

Studies show that financial literacy enhances financial inclusion, improving access to banking, microfinance, and digital financial tools (Hasan et al., 2021). In Bangladesh, only 35% of urban low-income adults possess basic financial literacy, leading many to rely on informal financial systems with high-interest loans (Khalily, 2016). This lack of financial knowledge increases vulnerability, making budgeting and saving more difficult.

Targeted financial education programs tailored to marginalized communities are essential. Programs focusing on women and youth have proven effective in increasing savings and improving financial decision-making  (Amin et al., 2010). However, education alone is insufficient. Access to secure, affordable financial services must complement literacy efforts, particularly in digital financial services (Lyons et al., 2020).

This study examines barriers to financial education and its role in economic empowerment among urban low-income communities in Bangladesh. Through qualitative analysis and financial literacy program evaluation, it contributes to the discourse on financial education as a tool for poverty reduction and economic growth. The findings offer insights for policymakers, financial institutions, and community organizations to develop effective financial education initiatives that promote financial inclusion and economic stability.

Methodology

This study employed a qualitative research design to examine the impact of financial education on economic empowerment and poverty reduction among urban low-income populations in Bangladesh. Semi-structured interviews were conducted with 17 participants to capture insights into financial behaviors, literacy gaps, and access barriers.

The study addressed the central question: How does financial education influence economic empowerment and financial decision-making among low-income urban populations in Bangladesh? Supporting sub-questions explored:

  1. Barriers to accessing financial education.
  2. The role of informal financial systems in shaping financial behaviors.
  3. The effectiveness of existing financial literacy programs.
  4. Differences in financial literacy across demographic groups.
  5. The impact of digital financial services on financial inclusion.

Participants were selected through purposive sampling to ensure relevance to the study’s focus. Interviews were conducted in person, transcribed, anonymized, and analyzed using thematic analysis to identify recurring patterns in financial decision-making, economic behaviors, and institutional challenges.

This study adhered to American Psychological Association (2017) ethical guidelines, ensuring informed consent, participant confidentiality, and secure data storage.

Findings

The study reveals that financial literacy plays a significant role in shaping financial decision-making and economic stability among urban low-income populations. However, accessibility constraints, reliance on informal financial systems, and digital barriers limit its overall impact.

1. Financial Literacy and Economic Decision-Making

Participants with financial literacy reported better budgeting, saving strategies, and resource allocation. “Before learning about savings, I spent whatever I earned. Now, I think before making a financial decision,” shared one respondent. However, inconsistent income sources often disrupted saving habits, forcing some individuals to rely on family support or informal loans.

2. Barriers to Financial Education

Limited access to structured financial education programs, coupled with socio-economic constraints, prevents many individuals from making informed financial decisions. “We don’t have places where we can learn about finance. Banks don’t explain things properly, and courses are expensive,” said one participant. Others cited bureaucratic requirements and high transaction fees as major deterrents to engaging with formal financial institutions.

3. The Role of Informal Financial Systems

Community savings groups and informal lending networks continue to be primary financial sources, especially for individuals excluded from formal banking. One participant explained, “I trust my local savings group more than a bank. If I need money urgently, I can borrow without too much paperwork.” However, reliance on informal sources leaves individuals vulnerable, as another respondent noted, “I borrowed from a local lender, but the interest kept increasing, and I had no way to challenge it.”

4. Digital Financial Inclusion: Opportunities and Challenges

While digital financial services offer new opportunities, low digital literacy, security concerns, and distrust of online transactions hinder widespread adoption. “I tried using a mobile banking app, but it was too confusing, and I was afraid of making mistakes,” shared one participant. Another recounted, “A relative lost money through a mobile transaction error, and customer service didn’t help,” reflecting concerns about financial security and trust in digital platforms.

Findings of this study highlight the need for targeted financial education initiatives, increased accessibility to formal banking, and strategies to build trust in digital financial services. Addressing socio-economic barriers and integrating financial education into community programs can enhance financial resilience and economic empowerment.

Discussion

1. Financial Literacy and Economic Decision-Making

Financial literacy enhances economic stability by improving budgeting, savings, and informed financial choices. It reduces reliance on high-interest informal loans and increases access to formal financial services (Hasan et al., 2021). However, in Bangladesh, many low-income individuals lack financial literacy, leading to poor financial planning and instability (Khalily, 2016). This study reinforces that participants with higher financial awareness engaged in structured financial planning and were less vulnerable to predatory lending.

2. Effective Financial Education Interventions

Structured financial education programs foster financial independence and economic empowerment. Evidence from targeted programs for low-income women demonstrates increased savings and improved financial habits (Bhutoria & Vignoles, 2018). Randomized studies further confirm that scenario-based financial learning enhances long-term behavioral change (Calderone et al., 2018). This study supports these findings, highlighting that participants who engaged in real-life financial exercises displayed greater financial confidence and decision-making skills.

3. Addressing Barriers to Financial Inclusion

Mistrust in formal banking institutions remains a major barrier to financial inclusion. Many participants preferred informal financial networks over banks due to bureaucratic hurdles and past negative experiences. Research suggests that microfinance institutions can act as intermediaries, bridging the trust gap and increasing financial access (Okello Candiya Bongomin et al., 2020). This study found that while targeted policy interventions have improved inclusion in Bangladesh, gaps remain, necessitating stronger community-driven financial education initiatives (Khalily, 2016).

4. Digital Financial Exclusion

Despite the expansion of digital financial services, low adoption rates persist due to digital illiteracy, security concerns, and usability challenges. Many participants struggled with mobile banking platforms, citing fraud risks and transaction errors (Rahman & bin Ahsan, 2024). Digital exclusion disproportionately affects older and rural populations, preventing them from leveraging financial technologies (Pal et al., 2020). This study underscores the need for integrating digital literacy into broader financial education efforts while strengthening fraud prevention measures to increase trust in digital platforms.

Financial literacy is a key driver of economic empowerment, enabling better financial decision-making and reducing vulnerability to financial shocks. This study confirms that structured financial education, when paired with improved access to financial services, significantly enhances financial stability. Addressing systemic barriers and mistrust in formal institutions is essential. Policymakers and financial institutions must collaborate to expand financial and digital literacy programs, ensuring sustainable financial inclusion.

Recommendations

Enhancing financial literacy and inclusion requires a multifaceted approach focusing on education, digital access, institutional trust, and collaboration. The following key strategies can drive economic empowerment and stability:

  1. Expand Financial Education: Implement targeted literacy programs for low-income populations, integrating financial education into schools and vocational training.
  2. Enhance Digital Financial Inclusion: Improve digital literacy, simplify financial platforms, and strengthen fraud prevention to increase adoption among underserved groups.
  3. Increase Access to Financial Services: Promote transparency, streamline account-opening processes, and expand microfinance initiatives to reach marginalized communities.
  4. Foster Multi-Stakeholder Collaboration: Engage policymakers, financial institutions, and community organizations to develop sustainable financial literacy initiatives.

Monitor and Evaluate Impact: Conduct ongoing assessments to refine interventions based on demographic and regional needs.

Conclusion

This study highlights the vital role of financial literacy in fostering economic empowerment and stability among low-income urban populations. Targeted financial education programs, coupled with improved access to financial services, can significantly enhance informed decision-making and reduce financial vulnerability. Addressing trust deficits in formal institutions and expanding digital literacy are essential for financial inclusion. Policymakers, financial institutions, and community organizations must collaborate to design accessible, scalable financial literacy initiatives that address demographic-specific needs and promote long-term financial resilience.

Limitations and Future Research

While this study provides valuable insights, several limitations must be acknowledged. The reliance on qualitative interviews limits generalizability, as financial behaviors and literacy levels vary across regions and socio-economic groups.

Future research should integrate quantitative methods and longitudinal studies to assess the long-term impact of financial literacy programs. Further exploration is needed on digital financial literacy interventions, particularly among rural and elderly populations. Additionally, investigating the role of behavioral economics in financial decision-making could help optimize financial education programs for better outcomes.

Addressing these gaps will contribute to the development of more robust, evidence-based financial inclusion strategies that enhance financial empowerment across diverse communities.

Acknowledgements

We sincerely thank all participants for their time and insights, as well as community leaders, financial educators, and organizations for their cooperation. Special appreciation goes to Userhub for their support. We also acknowledge our colleagues and mentors for their valuable feedback. AI tools were used for data organization and language refinement, but all analysis, interpretations, and conclusions were independently conducted and critically reviewed by the research team to ensure rigor and alignment with the study’s objectives.

Declaration of Interest

The authors declare no conflicts of interest. This research was conducted independently, with no financial or personal influences on the findings.

References

Amin, S., Rahman, L., Ainul, S., Rob, U., Zaman, B., & Akter, R. (2010). White paper: Enhancing adolescent financial capabilities through financial education in Bangladesh. https://doi.org/10.31899/pgy1.1022

Bhutoria, A., & Vignoles, A. (2018). Do Financial Education Interventions for Women from Poor Households Impact Their Financial Behaviors? Experimental Evidence from India. Journal of Research on Educational Effectiveness, 11(3), 409–432. https://doi.org/10.1080/19345747.2018.1465317

Calderone, M., Fiala, N., Mulaj, F., Sadhu, S., & Sarr, L. (2018). Financial Education and Savings Behavior: Evidence from a Randomized Experiment among Low-Income Clients of Branchless Banking in India. Economic Development and Cultural Change, 66(4), 793–825. https://doi.org/10.1086/697413

Hasan, M., Le, T., & Hoque, A. (2021). How does financial literacy impact on inclusive finance? Financial Innovation, 7(1), 40. https://doi.org/10.1186/s40854-021-00259-9

Khalily, M. A. B. (2016). Financial inclusion, financial regulation, and education in Bangladesh. https://www.econstor.eu/handle/10419/163120

Lyons, A. C., Kass-Hanna, J., Liu, F., Greenlee, A. J., & Zeng, L. (2020). Building financial resilience through financial and digital literacy in South Asia and Sub-Saharan Africa (Issue 1098). Asian Development Bank Institute (ADBI). https://hdl.handle.net/10419/238455

Okello Candiya Bongomin, G., Munene, J. C., & Yourougou, P. (2020). Examining the role of financial intermediaries in promoting financial literacy and financial inclusion among the poor in developing countries: Lessons from rural Uganda. Cogent Economics & Finance, 8(1), 1761274. https://doi.org/10.1080/23322039.2020.1761274

Pal, A., Herath, T., De’, R., & Rao, H. R. (2020). Contextual facilitators and barriers influencing the continued use of mobile payment services in a developing country: insights from adopters in India. Information Technology for Development, 26(2), 394–420. https://doi.org/10.1080/02681102.2019.1701969

Rahman, H., & bin Ahsan, W. (2024). Fraud Mitigation, Usability Challenges, and Financial Literacy in Mobile Financial Services for Rural Bangladesh. https://doi.org/10.58947/journal.wpgr45

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