The explanatory variables used in the analyses are financial knowledge, financial inclusion, and socio-demographic variables. Financial knowledge is measured using seven questions related to time value of money, interest paid on a loan, simple interest calculation, compound interest calculation, risk and return, inflation, and risk diversification. For each question, respondents are allowed to choose any of the given answer or choose “I don’t know”. Each correct answer will be given a value of 1. Hence, the total value for financial knowledge ranges from 0 to 7. A value between 0 and 2 is considered as low financial knowledge, a value between 3 and 4 is considered moderate financial knowledge, and a value between 5 and 7 is considered high financial knowledge.
Financial inclusion is measured from two aspects: using bank products and services and level of financial product holding. Using bank products and services is classified into not using any banking products and services, using banking products and services from a single bank, and using banking products and services from several banks. Using products and services from several banks is used as the reference group. Level of financial product holdings consider respondents holding of deposit account, loan account, credit or debit card, insurance or takaful products, investment products and retirement products. Low product holding is classified as those holding two products and less, moderate product holding is classified as those holding three or four products and high product holding is classified as those holding five to six products.
Several socio-demographic characteristics are included as the control variables in the analyses. Gender is included in the analyses with value 1 assigned to male and 0 to female. Age is classified into six categories: 24 years and less; 25 to 29; 30 to 39; 40 to 49; 50 to 59; 60 years and above. Age category of 24 years and less is used as the reference group. Respondents’ education level is categorised into four, no formal education or primary education, secondary education, vocational education beyond secondary school and university education. Having university education is used as the reference group. Income is divided into four categories which are RM1500 and less; RM1501 to RM5000; RM5001 to RM10,000 and above RM10,000. Earning income of RM1500 and less is used as the reference group. Ethnicities considered are Malays, Chinese, Indian and others, with Malays used as the reference group. Marital status in divided into single, married and divorced or widowed. Being married is used as the reference group. Dependents is classified into three categories based on whether the income is used to support oneself, immediate family, or extended family, with supporting oneself used as the reference group.
According to World Bank (2021 ), there are economic disparity among the regions in Malaysia. In line with that, region of residence is included in the analysis. Peninsula Malaysia is represented by four regions which includes the northern, central, eastern, and southern regions. East Malaysia is considered the fifth region. The central region of Peninsula Malaysia is used as the reference group. Additionally, location of residence in terms of whether the respondent resides in a city centre, urban or rural area are also controlled for with living in city centre used as the reference group.
Financial inclusion is measured from two aspects: using bank products and services and level of financial product holding. Using bank products and services is classified into not using any banking products and services, using banking products and services from a single bank, and using banking products and services from several banks. Using products and services from several banks is used as the reference group. Level of financial product holdings consider respondents holding of deposit account, loan account, credit or debit card, insurance or takaful products, investment products and retirement products. Low product holding is classified as those holding two products and less, moderate product holding is classified as those holding three or four products and high product holding is classified as those holding five to six products.
Several socio-demographic characteristics are included as the control variables in the analyses. Gender is included in the analyses with value 1 assigned to male and 0 to female. Age is classified into six categories: 24 years and less; 25 to 29; 30 to 39; 40 to 49; 50 to 59; 60 years and above. Age category of 24 years and less is used as the reference group. Respondents’ education level is categorised into four, no formal education or primary education, secondary education, vocational education beyond secondary school and university education. Having university education is used as the reference group. Income is divided into four categories which are RM1500 and less; RM1501 to RM5000; RM5001 to RM10,000 and above RM10,000. Earning income of RM1500 and less is used as the reference group. Ethnicities considered are Malays, Chinese, Indian and others, with Malays used as the reference group. Marital status in divided into single, married and divorced or widowed. Being married is used as the reference group. Dependents is classified into three categories based on whether the income is used to support oneself, immediate family, or extended family, with supporting oneself used as the reference group.
According to World Bank (2021 ), there are economic disparity among the regions in Malaysia. In line with that, region of residence is included in the analysis. Peninsula Malaysia is represented by four regions which includes the northern, central, eastern, and southern regions. East Malaysia is considered the fifth region. The central region of Peninsula Malaysia is used as the reference group. Additionally, location of residence in terms of whether the respondent resides in a city centre, urban or rural area are also controlled for with living in city centre used as the reference group.
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