The Impact of Financial Literacy On Household Consumption Patterns in Kenya: A Microeconomic Analysis Using Secondary Data

• Author(s): Cayne Kwamboka Makori ; Dr. Yassin Gabon Kuso
• Paper ID: 1708992
• Page: 128-130
• Published Date: 05-06-2025
• Published In: Iconic Research And Engineering Journals
• Publisher: IRE Journals
• e-ISSN: 2456-8880
• Volume/Issue: Volume 8 Issue 12 June-2025

Abstract

This study examines the influence of financial literacy on household consumption patterns in Kenya, using microeconomic theory and secondary data from the 2021 FinAccess Household Survey. Against a backdrop of rapid financial inclusion—driven by mobile money, fintech innovations, and expanding banking services—this research investigates how knowledge of interest rates, inflation, budgeting, and financial products shapes expenditure allocation, savings behavior, and consumption smoothing. Employing a cross-sectional quantitative design, the study analyzes data from 7,500 households across urban and rural regions. Descriptive statistics, correlation matrices, and multiple regression analyses (including instrumental variable estimation) are conducted to assess relationships among financial literacy, socio-demographic factors, and consumption categories (food, education, healthcare, housing, transport, and discretionary spending). Key findings indicate that higher financial literacy is significantly associated with greater investment in human capital—education and health expenditures increase by 15–20% in the top literacy quartile—while reducing reliance on informal credit. Instrumental variable results confirm causality, with robust checks through subgroup analyses (gender, region, income level) affirming heterogeneous impacts. The study underscores policy imperatives to integrate financial education into formal curricula, community outreach, and digital platforms to bolster economic stability and resilience.

Keywords

Financial Literacy, Household Consumption, Finaccess 2021, Kenya, Microeconomics, Consumption Smoothing, Human Capital Investment

Citations

IRE Journals:
Cayne Kwamboka Makori , Dr. Yassin Gabon Kuso "The Impact of Financial Literacy On Household Consumption Patterns in Kenya: A Microeconomic Analysis Using Secondary Data" Iconic Research And Engineering Journals Volume 8 Issue 12 2025 Page 128-130

IEEE:
Cayne Kwamboka Makori , Dr. Yassin Gabon Kuso "The Impact of Financial Literacy On Household Consumption Patterns in Kenya: A Microeconomic Analysis Using Secondary Data" Iconic Research And Engineering Journals, 8(12)