Financial Capability: A Conceptual Review, Extension, and Synthesis

Abstract

Financial capability is an important factor that contributes to consumer financial wellbeing. In the research literature, financial capability has multiple meanings that could refer to financial literacy, financial behavior, financial access, and/or financial outcome, depending on different research purposes and conceptualizations. The purpose of this review is to examine the literature on consumer financial capability with a focus on conceptual definitions. After reviewing 250 research papers on financial capability published in 2007-June 2021 and retrieved from Scopus, five conceptual definitions of financial capability are identified and discussed. Based on the discussion, in this review, financial capability is defined as an individual ability to apply appropriate financial knowledge, perform desirable financial behaviors, and take available financial opportunities for achieving financial wellbeing. A conceptual framework on the antecedents, construct, and outcomes of financial capability is then presented and propositions based on this framework and relevant literatures are proposed. Finally, implications for future research are discussed.