Abstract
This paper investigates the collective impact of financial literacy and inclusion on individuals’ financial capability focusing on the mediating role of financial behaviour. The research is conducted on an individual-level survey. The relationships were examined by using PLS-SEM. Financial capability can be improved by increasing individuals’ financial knowledge, financial behaviour and promoting their inclusion in financial services. Furthermore, the indirect effect of financial knowledge and attitude on financial capability is found to be significant, highlighting the importance of financial behaviour. The results assist policymakers and industry leaders in understanding the most influential factors on financial capability in the context of a post-communist transition country. This enables them to design policies and services aimed at equipping citizens with knowledge and skills to make best use of their financial resources.
Highlights
The government, continuously strive for providing a congenial environment for people to understand the complexities of their finance, take the right financial decisions, and plan their retirement and other financial goals wisely
Based on the theoretical framework, financial behaviour is determined by financial attitude and financial knowledge
Regarding the determinants of financial capability, results revealed that financial capability is positively affected by financial behaviour with a moderate effect (b 1⁄4 0.289, p < 0.001, f2 1⁄4 0.077), financial knowledge with a small effect (b 1⁄4 0.192, p < 0.01, f2 1⁄4 0.037) and financial inclusion with small effect (b 1⁄4 0.201, p < 0.01, f2 1⁄4 0.05)
Summary
The government, continuously strive for providing a congenial environment for people to understand the complexities of their finance, take the right financial decisions, and plan their retirement and other financial goals wisely. People must develop a desirable financial attitude, knowledge, and behaviour In recent studies, it is brought into the notice that the intention of promoting financial literacy and all the related efforts through regulations, policies, plans, and business practices must cause helping individuals to enhance their financial capabilities (Hira, 2012). It is readily noted that financial literacy is a widely used terminology (Bongini et al, 2018; Hensley, 2015), but recently, a new notion has been getting buzz, i.e. financial capability (Hira, 2012).
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