Link between Financial Literacy and Financial Inclusion: A Case of Urban Areas of Karachi, Pakistan

Abstract

The paper is aimed at examining the link between financial literacy and financial inclusion in the presence of social interaction. An established theoretical framework was used, and tested questionnaire was employed to test the hypotheses and data collection. Smart PLS was used as the data is primary in nature. The model is a considered to be a strong model as the effect size is 0.76. Results show that behaviour and knowledge contribute to have an impact on financial inclusion while skills and attitude do not significantly influence, which implies a significant positive influence of financial literacy on financial inclusion. Also, it was found that social interaction moderates the relationship between financial literacy and inclusion as hypothesized in the study. These results imply that in order to improve knowledge and understanding of financial ideas and practises, policy makers, financial institutions, and groups working on financial inclusion projects should concentrate on offering financial education and literacy programmes. Also, tailored interventions must be considered by the policymakers and organizations that combine financial literacy programs with opportunities for social interaction. These interventions could involve interactive workshops, community-based financial education initiatives, and social platforms that facilitate knowledge sharing and peer support.