Abstract
The basic aim of this research was to investigate the impact of the behavioral biases on financial inclusion in Pakistan while considering the moderating effect of financial literacy in this relation, in the context of behavioral perspective. This study focused on the significant behavioral phenomenon, including self-control, optimism, herding, and loss aversion with a perspective of the digital economy. To test the proposed hypothesis, the primary data collection method was used. A structured questionnaire was designed to collect data from 102 individual households through the convenience sampling technique. SmartPLS was used to analyze collected data. This study found the negative impact of self-control, optimism, and herding on financial inclusion. In contrast, loss aversion contributes to the uplift of financial inclusion in Pakistan. Similarly, financial literacy proved to have a decreasing effect on financial inclusion because of religious concerns. The moderation effect of financial literacy was also significantly positive except for loss aversion. The behavioral phenomenon proved to have a significant impact on financial inclusion. This research shows that individual households who do not use developed technological services and products from formal financial inclusion can overcome the behavioral biases that hinder them from making informed financial decisions. This research work will significantly help households use financial services to improve their standard of living and overall long-term financial well-being. This research is essential because many households are not using bank services and have low financial knowledge in Pakistan. The key contribution of this research study is that it found the relation between behavioral factors and financial inclusion. Financial literacy also has a moderating effect on their relations.
Highlights
The origin of financial inclusion is microcredit and microfinance with the emerging context of global financial exclusion
In light of all these research contributions, this study aimed to investigate the role of loss aversion on the financial inclusion of an individual household
The research study aimed to determine the relationship between behavioral biases and financial inclusion in Pakistan while considering financial literacy as a moderator
Summary
The origin of financial inclusion is microcredit and microfinance with the emerging context of global financial exclusion. The thematic concept of financial inclusion brings access to individuals and businesses for consummating financial services and products. Financial inclusion refers to providing financial services including credit, insurance, deposits, payment, and loan services to people and according to their ease. It aims to include the people in the financial circle who are either not using these services or not accessing the financial products. Credit unions and financial intermediaries have played a significant role in providing financial assistance, almost 2.5 billion people still do not have their saving account or are not using financial services. Financial inclusion is the concept to bring all these people who are not using the financial product into the financial circle. According to major agencies that have an active role in the development of countries around the world, including the United Nations Development Programme, World Bank, G20, and Bill and Melinda Gates Foundation, there is an immense need for financial inclusion from all the sectors of the population to achieve sustainable economic growth and eliminate poverty, significantly in developing countries (Bongomin et al, 2018; Valencia et al, 2021)
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