Financial Self-Efficacy (FSE) as a Mediator Between Financial Literacy (FL) and Financial Inclusion (FI): An Empirical Study in Indian Context

Authors

  • Garima Bansal

DOI:

https://doi.org/10.33516/rb.v49i4.59-77p

Keywords:

Financial Self-efficacy, Financial Literacy, Financial Inclusion

Abstract

The objective of the paper is to investigate the influence of financial literacy (FL) level on financial inclusion (FI) of individuals residing in the National Capital Region (NCR) of India, with the role of financial self-efficacy (FSE) as a mediator. The study considers 384 individuals selected through convenient sampling. CFA and Regression analysis were used to analyse data using SPSS and AMOS 20.

The results indicate that FSE partially mediates the association among FL and FI. The study recommends that “FL aids in increasing finance related knowledge and in enhancing individuals’ skills so that they can make comparison and select better financial products which ultimately enhance FI”.

A majority of previous researchers have studied FI and FL; however, the role of FSE as mediator within this realm has remained unexplored. This paper is possibly the first attempt to bridge this gap.

Downloads

Download data is not yet available.

Published

2024-01-30

How to Cite

Bansal, G. (2024). Financial Self-Efficacy (FSE) as a Mediator Between Financial Literacy (FL) and Financial Inclusion (FI): An Empirical Study in Indian Context. Research Bulletin, 49(4), 59–77. https://doi.org/10.33516/rb.v49i4.59-77p

Issue

Section

Articles

References

Amatucci, F.M. and Crawley, D.C. (2011), “Financial self-efficacy among women entrepreneurs”, International Journal of Gender and Entrepreneurship, Vol. 3 No. 1, pp. 23-37. DOI: https://doi.org/10.1108/17566261111114962

Angela, A.H., Parker, A.M. and Yoong, K.J. (2009), “Defining and measuring financial literacy”, RAND Labor and Population. Working paper series, 708. Department of Labor and the National Institute on Aging via the RAND Royal Center for Financial Decision Making.

Asebedo, S. D., Seay, M. C., Archuleta, K. and Brase, G. (2019). “The psychological predictors of older preretirees’ financial self-efficacy”, Journal of Behavioral Finance, Vol. 20 No. 2, pp.127-138. DOI: https://doi.org/10.1080/15427560.2018.1492580

Atkinson, A. and Messy, F.A. (2012), “Assessing financial literacy in 12 countries: an OECD/INFE international pilot exercise”, Journal of Pension Economics & Finance, Vol. 10 No. 4, pp.657-665. DOI: https://doi.org/10.1017/S1474747211000539

Atkinson, A. and Messy, F.A. (2013), “Promoting financial inclusion through financial education: OECD/INFE evidence, policies and practice”, OECD working papers on finance, insurance and private pensions, No. 34.

Bahadur, L.R. (2015), “Financial literacy: the Indian story”, World Journal of Social Sciences, Vol. 5 No. 3, pp.45-57.

Bandura, A. (1977), “Self-efficacy: toward a unifying theory of behavioral change”, Psychological Review, Vol. 84 No. 2, pp.191-215. DOI: https://doi.org/10.1037//0033-295X.84.2.191

Barbić, D., Palić, I., Bahovec, V., Palić, I. and Bahovec, V. (2016), “Logistic regression analysis of financial literacy implications for retirement planning in Croatia”, Croatian Operational Research Review, Vol. 7 No. 2, pp.319331. DOI: https://doi.org/10.17535/crorr.2016.0022

Baron, R.M. and Kenny, D.A. (1986), “The moderator–mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations”, Journal of Personality and Social Psychology, Vol. 51 No. 6, 1173. DOI: https://doi.org/10.1037//0022-3514.51.6.1173

Bojuwon, M., Olaleye, B. R., & Ojebode, A. A. (2023). Financial Inclusion and Financial Condition: The Mediating Effect of Financial Self-efficacy and Financial Literacy. Vision: The Journal of Business Perspective, 097226292311662. https://doi.org/10.1177/09722629231166200 DOI: https://doi.org/10.1177/09722629231166200

Bongomin, G.O.C., Ntayi, J.M., Munene, J.C. and Nabeta, I.N. (2016), “Social capital: mediator of financial literacy and financial inclusion in rural Uganda”, Review of International Business and Strategy, Vol. 26 No 2, pp.291-312. DOI: https://doi.org/10.1108/RIBS-06-2014-0072

Cáamara, N. and Tuesta, D. (2014), “Measuring financial inclusion: a multidimensional index”, BBVA Research. Working Paper 14/26.

Cochran, W.G. (1977), “Sampling techniques (3rd ed.)”, New York: John Wiley & Sons.

Cohen, M. and Nelson, C. (2011), “Financial literacy: a step for clients towards financial inclusion”, working paper, Global Microcredit Summit, DC, pp.14-17.

Cole, S., Sampson, T. and Zia, B. (2009), “Financial literacy, financial decisions, and the demand for financial services: evidence from India and Indonesia”, Harvard Business School, Working Paper 09-117.

Damodaran, A. (2013), “Financial inclusion: issues and challenges”, AKGEC International Journal of Technology, Vol. 4 No. 2, pp.54-59.

Demirhan, D., Babacan, O., Ardogan, A.R. and Tatarlar, C.D. (2019), “Relationship between financial literacy and financial self-efficacy: a research on university students”, International Conference on Applied Economics and Finance, Turkey.

Emmons, W.R. (2005), “Consumer-finance myths and other obstacles to financial literacy”, Saint Louis University Public Law Review: Vol. 24 No. 2, Article 7, available at: https:// scholarship.law.slu.edu/plr/vol24/ iss2/7 (accessed 20 February 2020).

Farrell, L., Fry, T.R. and Risse, L. (2016), “The significance of financial selfefficacy in explaining women’s personal finance behaviour”, Journal of Economic Psychology, Vol. 5 4 , pp.85-99. DOI: https://doi.org/10.1016/j.joep.2015.07.001

Fornell, C. and Larcker, F.D. (1981), “Structural equation models with unobservable variables a n d measurement error”, Algebra and Statistics, Vol. 183, pp. 382-388. DOI: https://doi.org/10.1177/002224378101800313

Ghosh, S. and Vinod, D. (2017), “What constrains financial inclusion for women? Evidence from Indian micro data”, World Development, Vol. 92, pp.60-81. DOI: https://doi.org/10.1016/j.worlddev.2016.11.011

Grohmann, A., Klühs, T. and Menkhoff, L. (2018), “Does financial literacy improve financial inclusion? Cross country evidence”, World Development, Vol. 111, pp.84-96. DOI: https://doi.org/10.1016/j.worlddev.2018.06.020

Gupte, R., Venkataramani, B. and Gupta. D. (2012), “Computation of financial inclusion index for India”, Procedia - Social and Behavioral Sciences, Vol. 37, pp.133-149. DOI: https://doi.org/10.1016/j.sbspro.2012.03.281

Hair JR, J.F., Black, W.C., Babin, B.J. and Anderson, R.E. (2010), “Multivariate Data Analysis (7th Ed.)”, Upper Saddle River, NJ: Pearson Prentice Hall.

Hair, J.F., Sarstedt, M., Hopkins, L. and Kuppelwieser, G.V. (2014), “Partial least squares structural equation modeling (PLS-SEM). An emerging tool in business research”, European Business Review, Vol. 19 No. 2, pp.139-152.

Harman, H.H. (1976), Modern factor analysis (3rd ed.), Chicago, IL: The University of Chicago Press.

Heckman, S.J. and Grable, J.E. (2011), “Testing the role of parental debt attitudes, student i n c o m e , dependency status, and financial knowledge have in shaping financial self- efficacy among college students”, College Student Journal, Vol. 45 No. 1, pp.51- 64,

Herawati, N.T., Candiasa, I.M., Yadnyana, I.K. and Suharsono, N. (2020), “Factors that influence financial selfefficacy among accounting students in Bali”, Journal of International Education in Business, Vol. 13 No. 1, pp.21-36. DOI: https://doi.org/10.1108/JIEB-02-2019-0010

Hu, L.T. and Bentler, P.M. (1998), “Fit indices in covariance structure modeling: sensitivity to under parameterized model misspecification”, Psychological Methods, Vol. 3 No 4, pp. 424-453, available at: https://doi.org/10.1037/1082-989X.3.4.424 (accessed 04 January 2020). DOI: https://doi.org/10.1037//1082-989X.3.4.424

Kesmodel, Ulrik S. (2018), “Crosssectional studies–what are they good for?” Acta obstetricia et gynecologica Scandinavica, Vol. 97 No. 4, pp.388-393. DOI: https://doi.org/10.1111/aogs.13331

Kumar, J. and Bansal, G. (2020), “Impact of financial literacy (FL) and access to banking services (AC) on financial well-being (FWB): an empirical study”, International Journal of Management, Vol. 11 No.12, pp. 1010-1020. DOI: https://doi.org/10.34218/IJM.11.12.2020.090

Lapp, W.M. (2010), “The missing link: financial self-efficacy’s critical role in financial capability’’, EARN research institute, pp.1-7.

Lim, H., Heckman, S.J., Letkiewicz, J.C. and Montalto, C.P. (2014), “Financial stress, self- efficacy, and financial help-seeking behavior of college students”, Journal of Financial Counseling and Planning, Vol. 25 No. 2, pp.148–160.

Liu, L. and Zhang, H. (2021), “Financial literacy, self-efficacy and risky credit behavior among c o l l e g e students: evidence from online consumer credit”, Journal of Behavioral and Experimental Finance, Vol. 32, 100569. DOI: https://doi.org/10.1016/j.jbef.2021.100569

Lown, J.M. (2011), “Development and validation of a financial self-efficacy scale”, Journal of F i n a n c i a l Counseling and Planning, Vol. 22 No. 2, pp.54-63.

Lusardi, A. (2002), “Increasing saving among the poor: the role of financial literacy”, Poverty Research News, Vol. 6 No. 1, p.12.

Lusardi, A. (2008), “Household saving behavior: the role of financial literacy, information and financial education programs”, Working Paper 13824. National Bureau of E c o n o m i c Research. DOI: https://doi.org/10.3386/w13824

Mahdzan, N.S. and Tabiani, S. (2013), “The impact of financial literacy on individual saving: an exploratory study in Malaysian context”, Transformations in Business & Economics, V o l . 12 No. 1(28), pp.41-55.

Mindra, R. and Moya, M. (2017), “Financial self-efficacy: a mediator in advancing financial inclusion”, Equality, Diversity and Inclusion: An International Journal, Vol.36 No. 2, pp.128-149. DOI: https://doi.org/10.1108/EDI-05-2016-0040

Mindra, R., Moya, M., Zuze, L.T. and Kodongo, O. (2017), “Financial selfefficacy: a determinant of financial inclusion”, International Journal of Bank Marketing, Vol. 35 No. 3, pp.338353. DOI: https://doi.org/10.1108/IJBM-05-2016-0065

Mohtar, N.M., Amirnordin, N.A. and Haron, H. (2014), “Ayamas food corporation Sdn. Bhd: a s t u d y on the factors of consumer behaviour towards Halal product selection”, Procedia- Social and Behavioral Sciences, Vo1. 21 No. 2, pp.166-185. DOI: https://doi.org/10.1016/j.sbspro.2014.01.1118

Montford, W. and Goldsmith, R. E. (2016),“How gender and financial selfefficacy influence i n v e s t m e n t risk taking”, International Journal of Consumer Studies, Vol. 40 No.1, pp.101-106. DOI: https://doi.org/10.1111/ijcs.12219

Mundra, S.S. (2016), “Financial Inclusion in India – The Journey so far and the Way Ahead”, available at: https:// rbi.org.in/scripts/BS_SpeechesView.aspx?Id=1024 (accessed 04 January 2020).

Noor N., Batool, I. and Arshad, H.M. (2020), “Financial literacy, financial self-efficacy and financial account ownership behavior in Pakistan”, Cogent Economics & Finance, Vol. 8 No. 1,DOI: 10.1080/23322039.2020.1806479. DOI: https://doi.org/10.1080/23322039.2020.1806479

Nunnally, J. (1978), “Psychometric theory”, New York: McGraw-Hill.

OECD (2013), “Financial literacy and financial inclusion: guidance, core questionnaire and supplementary questions”, available at: http://www.oecd.org/finance/financial education/Toolkit-to-measure-fin-lit-2013.pdf (accessed 12 January 2020).

Oquaye, M., Owusu, G.M.Y. and Bokpin, G.A. (2020), “The antecedents and consequence of financial wellbeing: a survey of parliamentarians in Ghana”, Review of Behavioral Finance. https://doi.org/10.1108/RBF12-2019-0169 DOI: https://doi.org/10.1108/RBF-12-2019-0169

Ozili, P.K. (2020), “Financial inclusion research around the world: A review”, In Forum for Social Economics, pp. 1-23. Routledge. DOI: https://doi.org/10.2139/ssrn.3515515

Postmus, J.L. (2011), ‘‘Understanding financial literacy with survivors of intimate partner v i o l e n c e ’ ’ , CFS Issue Brief http://www.cfs.wisc.edu/briefs/Postmus2011_ResearchBrief.pdf.

Potrich, A.C.G., Vieira, K.M. and Wesley Mendes-Da-Silva, W. (2016), “Development of a financial literacy model for university students”, Management Research Review, Vol. 39 No 3, pp.356-376. DOI: https://doi.org/10.1108/MRR-06-2014-0143

Qamar, M. A. J., Khemta, M. A. N. and Jamil, H. (2016), “How knowledge and financial self- efficacy moderate the relationship between money attitudes and personal financial management behavior”, European Online Journal of Natural and Social Sciences, Vol. 5 No. 2, pp.296–308.

Ramakrishnan, R. (2011), “Financial literacy-the demand side of financial inclusion”, available at: http://ssrn.com/abstract1958417.

Ramakrishnan, R. (2012), “Financial literacy and financial inclusion”, available at: http://ssrn.com/abstract2204173 (accessed 12 January 2020).

Rangarajan, C. (2008), “Committee on financial inclusion”, available at: https://www.sidbi.in/files/RangarajanCommitee-report-on-FinancialInclusion.pdf (accessed 10 January 2020).

Remund, D.L. (2010), “Financial literacy explicated: the case for a clearer definition in an increasingly complex economy”, The Journal of Consumer Affairs, Vol. 44 No. 2, pp.276-295. DOI: https://doi.org/10.1111/j.1745-6606.2010.01169.x

Rothwell, D.W., Khan, M.N. and Cherney, K. (2016), “Building financial knowledge is not enough: Financial self-efficacy as a mediator in the financial capability of lowincome families, Journal of Community Practice, Vol.24 No. 4, pp.368-388. DOI: https://doi.org/10.1080/10705422.2016.1233162

Sarma, M. and Pais, J. (2008), “Financial inclusion and development: A cross country analysis”, Paper presented at the Annual Conference of the Human Development and Capability Association, New Delhi.

Sarma, M. (2008), “Index of financial inclusion”, Indian Council for Research on International Economics Relations, India.

Schlein, M. (2017), “ACCION conversation on the future of financial inclusion”, MoneyConf Fintech Conference, Madrid, July.

Serido, J., Shim, S. and Tang, C. (2013), “A developmental model of financial capability: A framework for promoting a successful transition to adulthood”, International Journal of Behavioral Development, Vol. 37 No. 4, pp.287-297. DOI: https://doi.org/10.1177/0165025413479476

Shiau, W.L., Yuan, Y., Pu, X., Ray, S. and Chen, C.C. (2020), “Understanding fintech continuance: perspectives from self-efficacy and ECT-IS theories”, Industrial Management & Data Systems, Vol. 120 No. 9, pp.1659-1689. DOI: https://doi.org/10.1108/IMDS-02-2020-0069

Strömbäck, C., Lind, T., Skagerlund, K., Västfjäll, D. and Tinghög, G. (2017), “Does self-control predict financial behavior and financial well-being?”, Journal of Behavioral and Experimental Finance, Vol. 14, pp.30-38. DOI: https://doi.org/10.1016/j.jbef.2017.04.002

Subha, M.V. and Priya, P.S. (2014), “The emerging role of financial literacy financial planning”, International Journal of Innovative Science, Engineering & Technology, Vol. 1 No 5, pp.400-408.

Tang, N. (2021), “Cognitive abilities, self-efficacy, and financial behavior”, Journal of Economic Psychology, Vol. 87, 102447. DOI: https://doi.org/10.1016/j.joep.2021.102447

Thomson, M., Maclnnis, D.J. and Park, C.W. (2005), “The ties that bind: measuring the strength of consumers’ emotional attachments to brands”, Journal of Consumer Psychology, Vol. 15 No. 1, pp.77-91. DOI: https://doi.org/10.1207/s15327663jcp1501_10

Zia-ur-Rehman, M., Latif, K., Mohsin, M., Hussain, Z., Baig, S.A. and Imtiaz, I. (2021), “How perceived information transparency and psychological attitude impact on the financial well-being: mediating role of financial self-efficacy”, Business Process Management Journal, Vol. 27 No. 6, pp.1836-1853. DOI: https://doi.org/10.1108/BPMJ-12-2020-0530