The Impact of Financial Inclusion on Poverty Alleviation: Moderating and Mediating Effect

Abstract

Purpose: The main purpose of this study is to examine the impact of financial inclusion on poverty alleviation with moderating effect of microfinance and mediating effect of financial literacy Design/methodology/approach: In order to fulfil the objectives of the study, primary data were collected from 300 users of microfinance banks using multistage stratified convenience sampling technique. Respondents are the people who used the microfinance services. They are usually self-employed business owners who operate out of their homes. The PLS-SEM method was used to analyze the data that was gathered for this study. In particular, PLS-Graph (Chin, 2010) and Smart PLS (Ringle, Wende, & Will, 2005), two popular PLS- SEM software programs, were used for the analysis and output display. Findings: Study results reveals that financial inclusion positively affects poverty alleviation and this effect is further enhanced by the presence of microfinance and financial literacy. The relationship between financial inclusion and poverty alleviation is represented by the mediating effect of financial literacy. Originality/Value: The study makes contribution towards financial inclusion literature relating to poverty alleviation and fulfils the research gap to some extent by assessing the impact of financial inclusion on poverty alleviation through microfinance and financial literacy. This paper can help the policymakers and other stakeholders of microfinance banks in promoting banking habits among poor rural households at the national level. Limitations: The cross-sectional data used in the study may make it more difficult to establish causal linkages because temporal fluctuations in the variables are not well represented. Data constraints, such as the lack of current and reliable financial literacy x information, may have an impact on how precise the study's conclusions are. It may have overlooked qualitative details that could have added to a thorough comprehension of the intricate relationships between the variables. The study may oversimplify the complex dynamics at work by failing to account for the wide variety of microfinance programs and their differing effects on the variables listed.