Interplay Between Financial Literacy and Financial Inclusion through Digital Financial Innovation among the University Students

Moderating Role of Trust

Abstract

Purpose: Digital financial services are experiencing explosive growth, offering unprecedented access to financial tools and inclusion for millions. This study investigates the interplay between financial literacy and financial inclusion, and proposes a modified framework by incorporating the mediating role of digital financial innovation and the moderating role of trust based on TPB and Financial literacy theory.

Design/methodology/approach: Based on positivist philosophy, a self-administered survey was conducted to empirically test the model using Structural Equation Modelling. By using the convenience sampling technique, data were collected from 484 respondents of different Nepalese universities operating in Kathmandu Valley.

Findings: The study findings highlighted financial literacy and digital financial innovation as significant predictors of financial inclusion. Further, digital financial innovation advantage mediated the interplay between financial literacy and financial inclusion. In contrast, Trust did not show a moderating effect.

Implications: The scope of the study is confined to university students within the Kathmandu Valley, cross-sectional data, and self-reported bias, which restricts the generalizability of the findings. By filling in empirical gap, this study contributes to the expanding topic of expanding the comprehension of financial inclusion in the context of digital financial use. Equipping university students with financial literacy is key to unlocking the potential of digital finance for a more inclusive and empowered financial future.

Originality/value: To the best of the authors' knowledge, this empirical study represents a novel approach by integrating the principles of combining financial literacy and behavioral theory, a combination not previously explored. Thus, the modified framework helps to understand how digital finance empowers responsible financial behavior and fosters trust, driving financial inclusion and economic growth among Nepalese University students.  

JEL Classification: G2, G20