FINTECH AND FINANCIAL INCLUSION: MEDIATING ROLE OF FINANCIAL LITERACY IN THE BANKING SECTOR OF AFGHANISTAN

Abstract

Financial Inclusion (FI) is a burning issue in weak economies where a weak infrastructure, institutional barriers, and poor Financial Literacy (FL) are the main factors that prevent access to formal financial services. Financial technology (FinTech) has become a new disruptive instrument that has the potential to increase the financial reach; but the success of this tool lies in the capacity of individuals to comprehend and use digital financial services. This paper examines how the use of Fins affects FI with FL as a mediator in the Afghani banking industry. A quantitative research design was used to gather data on 250 banking customers in terms of a structured questionnaire and analyzed using SPSS. The proposed relationships were tested using descriptive statistics, correlation analysis, multiple regression and mediation analysis with the help of PROCESS Macro (Model 4). The findings show that FI and FL are greatly increased with the Fin adoption. FL is also a significant predictor of FI, as well as a partial mediator between Fin adoption and FI. These results indicate that technological access is not enough to guarantee inclusive results and the role of financial capability development in achieving the inclusion benefits of Fin. The study is relevant to the FI theory by confirming that FL is an effective transmission factor between the Fin adoption and inclusion outcomes in a weak banking setting. Policy implications indicate that Afghan banks and regulators are recommended to consider the Fin expansion strategies alongside the financial education programs as a sustainable approach to establish FI.