HOW LOAN ACCESSIBILITY EFFECTS ON LOAN OUTCOMES THROUGH MEDIATION EFFECT OF FINANCIAL LITERACY AND MODERATION EFFECT OF SOCIAL CUSTOMS. A CASE STUDY OF HYDERABAD, PAKISTAN

Abstract

Financial inclusion is now a significant economic empowerment force in the developing economies, but credit provision is not always a guarantee of good financial performance. This paper explores the impact of access to loans in the city of Hyderabad, Pakistan, on loan outcomes, using the mediating impact of financial literacy and moderating impact of social customs. An explanatory research design was embraced that is quantitative in nature because the article aims to explain a phenomenon and collect data through the use of a structured questionnaire with a seven-point Likert scale. Partial Least Squares Structural Equation Modeling (PLS-SEM) was used in the analysis. The findings show that there is a strong positive impact of loan access on the outcome of loans. The financial literacy levels also play a significant role in enhancing the performance of loan and mediate the relationship between access to loans and loan performance, emphasizing the role of financial literacy of borrowers in the effective use of credit. Social customs, on the contrary, had only a weak moderating effect. The results underline the importance of enhancing financial literacy and access to credit in promoting the efficiency of borrowing and financial inclusion policies in the developing world.