Social and behavioural influences on financial inclusion: Insights from a regional study

Abstract

The research explores financial inclusion through a novel demand-side perspective, combining behavioral and societal elements to study their impact on financial inclusion, especially in underdeveloped economic areas. The primary data for the study was obtained from 1,050 participants. The research used Structural Equation Modeling (SEM) to analyze financial inclusion in relation to behavioral biases, social norms, social networks (financial and social), social trust, and subjective norms. The findings indicate that subjective norms are the most significant factor for financial inclusion, followed by social networks, social norms, and behavioral biases. The higher-order model offers a clearer understanding, highlighting the positive impact of behavioral biases and social factors on financial inclusion. The research demonstrates that behavioral and social elements strongly determine the outcomes of financial inclusion. Financial inclusion strategies need to focus on local socio-behavioral dynamics because subjective and social norms prove to be essential drivers. The research provides useful guidance for both policymakers and financial service providers. Understanding behavioral and social factors in financial inclusion enables the development of specific and culturally appropriate strategies to build inclusive financial systems in underserved areas.