Financial Inclusion and Financial Innovation: A Moderated Mediation Analysis Involving Financial Behavior and Financial Orientation

Abstract

The study was carried out with the major objective to analyze the role of financial inclusion in enhancing financial innovation of SMEs in context of the developing economy like Pakistan with the mediating role of the financial behavior and moderating role of financial orientation. The research was grounded on Resource Based View and Theory of Planned behavior perspectives to entail the conceptual framework to understand the interplay among financial inclusion, financial innovation, financial behavior and financial awareness. In this study, descriptive research design was undertaken to analyze the gathered data from the target population, which comprises of owners, CEOs and managerial level employees of the SMEs operational in Hattar industrial estate, Hazara Division, Khyber Pakhtunkhwa, Pakistan. A total of 385 sample size which was calculated through Cochran’s Sample Size formula, selected through systematic random sampling technique to confirm the representative representation of the entire industry. Questionnaires were used as data collection instrument. The statistical analysis represents that financial inclusion considerably impacts the financial innovation of the SMEs, while financial behavior mediates this association. Furthermore, the results also supported the moderating role of financial orientation on the association of financial inclusion and financial innovation. The findings of this study recommends that the owners. CEOs and management of the employees should consider financial inclusion in their core strategies of emprises for enhancing financial innovation through augmented financial behavior and strengthen financial orientation to accomplish competitive edge and affirm survival in long run.  

Keywords: Financial Innovation, Financial Inclusion, Financial Behavior, financial orientations, SMEs