Socio-economic empowerment in rural India: Do financial inclusion and literacy matters?

Financial literacy as a major catalyst in the area of inclusive growth has obtained utmost prevalence, based on which this study intended to analyze the role of financial literacy in ensuring financial inclusion which further enhances socio-economic empowerment in rural areas of Karnataka, India. In order to conduct the study 398 responses (i.e. 93% response rate) were collected through comprehensive questionnaire which was then analyzed using SPSS 26 and SPSS AMOS 23 software, as SEM (Structural Equation Modeling) was used to evaluate the proposed conceptual model, as well as two-way ANOVA to analyze the demographic effect on the components. The study outcome confirmed that financial inclusion is highly affected by the financial literacy of a rural community in a direct way; but when they can take effective financial decision and are responsible in financial behavior, they tend to show more financial inclusion which has contributed to their socio-economic empowerment. Realizing the dominant role of financial literacy one of the key policy implications of this article is that the Indian government may begin spending considerable amounts of money to promote financial literacy, which can significantly expand financial inclusion. Furthermore, measures might be taken to discover the gaps in digital financial transaction (online and mobile banking) where the Government of India should be aggressive in building the infrastructure for financial inclusion, which would aid in the socio-economic growth of the rural people.