Empowering Sustainable Development: The Role of Financial Literacy and Social Capital in Bridging Financial Inclusion in Developing Nations.

Abstract

Purpose- This paper investigates how financial inclusion impacts sustainable development in Pakistan, with financial literacy and social capital as mediators. The purpose is to explore whether these factors are connected and what this link means for more inclusive and sustainable growth. Study Design/methodology/approach – A quantitative research design was adopted, which was based on data gathered through a structured questionnaire survey of 488 banking customers in Pakistan. Data were analyzed through structural equation modeling (SEM) using PLS4-SEM software to assess the direct and indirect relationships between financial inclusion, social capital, financial literacy, and sustainable development. Findings- The findings suggest that financial inclusion positively and significantly impacts sustainable development. Financial literacy and social capital are demonstrated to play a mediating role in enhancing the pathway between financial inclusion and sustainable development. The findings show that increased financial inclusion improves financial literacy and social capital, hence promoting better economic, social, and environmental sustainability outcomes. Research limitations/implications – This study adds to the insights of the policymakers and financial institutions that help achieve sustainable development goals (SDGs). Its major implication for policymakers and financial institutions in Pakistan is that strategies that will lead towards enhancing access to banking services, promoting more financial literacy initiatives, and developing social cohesion are essential drivers of inclusive and sustainable development in Pakistan. Research Practical Implications- The study advocates for corporate governance reforms and policy interventions to prioritize human talent capital investments. Financial strategies such as maintaining liquidity and managing leverage are recommended to stabilize firm volatility. Originality/value- This research contributes to the existing literature by providing a detailed analysis of the synergistic relationship between financial inclusion, social capital, and financial literacy in the context of sustainable development. It offers a robust empirical framework for addressing development challenges in emerging economies, focusing on actionable strategies for achieving SDGs.