Demand Side Factors and Financial Inclusion: The Mediating Role of Financial Self-efficacy

Despite the recognized significance of achieving financial inclusion in Nigeria,there is limited studies in this area. This gap primarily arises from the prevailingfocus in existing literature on financial inclusion in Nigeria, which predominantlyemphasizes the supply side. Therefore, this study delved into the role of financial selfefficacyas a mediator in the relationship between demand-side factors and the financialinclusion of micro, small, and medium enterprises (MSMEs) in selected local governmentsin Oyo State. The study employed a cross-sectional survey design, the studygathered primary data through structured questionnaires and utilized a structuralequation model for analysis. The findings reported a significant positive link betweenfinancial attitude and financial inclusion (p-value: 0.000). Likewise, there was a noteworthypositive association between subjective norms and financial inclusion (p-value:0.001), as well as between personal experience and financial inclusion (p-value: 0.003). Intriguingly, financial self-efficacy emerged as a substantial obstacle to financial inclusion,acting as a mediating factor with a p-value of (0.002). By evaluating the mediationeffect, this study shows how financial self-efficacy enhance individuals MSMEs ownersto confidently undertake financial tasks and decisions and consequently, financial inclusion in relation to their attitude, experience and subjective norms respectively. Consequently,the study recommends the promotion of positive financial attitudes amongindividual MSMEs to facilitate continuous access to diverse financial services. Financialservice providers should prioritize the establishment of an effective and sustainablefinancial system that offers affordable services to MSMEs. Furthermore, communityleaders are encouraged to play a role in motivating their members to actively engage inthe formal financial sector.