MODERATING EFFECT OF FINANCIAL LITERACY AND GOVERNMENT POLICIES ON THE RELATIONSHIP BETWEEN MICROFINANCE AND SOCIOECONOMIC CONDITIONS

The main aim of the study was to know the moderating effect of financial literacy and government on the relationship between microfinance and socioeconomic conditions of merged areas of Khyber Pakhtunkhwa. The research conducted aligned with the positivist philosophical viewpoint. The population of the study was unknown for which G*Power was used. The sample calculated was 350. The data was collected from the individuals who had taken microcredit from Akhwat Islamic Microfinance (AIM), Sarhad Rural Support Program (SRSP), and National Rural Support Program (NRSP) via questionnaires. After highlighting descriptive statistics, the frequency distribution of the respondents' demographic was discussed. For the scale's reliability, Cronbach's alpha was used, the most common method to confirm or test the scale's reliability. The next step was to check the scale's validity for which KMO and Bartlett's tests were used. It assesses the instrument's capacity to measure the intended attribute accurately. Moreover, each question's component matrix or factor loading surpassed the acceptable range, indicating a solid factor loading. After completing these tests, regression analysis was carried out. The model summary of the predictor and predicted variables and values of R2 were calculated. ANOVA statistics and regression coefficients were also summarized. For moderation, the Hayes Model was used. While doing analysis, the R, R2, and F values were found satisfactory. In the other step, the values of Coefficients, the most important of which was the p value of interaction term (int_1), were found significant. Hence, it was concluded that microfinance has an impact on basic needs, living standards, and microfinance usage. Moreover, this study adds to the current body of literature by filling a gap in research as,to the best of the researcher knowledge, this study hasn’t been conducted within the merged areas of Khyber Pakhtunkhwa. It also distinguishes itself by incorporating two moderating variables—financial literacy and government policies—which have not been explored in previous studies. Microfinance, Financial Literacy, Socioeconomic Conditions, & Government Policies