Bridging the Gap between Financial Literacy and Financial Inclusion: Insights from Rural Nepal

Having financial literacy and belonging to the financial sector are key to empowerment and the development of the economy. Being financially literate helps you understand and use financial concepts, but financial inclusion is about opening equal access to financial services. This study explores how financial literacy and financial inclusion are related and how cognition works as a moderator for impoverished people in rural Kirtipur, Nepal. Using a structure questionnaire, an active selection of 441 participants was made for the survey. The study included things like financial literacy (knowledge, abilities, attitude, and behavior), cognitive functions (procedural and declarative) and how financially included people are (whether they have access, use services, how the services work and their well-being). Results indicated that people’s financial knowledge, financial skills and attitudes support being financially included. Cognition played a big role in making both financial literacy and financial inclusion easier for many individuals. Additionally, it found that while financial attitude and behavior in people’s lives had a stronger impact on financial inclusion, their level of financial skill did not. Interestingly, cognition lessened the harmful effect of having financial knowledge on inclusion. The findings show that cognition is important for improving people’s financial judgments and use of financial resources. Helping underserved money managers improve their thinking skills can make a big difference in boosting their inclusion in financial systems. This study helps policymakers, banks and those in the technology sector design reliable financial literacy efforts that support both the economy and the fair treatment of people.