Financial knowledge and access to financial services of farmers in India: the mediating role of financial confidence

Purpose The research aims to explore whether financial confidence mediates the association between financial knowledge and access to financial services of farmers in the study region. Design/methodology/approach We tested the mediation model utilizing the Hayes PROCESS Macro plug-in for SPSS based on the data from 400 farmers in the Punjab state of India. We applied exploratory factor analysis to inspect the construct validity of the financial knowledge instrument. Additionally, we addressed the potential endogeneity using the two-stage least squares method with instrumental variables. Findings The study revealed that financial confidence significantly mediates between financial knowledge and access to financial services, explaining 26.23% of the total effect of financial knowledge on access to financial services, even after adjusting for covariates, including marital status, age, education, income and size of landholdings. Research limitations/implications The study provides implications for policymakers and financial institutions working to expand rural financial inclusion to enhance financial confidence, along with the financial knowledge of the farmers, to facilitate their access to financial services. The study additionally highlights the need for a public–private partnership to enhance the financial confidence of the farmers. Originality/value While earlier research has explored financial knowledge’s influence on financial inclusion, this study offers a nuanced understanding of how the interplay of financial knowledge and financial confidence influences farmers' ability to access financial services.