EXPLORING THE MEDIATING ROLE OF FINANCIAL LITERACY IN THE LINK BETWEEN MICROFINANCE AND WOMEN’S FINANCIAL WELL-BEING

Abstract

This study investigates how microfinance participation influences the financial well-being of rural women in Haryana, India, with a focus on the mediating role of financial literacy. Microfinance initiatives, through access to collateral-free loans and savings, have expanded financial inclusion and socio-economic opportunities for women, yet variations in regional impact point to the importance of financial literacy as a critical enabler. Employing Partial Least Squares Structural Equation Modelling (PLS-SEM) on primary data from 403 rural women, the research confirms that microfinance significantly improves financial literacy, which in turn positively affects women’s financial well-being. The model exhibits excellent fit and explanatory power with strong direct and indirect pathways, validating financial literacy as a partial mediator in this relationship. Findings highlight that microfinance, when combined with financial literacy, empowers women economically, socially, and psychologically—enhancing income generation, decision-making power, confidence, and community participation. The study underscores the need to integrate comprehensive financial education within microfinance programs to optimize empowerment outcomes in rural India. These insights contribute to policy discussions on sustainable development goals targeting gender equality, poverty reduction, and inclusive economic growth.