Purpose: Understanding the mediating role of the adoption of financial innovations on the relationship behavioral factors and utilization of formal financial services was the main aim of this research. The behavioral factors examined were self-control, confidence and social proof. The study is premised on behavioral finance theories. Design/Methodology: The positivist approach and explanatory research designs were adopted to understand the relationships between the variables under investigation. A sample of 486 owners/managers of licensed micro-enterprises in Nairobi, Kenya were selected using stratified random sampling technique. Primary data was collected through a structured questionnaire. Hypotheses were tested using Hayes and Zhao approach for mediation analysis. Findings: The results showed that financial innovations mediated the relationship between each of the behavioral factors and financial inclusion, that is; self- control (β =.0941, ρ= .00), confidence; (β = .1019, ρ = .00) and social proof (β = .1036, ρ = .00). Practical implications: The study has brought into fore the mediating role of financial innovations on the relationship between the three behavioral factors and financial inclusion. Thus, practitioners are encouraged give due attention to behavioral factors and financial innovations in policy formulation and programs geared towards optimal utilization of financial services.
Financial Inclusion has been conjectured as a driver of social development with benefits accruing both at micro and macro levels. Finance theory suggest that behavioral factors influence the utilization of financial services and adoption of emerging innovations and that financial has an effect on optimal usage of financial services. Studies that examines the combined effects of behavioral factors, financial innovations and financial literacy in determining the effect on utilization of financial services are scanty, yet the latter is deemed as a key driver in realization of a number of United Nation’s Sustainable Development Goals (2030). The study extended prior suppositions by integrating the three variables into a novel model of moderated mediation. Thus, the linkage between self-control, which is a behavioral factor, adoption of financial innovations and utilizations of diverse everyday financial services was examined. The relationship between the three variables was further tested for the moderating effects of various levels of financial literacy of the sampled users of the financial services. Data was collected using a structured questionnaire from the randomly sampled owners/or their representatives of microenterprises in Nairobi, Kenya. The hypotheses were tested using relevant models in Process Macro [52]. The conditional indirect effects were attested, thus the conclusion that financial innovations mediates the self-control and financial inclusion relations if entrepreneurs hold sufficient levels of financial literacy. The strength of the mediated effect varied with levels of financial literacy. Implications for theory growth and policy interventions are discussed.
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