Factors shaping the financial capability of low‐income consumers from rural regions of Poland

Abstract

The two‐fold purpose of this study was to explore the financial capability of low‐income consumers from rural regions of Poland, using Xiao’s financial capability index, while accounting for their poverty status, demographic and financial characteristics. To test the relevant hypothesis of the study, a micro database of low‐income consumers was used. Factor, descriptive and correlation analyses were employed for preliminary examinations. One‐way ANOVA was used to examine the impact of different poverty indicators on financial capability index variables. Multiple OLS regressions were used to examine the influence of the selected factors on the level of financial capability. Six sets of linear regression models were used to explore the effects of factors associated with the financial capability variables. The findings of our study suggest that financial inclusion is an essential component of the financial capability index. The results also show that all five variables play a significant role in the financial capability index. Therefore, Xiao’s financial capability index captures a specific combination of financial literacy and financial behaviour of low‐income consumers from rural regions of Poland.

Improving financial capability: the mediating role of financial behaviour

“…The core findings of this study established that financial behaviour has a significant impact on the financial capability of individuals. This agrees with other studies which indicated that financial behaviour is an essential factor to determine a person's financial capability (Potocki & Cierpiał-Wolan, 2019;Xiao, Chen, et al, 2014).…”

“…Higher knowledge results in better financial behaviour which in return can enhance higher financial capability and control, with higher capability an individual can plan financial commitments, better financial planning and cash flows in much better ways. As mentioned earlier, financial behaviour is a core element that shapes the level of financial capability (Potocki & Cierpiał-Wolan, 2019), and financial knowledge precedes financial behaviour (Hayhoe et al, 2005;Potrich et al, 2016;Yong et al, 2018). Learning financial topics can improve attitudes and behaviours, and in the long run, it can enhance financial capability (Batty et al, 2015).…”

“…Financial behaviour is a very important factor that shapes financial capability (Potocki & Cierpiał-Wolan, 2019;Xiao, Chen, et al, 2014). Higher financial capability is associated with favourable and less risky financial behaviours.…”

“…Financial capability can be measured through financial behaviours (Mitchell & Lusardi, 2011), and it is also stated that financial behaviour is one of the important factors of financial capability (Xiao, Chen, et al, 2014). Financial capability refers to the application of financial knowledge underpinned by desirable financial behaviours to attain financial well-being (Potocki & Cierpiał-Wolan, 2019;Xiao, Chen, et al, 2014). Hence, a new hypothesis is proposed as: H3: Financial behaviour positively affects financial capability.…”

“…On the other side, financial behaviour impacts financial capability. financial behaviour is one of the most significant factors that shape the level of financial capability (Potocki & Cierpiał-Wolan, 2019;Xiao, Chen, et al, 2014). As financial behaviour succeeds financial attitude and precedes financial capability, therefore financial behaviour falls between financial attitude and financial capability.…”