From access to capability’ financial literacy, financial behaviour and welfare impact of financial inclusion in Uganda

Financial inclusion has increased sharply with the advent of mobile money systems, SACCOs and traditional banking. However, its differential effect on household welfare is ambiguous and theoretically disputable. This research seeks to establish whether financial literacy and financial behavior act as mediating variables in the financial inclusion–household welfare nexus, while analyzing the influence of behavioral and structural constraints thereof.  Drawing on the capability theory and behavioral economics, it regards financial inclusion as access, financial literacy as capability, and financial behavior as the scale of translating access into welfare outcomes.  The mediated–moderation empirical framework applied shows that financial inclusion substantively contributes to financial literacy access, and that financial literacy improvement has a nutritional effect on financial behavior and household welfare.  Poverty, income shifts, and lack of trust dampen the nexus. The evidence calls for a paradigm shift from access-led to capability-led financial systems policy.