Does Digital Financial Inclusion Make Individuals More Financially Resilient? The Role of Financial Capability and Digital Literacy

This study examines the effect of digital financial inclusion on financial resilience and investigates the mediating role of financial capability and the moderating role of digital literacy. Drawing on Sen's capability approach and the financial capability framework, the study proposes that access to and use of digital financial services can enhance financial resilience by strengthening individuals' financial capabilities, while digital literacy determines how effectively individuals convert digital access into financial outcomes. Data were collected through a structured questionnaire from 278 adult users of digital financial services in Pakistan and analyzed using partial least squares structural equation modelling (PLS-SEM). The results show that digital financial inclusion has a positive and significant effect on both financial capability and financial resilience, while financial capability also positively affects financial resilience. Financial capability significantly mediates the relationship between digital financial inclusion and financial resilience, with the indirect effect accounting for approximately 43% of the total effect. Furthermore, digital literacy significantly strengthens both the relationship between digital financial inclusion and financial capability and the relationship between digital financial inclusion and financial resilience. The moderating effect is stronger for the digital financial inclusion-financial capability relationship.