Determinants of financial capability: Evidence from a transition country

Abstract

Among scholars, academicians and policymakers there is a constant concern on how to improve financial literacy and capability of individuals. In this regard, this study seeks to investigate the effect of financial literacy along with demographic factors on individuals' financial capability. This research is administrated on an individual-level data collection through a survey. This paper uses hierarchical multiple regression with two steps in a dataset of 200 respondents from a transition country, Albania. Results demonstrated that financial capability is affected by financial knowledge and financial behaviour. In addition, individuals that were single, unemployed and young negatively influenced financial capabilities. However, having higher incomes positively impacted financial capability. These findings are consistent with the literature in the field of financial literacy. Financial attitude and gender did not show any significant effect on financial capability. This paper contributes to enriching the literature of the field by offering evidence on how financial literacy and demographic factors drive individuals' financial capability. In addition, this current study provides useful insights for academicians, educational institutions managers, and public-policy advocates responsible for designing curricula and strategies to increase the level of individuals' financial capability.