Financial Literacy: The Key to Unlocking Credit Access in Northeast India's Microfinance Landscape

The study "Why Financial Literacy Matters" focuses on Northeast India's microfinance landscape, revealing that financial literacy is crucial for accessing credit. It challenges the myth that bank expansion ensures financial inclusion. Lack of financial knowledge bars people from loans, even where banks are present. The research, using the theory of information asymmetry, shows that improving financial literacy can boost trust and participation in financial activities, benefiting developing economies. It also finds that more profitable businesses may avoid loans due to risk aversion. The study combines demand and supply perspectives, concluding that lack of financial literacy creates barriers to credit access. It proposes "Financial Literacy and Credit Facilitation Hubs" to help overcome these hurdles.