Impact of Inclusive Finance and Government Support Policies on Entrepreneurial Behaviour

Abstract

Entrepreneurship has become a significant catalyst for economic development, employment generation, innovation, and sustainable growth, particularly in developing economies where financial accessibility and institutional support play a crucial role in fostering entrepreneurial activities. The present study investigates the influence of financial inclusion and government support policies on entrepreneurial behaviour, while examining the mediating role of Individual Entrepreneurial Orientation in explaining the relationship among these constructs. The study proposes a comprehensive serial mediation framework to understand how access to inclusive financial services and supportive government initiatives collectively shape entrepreneurial attitudes and behaviours. A quantitative research design was adopted, and primary data were collected from 612 respondents across Karnataka, India, using a structured questionnaire. The collected data were analysed using Structural Equation Modelling (SEM) to evaluate the measurement model, assess the structural relationships, and test the proposed hypotheses. The empirical findings reveal that financial inclusion has a significant positive influence on entrepreneurial behaviour by improving entrepreneurs' access to formal financial services, enhancing financial literacy, reducing perceived financial risk, and increasing confidence in undertaking entrepreneurial ventures. Similarly, government support policies significantly contribute to entrepreneurial behaviour by facilitating financial assistance, business development programmes, skill enhancement initiatives, institutional support, and easier access to credit, thereby creating a favourable entrepreneurial ecosystem. Furthermore, the mediation analysis confirms that Individual Entrepreneurial Orientation significantly mediates the relationship between financial inclusion, government support policies, and entrepreneurial behaviour, indicating that financially inclusive environments and supportive public policies strengthen entrepreneurial orientation, which subsequently encourages opportunity recognition, innovation, proactiveness, risk-taking ability, and positive entrepreneurial actions. The study demonstrates that entrepreneurial orientation serves as an important psychological and behavioural mechanism through which financial inclusion and government interventions translate into enhanced entrepreneurial outcomes. The findings provide valuable implications for policymakers, government agencies, financial institutions, entrepreneurship development organizations, and other stakeholders by emphasizing the need to strengthen inclusive financial systems, expand financial literacy initiatives, simplify access to financial products, and design effective policy interventions that encourage entrepreneurship and economic development. The study also contributes significantly to the existing body of entrepreneurship literature by integrating financial inclusion, government support policies, entrepreneurial orientation, and entrepreneurial behaviour into a unified Structural Equation Modelling framework, thereby addressing an important research gap and providing empirical evidence on the direct and indirect relationships among these variables. The proposed model offers a comprehensive understanding of the institutional and financial factors influencing entrepreneurial success and serves as a valuable reference for future research, policy formulation, and entrepreneurship development strategies aimed at promoting inclusive and sustainable economic growth.