Eco-Microcredit and Rural Transformation: The Mediating Role of Sustainable Farming Practices and the Moderating Effect of Financial Literacy on Household Sustainability

Abstract

Rural communities often struggle to achieve sustainable livelihoods due to limited financial access, low adoption of sustainable farming practices, and insufficient financial literacy. This study addresses these challenges by examining how eco-microcredit, as a form of green financing, serves as a catalyst for rural transformation through its impact on sustainable farming practices and household sustainability. The study aims to develop and validate a conceptual framework that positions sustainable farming practices as a mediating variable and financial literacy as a moderating variable in the relationship between green financing and household sustainability. Using a conceptual and theoretical approach grounded in the Sustainable Livelihoods Framework, ecological modernization theory, and innovation-adoption theory, the study integrates financial access, behavioral adoption, and human capability perspectives. The findings suggest that eco-microcredit enhances household sustainability indirectly by promoting the adoption of sustainable farming practices, while financial literacy strengthens this relationship by enabling effective utilization of financial resources. The study contributes theoretically by linking financial inclusion, behavioral change, and sustainability outcomes in a unified model. Practically, it provides insights for policymakers and financial institutions to design integrated eco-microcredit programs that combine financial support, capacity building, and market access to achieve long-term rural resilience and sustainability.