Harnessing Fintech for Poverty Alleviation: Enhancing Credit Utilization and Livelihoods in Urban Slums of North-western India through the Capability Approach and Sustainable Livelihoods Framework

Abstract

The persistence of urban poverty and financial exclusion continues to challenge developing economies, particularly within India's expansive slum communities. Our research examines how financial technology (Fintech) can transform productive credit utilization and enhance livelihood outcomes among urban slum residents in Northwestern India. We construct a conceptual model that positions Fintech as a catalyst for capability expansion and asset enhancement, drawing upon Amartya Sen's Capability Approach and the Sustainable Livelihoods Framework. Through a mixed-methods design, we gathered quantitative data from 600 households across twelve urban slums, complemented by in-depth qualitative interviews with 40 participants. Our analytical approach combined Structural Equation Modeling (SEM) and Fuzzy Set Qualitative Comparative Analysis (fsQCA). The results demonstrate robust relationships between key variables: Fintech adoption significantly enhances productive credit utilization (β = 0.68, p < 0.001), which subsequently strengthens livelihood assets (β = 0.72, p < 0.001) and expands capabilities (β = 0.75, p < 0.001). This capability expansion ultimately yields improved livelihood outcomes, contributing to sustainable poverty alleviation (β = 0.70, p < 0.001). Transforming structures and processes-including supportive policies and social networks-moderate these relationships. Our findings emphasize the critical importance of integrating technological innovations into development strategies and offer concrete recommendations for policymakers, financial institutions, and development practitioners seeking to leverage Fintech for socioeconomic advancement in marginalized urban contexts.

Keywords: Credit Utilization, Poverty Alleviation, Capability Approach, Sustainable Livelihoods Framework, Financial Inclusion, Urban Slums, India, Structural Equation Modeling

JEL Classification: G21, I32, O16, O33, D14, R20