Publication Details
Abstract
This study investigates the impact of financial literacy on non-performing loans (NPLs) in Uzbekistan’s commercial banking sector using a dynamic panel data model and the System Generalized Method of Moments (GMM) estimator. Drawing on a panel of 28 banks over the period 2011–2024, the analysis incorporates both bank-specific and macroeconomic variables to capture the multidimensional nature of credit risk. Financial literacy is proxied by the share of finance and economics graduates among total higher education graduates, offering a novel macro-level indicator of financial awareness. The results demonstrate that higher levels of financial literacy are significantly associated with lower NPL ratios, suggesting that informed financial decision-making contributes to improved loan performance. Additionally, capital adequacy, bank profitability, and GDP growth are found to mitigate credit risk, while inflation exerts a positive and significant effect on NPLs. Exchange rate volatility, by contrast, is statistically insignificant in this context. Model diagnostics confirm the robustness and validity of the findings. The study concludes with targeted policy recommendations, emphasizing the need for nationwide financial education strategies, data-driven credit risk assessments, and macroeconomic stability to reduce systemic vulnerabilities in emerging markets.