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Eco-Microcredit and Rural Transformation: The Mediating Role of

Sustainable Farming Practices and the Moderating Effect of

Financial Literacy on Household Sustainability

Zuraidah Mohamed Isa

, Zaiful Affendi Ahmad Zabib

, Chaleeda Som Sak

, Rini Lestari

, Mohamad

Hanif Abu Hassan

1,3

Faculty of Business and Management, Digital Innovations & Social Entrepreneurship, University

Teknologi MARA, Cawangan Kedah, Kampus Sungai Petani, Kedah, Malaysia

Sekolah Kebangsaan Semeling, Semeling, 08100 Bedong, Kedah, Malaysia

Faculty of Economics and Business, Department of Accounting, Universitas Islam Bandung, Indonesia

School of Business Managament, College of Business, University Utara Malaysia, 06010 Sintok, Kedah,

Malaysia

Corresponding Author

DOI: https://doi.org/10.47772/IJRISS.2025.910000183

Received: 10 October 2025; Accepted: 16 October 2025; Published: 07 November 2025

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.

Keywords: Eco-microcredit, green financing, sustainable farming practices, rural transformation, household

sustainability.

INTRODUCTION

Rural communities across the developing world face interconnected challenges of poverty, food insecurity, and

environmental degradation. Climate change, soil depletion, and water scarcity further undermine agricultural

productivity, making rural households increasingly vulnerable to economic shocks. In this context, access to

financial resources becomes critical for enabling adaptation and resilience. Microcredit has long been recognized

as a powerful tool for poverty alleviation, but its potential role in promoting environmentally sustainable

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livelihoods has only recently gained traction. The concept of eco-microcredit where microfinance products

tailored toward supporting sustainable agricultural practices and green technologies—emerges as an innovative

pathway to address both livelihood improvement and environmental sustainability simultaneously (Lal & Israel,

2006; Liu, 2024).

Evidence suggests that eco-microcredit and green finance interventions can significantly enhance household

well-being when coupled with sustainable farming practices. In China, Green Finance Reform and Innovation

Zones were found to improve household operating income and reduce reliance on traditional farming while

decreasing rural out-migration (Yan et al., 2025). In Kenya, microcredit-supported adoption of improved seed

varieties increased maize farmers’ income by more than 40% (Kipkogei et al., 2025). Similarly, studies in

Bangladesh reveal that microcredit allowed land-poor households to diversify into livestock and nonfarm

enterprises, thereby stabilizing income (Khandker & Koolwal, 2016). While these findings highlight eco-

microcredit as a catalyst for rural transformation, other studies caution that repayment burdens, weak financial

literacy, and institutional limitations may undermine long-term benefits (Phan et al., 2019; Shahidullah & Haque,

2014).

Despite these insights, the mechanisms through which eco-microcredit contributes to household sustainability

remain under-conceptualized. Much of the existing literature focuses either on financial access or on agricultural

outcomes without fully integrating the environmental dimension. Furthermore, most empirical studies examine

direct effects of microcredit on income or productivity, overlooking the mediating role of sustainable farming

practices. Without this conceptual clarity, policymakers and financial institutions risk designing eco-microcredit

schemes that provide short-term gains but fail to achieve long-term sustainability. This lack of theoretical

integration limits our understanding of how eco-microcredit can simultaneously promote economic resilience,

food security, and ecological balance in rural households.

This paper addresses the gap by proposing a conceptual framework that positions sustainable farming practices

as the mediating variable between eco-microcredit and household sustainability. Drawing on the Sustainable

Livelihoods Framework (DFID, 1999), this study conceptualizes eco-microcredit as a financial intervention that

strengthens household assets and enables strategic livelihood choices. The framework is augmented by

ecological modernization theory, which explains how financial and technological innovation can support

environmental goals (Mol & Sonnenfeld, 2000), and by innovation-adoption theory, which accounts for

heterogeneity in farmers’ decisions to adopt sustainable practices (Rogers, 2003). By integrating these

perspectives, this paper develops a theoretically grounded model that clarifies causal pathways and offers

testable propositions for future research.

The significance of this study lies in its potential to bridge theoretical gaps while offering practical guidance for

policymakers, microfinance institutions, and development practitioners. A clear conceptual framework will help

design eco-microcredit schemes that not only improve income but also incentivize sustainable resource use,

contributing directly to multiple Sustainable Development Goals (SDGs) such as poverty reduction, food

security, climate action, and sustainable communities. The remainder of the paper is structured as follows:

Section 2 reviews the literature on eco-microcredit, sustainable farming practices, and household sustainability;

Section 3 develops the conceptual framework and theoretical underpinnings; Section 4 discusses the proposed

hypotheses and implications; and Section 5 concludes with directions for policy and future research.

LITERATURE REVIEW

Access to eco-microcredit and green finance has shown promising potential in enhancing rural livelihoods while

promoting environmental sustainability. Studies indicate that well-designed programmes can increase

agricultural productivity, household income, and resilience. For instance, the Green Finance Reform and

Innovation Zones (GFRIZ) in China significantly improved household operating income, reduced reliance on

traditional agriculture, and decreased rural out-migration by facilitating access to credit and insurance (Yan et

al., 2025). Similarly, microcredit programmes in Kenya enabled maize farmers to adopt improved seeds and

technologies, resulting in a 40.52% increase in income (Kipkogei et al., 2025). Evidence from Bangladesh shows

that microcredit helped land-constrained households diversify into livestock and nonfarm activities, thereby

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improving income stability (Khandker & Koolwal, 2016). These findings collectively suggest that eco-

microcredit can catalyze rural transformation by enabling both economic and environmental benefits.

However, these positive outcomes are not universal, and challenges remain. Studies caution that loan repayment

burdens, inadequate financial literacy, and limited institutional capacity can undermine the sustainability of

benefits. For example, microcredit in Vietnam improved food consumption in the short term, but repayment

obligations later reduced consumption levels (Phan et al., 2019). Likewise, microenterprises supported by

microcredit often face difficulties in maintaining environmentally sustainable practices without ongoing support

(Shahidullah & Haque, 2014). These findings highlight that eco-microcredit alone is insufficient; its success

depends on complementary support systems such as financial literacy training, extension services, and enabling

policies that ensure households can translate credit into sustainable farming practices and long-term well-being.

To interpret these mixed outcomes, the Sustainable Livelihoods Framework (SLF) provides a valuable

perspective by emphasizing the interaction of assets (financial, natural, human), institutions, and external

contexts in shaping strategies and outcomes (DFID, 1999).

Building on SLF, additional theoretical perspectives deepen understanding of how eco-microcredit leads to rural

sustainability. Ecological modernization theory explains how financial and technological innovations—such as

credit for renewable energy or conservation agriculture—can reduce environmental intensity while sustaining

production (Mol & Sonnenfeld, 2000). Innovation-adoption theory, meanwhile, accounts for why farmers differ

in adopting sustainable practices, highlighting the importance of perceived relative advantage, compatibility,

observability, and peer influence (Rogers, 2003). Recent studies reinforce the role of moderators such as financial

literacy, market access, and extension services in shaping these outcomes (Alqatan et al., 2025; Berhanu et al.,

2021; Revindo & Gan, 2017; Wang & Wang, 2012). Despite this growing body of evidence, few studies explicitly

conceptualize sustainable farming practices as the mediating variable linking eco-microcredit to household

sustainability. This gap calls for a conceptual framework that integrates SLF, ecological modernization, and

adoption theory to clarify the pathways, mediators, and moderators that explain how eco-microcredit can

function as a catalyst for rural transformation.

METHODOLOGY

Research Design – Narrative Review Methodology

This study adopts a narrative review methodology to synthesize the evolving body of literature on eco-

microcredit and its role in promoting sustainable agricultural practices and household sustainability. Unlike

systematic reviews, which are often narrowly focused on empirical findings, narrative reviews allow for broader

integration of diverse theoretical, conceptual, and empirical contributions (Baumeister & Leary, 1997). This

design is particularly suitable for emerging research areas where concepts and theoretical frameworks are still

being developed, as is the case with eco-microcredit and green finance in rural sustainability. By drawing on

both empirical studies and theoretical perspectives, this approach provides the flexibility to trace conceptual

linkages across disciplines such as development studies, agricultural economics, sustainability science, and

financial innovation. The narrative review thus serves as the basis for developing a conceptual framework that

explains how eco-microcredit functions as a catalyst for rural transformation.

Key Steps in Conducting a Narrative Review

The review was conducted in several sequential steps. First, the research questions were established to guide the

scope: (i) How does eco-microcredit contribute to household sustainability? (ii) What role do sustainable farming

practices play in mediating this relationship? (iii) Which theoretical perspectives best explain these linkages?

Second, the data collection was conducted primarily through the Scopus database, selected for its comprehensive

coverage of peer-reviewed journals in social sciences, business, economics, and environmental studies. Third,

relevant studies were identified, screened, and included based on relevance to eco-microcredit, green finance,

agricultural sustainability, and household outcomes. Fourth, an integrative thematic analysis was applied to

synthesize insights, identify recurrent patterns, and map theoretical perspectives across studies. Finally, the

findings were interpreted in light of the Sustainable Livelihoods Framework, ecological modernization, and

innovation-adoption theory to support the development of a conceptual model.

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Data Collection and Review Strategy

Data collection relied on a structured search of the Scopus database. The search string used was:

("eco-microcredit" OR "microfinance" OR "green credit" OR "sustainable lending") AND ("green financing"

OR "environmental finance" OR "sustainable finance" OR "eco-financing") AND ("sustainable farming" OR

"sustainable agriculture" OR "agroecology" OR "eco-agriculture") AND ("household sustainability" OR

"domestic sustainability" OR "home sustainability" OR "family sustainability")

The initial search yielded 212 documents, which were then filtered through inclusion and exclusion criteria. Only

peer-reviewed journal articles, book chapters, and high-quality conference papers published in English between

2000 and 2025 were retained. Grey literature and non-peer-reviewed sources were excluded to ensure academic

rigor. After screening titles, abstracts, and keywords, 76 articles were identified as highly relevant.

An integrative thematic analysis approach was then applied. This method involves identifying, comparing, and

synthesizing recurring themes, concepts, and theoretical perspectives across the selected studies (Whittemore &

Knafl, 2005). Coding was performed manually in three stages: (i) open coding to identify initial categories, (ii)

axial coding to group concepts into broader themes, and (iii) selective coding to link themes with theoretical

perspectives. The final synthesis emphasized conceptual linkages among eco-microcredit, green financing,

sustainable farming practices, and household sustainability, thereby informing the construction of the conceptual

framework.

Key Findings from the Narrative Review

The thematic analysis yielded five major themes: (1) Eco-microcredit and financial access, (2) Adoption of

sustainable farming practices, (3) Household sustainability outcomes, (4) Moderating factors, and (5) Theoretical

perspectives. These are summarized in Table 1 below.

Table 1. Key Findings from the Narrative Review

Theme

Key Findings

Description

Eco-microcredit

and financial

access

Eco-microcredit expands

access to financial capital

Green microcredit products provide rural households with funds

for sustainable inputs, renewable energy, and conservation

agriculture. Evidence shows increased income and reduced

migration (Yan et al., 2025; Khandker & Koolwal, 2016).

Sustainable

farming practices

adoption

Credit facilitates

technology and practice

adoption

Microcredit enables farmers to adopt high-yield seeds, organic

fertilizers, and water-saving irrigation. For example, maize

farmers in Kenya saw a 40.52% income increase after adopting

improved seeds (Kipkogei et al., 2025).

Household

sustainability

outcomes

Improved income, food

security, and resilience

Eco-microcredit contributes to income stability, household food

security, and reduced environmental degradation. However,

repayment burdens may offset short-term gains (Phan et al., 2019;

Shahidullah & Haque, 2014).

Moderating

factors

Institutional and

contextual conditions

shape outcomes

Financial literacy, extension services, landholding size, and

market access influence the effectiveness of eco-microcredit

interventions (Revindo & Gan, 2017; Wang & Wang, 2012).

Theoretical

perspectives

Integration of SLF,

ecological modernization,

and adoption theory

SLF explains asset-based livelihood strategies; ecological

modernization highlights finance-technology-environment

linkages; adoption theory explains heterogeneity in uptake (Mol

& Sonnenfeld, 2000; Rogers, 2003).

The narrative review highlights several interconnected insights regarding the role of eco-microcredit in fostering

rural sustainability. These findings are best understood by analyzing them across five themes: financial access,

adoption of sustainable farming practices, household outcomes, moderating factors, and theoretical integration.

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First, eco-microcredit and financial access emerged as a critical enabler of sustainable livelihoods. By expanding

financial inclusion, eco-microcredit provides rural households with the capital necessary to invest in technologies

and practices that would otherwise be unaffordable. Studies show that green microcredit schemes not only

increase household operating income but also reduce rural-to-urban migration by creating viable livelihood

opportunities in rural areas (Yan et al., 2025). Evidence from Bangladesh demonstrates that land-poor farmers

could diversify into livestock and nonfarm activities once microcredit expanded their financial base, improving

both resilience and income stability (Khandker & Koolwal, 2016). Thus, eco-microcredit functions as a structural

intervention that enhances financial assets within the Sustainable Livelihoods Framework (DFID, 1999).

Second, the review confirms that adoption of sustainable farming practices is the pivotal mechanism through

which eco-microcredit translates into long-term sustainability. Access to eco-microcredit increases farmers’

ability to adopt organic inputs, improved seeds, renewable energy systems, and water-conserving irrigation

technologies. For instance, maize farmers in Kenya who accessed microcredit to invest in better seeds and inputs

experienced a 40.52% rise in income (Kipkogei et al., 2025). Similar findings are noted in Indonesia, where

credit access spurred technology adoption that improved farmer prosperity (Mariyono et al., 2019). The

consistency of these findings across contexts suggests that practice adoption is the mediating variable connecting

financial interventions to sustainability outcomes.

Third, eco-microcredit interventions show clear benefits for household sustainability outcomes but with

important caveats. On the positive side, increased credit access is associated with improved income stability,

greater food security, and higher resilience to shocks such as crop failure or market fluctuations (Berhanu et al.,

2021). In addition, eco-microcredit programs that target environmentally sustainable practices can reduce

reliance on chemical inputs, conserve soil and water resources, and mitigate ecological degradation (Lal & Israel,

2006). However, risks remain: evidence from Vietnam shows that while microcredit temporarily improved food

consumption, repayment pressures later reduced household consumption levels (Phan et al., 2019). Likewise,

microcredit-supported enterprises may struggle to sustain environmentally friendly practices without continuous

support, highlighting the tension between short-term financial goals and long-term ecological outcomes

(Shahidullah & Haque, 2014).

Fourth, the effectiveness of eco-microcredit is contingent upon a range of moderating factors. The review

identifies financial literacy, extension services, market access, and landholding size as critical conditions shaping

outcomes. For instance, without financial literacy, households may misuse loans or struggle with repayment,

undermining both livelihood and ecological benefits (Revindo & Gan, 2017). Similarly, farmers with weak

market access may adopt sustainable practices but fail to reap higher returns due to limited sales opportunities,

while inadequate extension services limit the ability to translate credit into effective practice adoption (Wang &

Wang, 2012). These moderating factors highlight the need for context-specific program design rather than one-

size-fits-all interventions.

Finally, the review underscores the importance of theoretical integration. The Sustainable Livelihoods

Framework (DFID, 1999) explains how eco-microcredit enhances financial assets that influence livelihood

strategies. Ecological modernization theory adds that financial innovation and technological adoption can be

harmonized with environmental sustainability (Mol & Sonnenfeld, 2000). Innovation-adoption theory,

meanwhile, explains why farmers differ in their uptake of sustainable practices, depending on perceived benefits

and social influences (Rogers, 2003). Taken together, these theories justify positioning sustainable farming

practices as the mediator between eco-microcredit (independent variable) and household sustainability

(dependent variable), while recognizing the role of moderators such as institutional capacity and market

integration.

The narrative review shows that eco-microcredit enhances financial access for rural households, but its

effectiveness depends on how credit is used. Evidence strongly supports its role in enabling sustainable farming

practices, such as improved seed adoption, conservation techniques, and renewable energy investments, which

in turn contribute to household sustainability outcomes like income diversification, food security, and ecological

resilience. However, challenges such as repayment burdens and low financial literacy can undermine benefits,

suggesting that moderating factors play a crucial role in determining success. The integration of the Sustainable

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Livelihoods Framework, ecological modernization, and innovation-adoption theory provides a robust theoretical

scaffold to explain these linkages and guide future research.

DEVELOPMENT OF THEORETICAL FRAMEWORK

The development of the theoretical framework begins with establishing the foundational relationship between

green financing and household sustainability. Green financing, as an independent variable, represents financial

support mechanisms that enable rural households to adopt environmentally sustainable practices (Yan et al.,

2025). Theoretical grounding is provided by the Sustainable Livelihoods Framework (DFID, 1999), which posits

that access to financial resources enhances household assets and livelihood strategies, thereby improving socio-

economic outcomes. Ecological modernization theory further explains that financial innovation, when combined

with technological adoption, can harmonize economic development with environmental sustainability (Mol &

Sonnenfeld, 2000). Within this framework, green financing is positioned as a structural intervention that

increases households’ capacity to invest in sustainable farming technologies, thereby setting the stage for

improved environmental and economic outcomes.

In the context of this study, the framework applies these theories to explain how sustainable farming practices

mediate the relationship between green financing and household sustainability. Empirical evidence demonstrates

that households with access to green financing adopt practices such as organic fertilization, water-conserving

irrigation, renewable energy utilization, and improved seed technologies, leading to enhanced productivity,

income stability, and environmental protection (Kipkogei et al., 2025; Mariyono et al., 2019). Innovation-

adoption theory (Rogers, 2003) provides insight into why households differ in the uptake of these practices,

highlighting the roles of perceived benefits, social influence, and access to extension services. Moderating

factors such as financial literacy, landholding size, and market access further influence the extent to which green

financing translates into sustainable practices and subsequent household outcomes (Revindo & Gan, 2017; Wang

& Wang, 2012). This mediating mechanism clarifies that green financing alone does not guarantee household

sustainability; rather, the adoption of sustainable practices is the critical pathway through which financial inputs

generate long-term benefits.

The practical implications of this conceptual framework are twofold. First, it provides guidance for policymakers

and microfinance institutions in designing green financing programs that incorporate technical support, training,

and market linkages, ensuring that households effectively adopt sustainable practices (Berhanu et al., 2021; Phan

et al., 2019). Second, it offers a structured roadmap for evaluating program effectiveness by linking financial

access, practice adoption, and household sustainability outcomes. In conclusion, the theoretical framework

integrates green financing, sustainable farming practices, and household sustainability into a coherent model,

bridging theory and empirical evidence while highlighting key mediators and contextual factors. This framework

not only supports academic inquiry but also informs interventions aimed at achieving economic, environmental,

and social sustainability in rural communities.

Proposition Development

Proposition Development: Green Financing and Sustainable Farming Practices

Green financing serves as a pivotal financial mechanism that enables rural households to adopt environmentally

sustainable agricultural practices, thereby functioning as a catalyst for improved livelihood strategies. Grounded

in the Sustainable Livelihoods Framework, access to financial resources enhances households’ capacity to invest

in productive assets, adopt innovative technologies, and implement practices that balance economic and

environmental objectives (DFID, 1999; Mol & Sonnenfeld, 2000). Empirical studies indicate that households

receiving green financing are more likely to engage in practices such as organic fertilization, water-conserving

irrigation, renewable energy utilization, and improved seed technologies, which collectively improve

agricultural productivity and environmental sustainability (Kipkogei et al., 2025; Mariyono et al., 2019).

Innovation-adoption theory further explains the variability in adoption rates, emphasizing the influence of

perceived benefits, social norms, and access to extension services on households’ decisions to implement

sustainable practices (Rogers, 2003). Moreover, factors such as financial literacy, landholding size, and market

access shape the effectiveness of green financing in fostering sustainable practices (Revindo & Gan, 2017; Wang

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& Wang, 2012). Therefore, sustainable farming practices act as a crucial mediating mechanism that translates

green financial inputs into tangible environmental and livelihood benefits.

Proposition 1 (P1): Green financing positively influences the adoption of sustainable farming practices

among rural households.

Proposition Development: Sustainable Farming Practices and Household Sustainability

Sustainable farming practices, as a mediating factor, play a central role in enhancing household sustainability by

promoting environmentally responsible, productive, and economically viable agricultural activities. These

practices improve resource efficiency, reduce environmental degradation, and stabilize household income,

aligning with the principles of ecological modernization and sustainable livelihoods (Mol & Sonnenfeld, 2000;

DFID, 1999). Empirical evidence shows that households implementing sustainable practices experience

enhanced food security, increased income stability, and long-term resilience against environmental and market

shocks (Berhanu et al., 2021; Phan et al., 2019). The adoption process is influenced by household-level factors,

including knowledge, technical skills, and access to support services, which determine the extent to which

sustainable practices contribute to broader household welfare outcomes (Rogers, 2003; Revindo & Gan, 2017).

As such, sustainable farming practices constitute the critical pathway through which financial and technological

inputs are converted into improved household sustainability.

Proposition 2 (P2): Sustainable farming practices positively affect household sustainability.

Proposition Development: The Mediating Role of Sustainable Farming Practices

Sustainable farming practices serve as a critical mediating mechanism that links green financing to household

sustainability by transforming financial access into tangible livelihood outcomes. While green financing

provides the financial means for rural households to invest in eco-friendly technologies and inputs, it is the

adoption of sustainable farming practices that converts these financial resources into improved productivity,

environmental conservation, and long-term economic stability. Through practices such as organic fertilization,

renewable energy use, efficient irrigation, and crop diversification, households enhance resource efficiency and

resilience to environmental shocks. The Sustainable Livelihoods Framework emphasizes that livelihood

improvements arise not merely from financial inputs but from how households utilize these resources to

strengthen their assets and strategies (DFID, 1999). Similarly, ecological modernization theory suggests that

environmental and economic objectives can be aligned when financial innovation facilitates green technological

adoption (Mol & Sonnenfeld, 2000). Empirical evidence supports that households engaging in sustainable

farming experience better income stability and ecological balance compared to those relying on conventional

methods (Mariyono et al., 2019; Kipkogei et al., 2025). Therefore, sustainable farming practices function as the

essential conduit through which green financing achieves household sustainability.

Proposition 3 (P3): Sustainable farming practices mediate the relationship between green financing and

household sustainability.

Proposition Development: The Moderating Role of Financial Literacy

Financial literacy plays a pivotal moderating role in strengthening the relationship between green financing and

the adoption of sustainable farming practices. It reflects the ability of households to understand, evaluate, and

effectively utilize financial information when making investment and production decisions. Households with

higher levels of financial literacy are better equipped to assess loan terms, manage credit responsibly, and

allocate financial resources efficiently toward environmentally sustainable technologies and inputs. This

capability enhances their capacity to convert green financing opportunities into productive agricultural practices

that yield both economic and ecological benefits. Conversely, households with limited financial knowledge may

face challenges in interpreting financial products, leading to suboptimal utilization of funds or reluctance to

engage in sustainable investments. Prior studies have shown that financial literacy significantly influences how

individuals perceive and respond to financial opportunities, particularly in rural and agricultural contexts where

decision-making is often constrained by limited information and risk aversion (Revindo & Gan, 2017; Wang &

Wang, 2012). Thus, financial literacy acts as a key enabling factor that determines whether access to green

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financing effectively translates into the adoption of sustainable farming practices and improved livelihood

outcomes.

Proposition 4 (P4): Financial literacy positively moderates the relationship between green financing and

sustainable farming practices, such that the relationship is stronger among households with higher levels

of financial literacy.

CONCLUSION

The study establishes that green financing plays a crucial role in enabling rural households to adopt sustainable

farming practices, which subsequently enhance household sustainability. The key findings indicate that access

to green financial resources provides households with the necessary capital to invest in environmentally

responsible agricultural technologies and methods. However, financial access alone is insufficient to guarantee

sustainable outcomes. The adoption of sustainable farming practices serves as the essential mediating mechanism

through which green financing produces long-term socio-economic and environmental benefits. In addition, the

study reveals that financial literacy acts as a significant moderating factor, amplifying the positive relationship

between green financing and sustainable farming practices by enabling households to make informed and

effective use of available financial resources.

Theoretically, this study contributes by integrating financial access, behavioral adoption, and sustainability

frameworks into a unified model that explains the process through which green financing fosters household

sustainability. It advances understanding of how financial mechanisms interact with human capability factors,

such as financial literacy, to influence adoption behavior and livelihood outcomes. Practically, the study offers

valuable insights for policymakers, financial institutions, and development agencies in designing green financing

initiatives that are coupled with financial education, technical assistance, and market access support. Such

integrated interventions can ensure that households not only gain access to financial resources but also possess

the knowledge and capacity to apply them effectively toward sustainable agricultural development.

Despite its theoretical and practical contributions, the study faces several limitations. It focuses primarily on

conceptual linkages rather than empirical validation, which restricts the generalizability of its findings.

Moreover, the moderating effect of financial literacy may vary across socio-economic, cultural, and regional

contexts, which the current framework does not fully capture. Future research should employ longitudinal and

mixed-method approaches to examine the dynamic effects of green financing and sustainable practices over

time. Further investigations could also explore additional moderating factors such as digital financial inclusion,

environmental awareness, and institutional support to provide a more comprehensive understanding of the

mechanisms driving household sustainability in rural communities.

ACKNOWLEDGEMENT

The authors would like to express their sincere gratitude to the Kedah State Research Committee, UiTM Kedah

Branch, for the generous funding provided under the Tabung Penyelidikan Am. This support was crucial in

facilitating the research and ensuring the successful publication of this article.

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