The Impact of Financial Literacy and Financial Inclusion on Mortgage Market Accessibility and Borrower Credit Performance in Georgia

Access to housing finance is a cornerstone of household welfare and long-term economic stability. However, obtaining and managing a mortgage depends on two interrelated conditions: financial literacy, which shapes the demand side by enabling borrowers to understand product terms and make sound credit decisions, and financial inclusion, which shapes the access side by determining who can enter the formal financial system. While their combined influence has been studied extensively in advanced economies, evidence from emerging markets, where mortgage markets are often shallow and foreign-currency lending exposes borrowers to additional risk, remains scarce. This study addresses that gap for Georgia, a country where financial inclusion has advanced considerably while financial literacy has remained persistently low. The analysis draws on aggregated national annual data for 2016-2025 and estimates multivariate linear regressions in which mortgage-market accessibility is proxied by the ratio of private-sector credit to GDP and borrower credit performance by the share of non-performing loans. The results show that greater financial inclusion is associated with improved accessibility and a lower share of non-performing loans, whereas higher loan dollarization is associated with weaker credit performance - directions that are consistent with prior research and theory, though limited in statistical strength by the small sample, multicollinearity, and the near-constant level of financial literacy across the period. As the first Georgian study to examine the joint influence of financial literacy and financial inclusion on the mortgage market, the paper offers policy directions centered on strengthening financial education, mitigating dollarization risk, and providing targeted support for vulnerable borrowers.