This study examines the relationship between microfinance and poverty alleviation, considering the moderating effect of both digital and traditional financial knowledge, as well as of social capital. The data sample comprises survey responses from 500 clients of conventional and Islamic microfinance institutions in Bhakkar, one of Pakistan’s most dynamic microfinance districts. The empirical results, obtained via structural equation modeling, show that digital financial knowledge positively moderates the relationship between microfinance effectiveness and poverty alleviation. A similar result is found for the moderating role of social capital when traditional financial knowledge is included in the model. However, this is not the case when digital financial knowledge is included in the model. These findings emphasize the importance of promoting both financial literacy and digital skills to maximize the positive impact of microfinance on poverty reduction.
