Locating Financial Capability Within Capability Approach – Theoretical Survey

The integration of financial capability with the capability approach remains an open and challenging issue. This paper offers a theoretical exploration of the financial capability framed within Sen’s capability approach in an interdisciplinary way. It focuses on the fundamental conceptual aspects of the capability approach, and on how we may use that framework for the development of financial capability theory. Moreover, the presented theoretical study addresses the issue of the critical role of constrained choice using Simon’s bounded rationality and ecological rationality approach. We used one type of research and it is conceptual analysis. It helped us to better understand and explain the concept of financial capability and address three important issues related to that concept. In this paper, we offer a more transparent and consistent approach that takes into account theoretical evidence on financial capability. We complemented the financial capability literature by highlighting the critical role of the classic works of A. Sen and more recently the influential work of I. Robeyns. Thus, our headline finding is that using A. Sen’s approach as a general framework for the financial capability may offer a more transparent and consistent approach to define financial capability.