Contribution of Financial Literacy on Behaviour: A Nepali Perspective

Abstract

Financial literacy and behaviour are emerging personal financial agendas both in education and finance. However, financial literacy has behavioural implication and effect on the financial well-being of individuals. Therefore, assessing financial behaviour by measuring financial literacy of individuals is important research attention. In this paper, the contribution of financial literacy on the financial behaviour of small borrowers is measured and analysed. The study follows a quantitative research methodology under the post-positivistic research paradigm. A simple scoring method is used to measure financial literacy and the logistic regression model is used to measure the probabilistic contribution of financial literacy on behaviour. By using a sample survey, the study collects 393 sets of responses from small borrowers selected randomly from four districts of Nepal. Theory of planned behaviour is used to interpret the finding. The theory of planned behaviour states that the literacy i.e. knowledge and skill in financial matters will develop an attitude, and if the attitude is positive, the persons will behave accordingly. The finding explores that improved level of financial literacy contributes financial behaviour of the small borrowers positively. The study concludes that for enhancing financial behaviour, contemporary and contextual financial literacy programs are necessary to educate the individuals. The study also connects financial well-beings with enhanced financial behaviour. Findings of this study are useful for policymakers, financial service users, academicians and financial service providers in Nepal.

Financial capability and financial wellbeing of women in community-based organizations: mediating role of decision-making ability

“…It is measured using the acts of daily money management, handling of planned financial commitments etc. (BCFP, 2018; Chaulagain, 2018).…”

Financial literacy among Malaysian Muslim undergraduates

“…Similarly, a monetarily mindful student who would agree that savings is one way to secure his/her future may choose not to execute this action. Cultures, values, experiences and surrounding situations have been among the main factors that affect a person's financial behaviour (Chaulagain, 2015).…”

“…As financial knowledge is about understanding the underlying financial concepts, financial skills refer to the ability to apply the knowledge to specific financial scenarios. These skills were reflected by the technical know-how used and formed in practices and habits of personal financial management (Pellinen et al, 2011), including the skills on how to compute basic financial concepts of compounded interest rate (Kunovskaya, 2010), inflation, risk and diversification (Sekita, 2011) and how to plan for, negotiate and select optimal financial transactions (Kunovskaya, 2010;Chaulagain, 2015;Lusardi and Mitchell, 2014). Muslim students specifically should be informed that any form of savings or investments that offer interest or "riba" (in the Arabic term) of any kind is considered "haram" and cannot be accepted.…”

“…The financial attitude dimension refers to judgement, predisposition or tendency to respond positively or negatively towards money and financial matters (Chaulagain, 2015). The outlook of money management, the availability and operations of financial services and Financial literacy the list of financial providers who maintain these services are three focal aspects that constitute a student's financial concerns, especially in obtaining loans and scholarships.…”

“…Financial behaviour is the conduct of an individual regarding financial matters. Financial behaviours have been measured by the effective acts of routine money management and planned and informed financial undertakings like keeping up-to date financial records, paying bills on time and using credit cards wisely [Chaulagain, 2015;Consumer Financial Protection Bureau (CFPB), 2015].…”