Financial literacy and its antecedents amongst the farmers: evidence from India

Abstract

PurposeThe article makes a modest attempt to explore the level of financial literacy (FL) amongst the farmers in India. An effort was also made to unearth the factors affecting such FL.Design/methodology/approachThe study used secondary data on 11,030 farmers across various regions of India from the Financial Inclusion Insight Survey, 2017. Standard and Poor Global FL questions were used to measure the level of FL amongst the respondents. In addition to the appropriate statistical tools and techniques, the censored tobit regression model and generalized structural equation model were applied to explore the determinants of FL of the Indian farmers.FindingsThe outcome of the study indicated that the majority of Indian farmers are financially illiterate. The average FL score obtained by the sample farmers was found to be only 33%. The results of the study signaled significant regional variation in FL amongst the farmers across India. Apart from the regional variation in FL, farmer type, state-specific agricultural productivity, gender, marital status, age, educational attainment and financial inclusion were found to be the major determinants of the FL amongst the farmers.Originality/valueEvaluation of FL amongst farmers is scanty in the literature in developed nations and especially in the context of emerging economies, like India. The authors tried to fill this gap by exploring FL and its determinants amongst Indian farmers. In addition to this, the study for the first time used a comprehensive and rich dataset of 11,030 Indian farmers while exploring the level of FL and its determinants.

Farmer's financial literacy and its determinants: evidence from South Asia

“…, 2014). In tune with the findings of the study carried out by Maji and Laha (2023a), FI was also found to exacerbate a notable positive effect in augmenting the level of FL of Indian farmers. The average FL score of financially included Indian farmers was observed to be 33.85%, whereas the same was found to be 27.34% in respect of financially excluded farmers.…”

“…The status of the farmer, i.e. owner or worker is a significant predictor of FL (Maji and Laha, 2023a). Farm owners were found to be more financially literate in India and Pakistan in tune with the findings of the study carried out by Maji and Laha (2023a).…”

“…owner or worker is a significant predictor of FL (Maji and Laha, 2023a). Farm owners were found to be more financially literate in India and Pakistan in tune with the findings of the study carried out by Maji and Laha (2023a). Gaurav and Singh (2012) also pointed out that farm owners holding large agricultural land exhibit positive financial aptitude.…”

“…Gaurav and Singh (2012) in their study found that cognitive ability, education, land holding and risk tolerance are important predictors of the FL and debt literacy of the Indian cotton farmers. The FL of Indian farmers was found to be poor (affected by FI, age, education, marital status and regional agricultural productivity) in the studies carried out by Maji and Laha (2023a) and Das and Maji (2023).…”

“…Existing literature suggests that financial experience plays a predominant role in augmenting the level of FL vis-a-vis financial skill (Frinjs et al, 2014). Often it is argued that exposure to financial activities in the financial system especially the banking system enables individuals to improve their financial capabilities (Maji and Laha, 2023a). Poor people who have a bank account are more financially knowledgeable than those people who do not have bank accounts (Klapper et al, 2015).…”