Accepted paper:

Financial literacy in India: measurement and socio-economic determinants


Nikhil Sapre (University of Coventry)
Rashmi Arora (University of Bradford)

Paper short abstract:

How can we measure financial literacy? What is the level of financial literacy in semi-urban areas of India? Is there a causal link between socio-economic factors, family background and financial literacy? How are financial access and financial literacy associated?

Paper long abstract:

Financial literacy is the ability to process economic information and make informed decisions that impact overall well-being. The literature confirms that there is strong link between financial literacy and use of financial services. We conduct a survey with a sample size of 300 students in secondary school and higher education institutes in semi-urban areas of state of Maharashtra (India), using a rich set of questions divided into 5 categories: demographic, socio-economic, knowledge of finance and economics concepts, awareness and usage of financial services and numeracy skills. First, we evaluate the level of financial literacy in students form the age of 15 to 20, through constructing an index and computing a composite measure. Second, with the financial literacy index values as the dependent variable, we examine the main determinants of financial literacy by employing probit, logit and OLS regression models. We find, parents' education, occupation and income have a significant association with the student's financial literacy. More importantly, students with lower financial literacy tend to be less aware of and have relatively lower usage of banking products. We find that majority of students have updated information of at least the basic form of technology driven financial services like internet or mobile banking; and in some cases, have used these services. Our study elucidates associations between financial literacy, financial access, usage of financial services and socio-economic/demographic characteristics of school students and young adults, who are potential consumers of financial services. These are preliminary results as this paper's work is in progress.

panel E05
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