Effect of financial literacy and financial confidence on the financial discipline of farmers: evidence from West Bengal, India

Soumyadwip Das · Sumit Kumar Maji

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Financial Literacy, Pension, Retirement Analysis Microfinance and Financial Inclusion Financial Literacy and Behavior

Abstract

Purpose The study seeks to assess the financial discipline of the farmers of West Bengal and also to examine the effect of financial literacy (FL) and financial confidence (FC) on their financial discipline. Design/methodology/approach The study is based on the primary survey carried out amongst a total number of 505 farmers (260 from Bardhaman and 245 from Purulia districts in West Bengal, India). Binary probit regression was used to determine the effect of FL and FC on the financial discipline of farmers. Findings The result shows that a mere 32.87% of the respondents were financially disciplined. The average FL score of farmers was only 1.80, indicating very poor FL among the farmers in West Bengal. The result shows that FL and FC improve farmers' financial discipline. Practical implications As financial discipline significantly reduces the impulsive expenditure of individuals and improves their financial well-being, financial discipline should be inculcated among the farmers. Considering the positive effect of FL and FC on financial discipline, policymakers should take appropriate steps to improve the FL and FC levels among the farmers. Originality/value The number of research studies available in the extant scholarship that assess the effect of FL and FC on the financial discipline in general, specifically for farmers are scanty. The present study makes an original effort to address this research gap. Moreover, instead of using the objective FL, subjective FL have also been taken into account which is important and powerful but often ignored by the past researchers.

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References

2014The Economic Importance of Financial Literacy: Theory and Evidence 2016Old Age and the Decline in Financial Literacy 2011Financial literacy and retirement planning in Japan 2016Financial Literacy and Long- and Short-Term Financial Behavior in Different Age Groups 2023Impact of financial literacy, mental budgeting and self control on financial wellbeing: Mediating impact of investment decision making 2016Financial literacy and over-indebtedness in low-income households 2018Financial Knowledge and Short-Term and Long-Term Financial Behaviors of Millennials in the United States 2016Household financial planning and savings behavior

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