Assessing Financial Literacy Levels and Determinants among Farmers in Punjab, India

Abstract: The study aims to assess the level of financial literacy and the factors influencing the financial literacy of the farmers in Punjab. Study Design: The study collected primary data from 400 farmers in three districts of Punjab, namely, Gurdaspur, Bhatinda, and Ludhiana, through an interview schedule using a multistage sampling technique. Place and Duration of the Study: The study was conducted in three districts of Punjab, namely Gurdaspur, Ludhiana, and Bhatinda, from August 2023 to December 2023. Methodology: The study validated the financial literacy scale using exploratory factor analysis (EFA) with tetrachoric correlation. Furthermore, to identify factors influencing financial literacy, we employed an ordinal logit regression model. Results: The findings revealed that 47.5% of the farmers had low, 20% had moderate, and 32.5% had high levels of financial literacy. Farmers performed relatively well in terms of financial behavior and financial knowledge, whereas the poorest performance was found in the case of financial attitude. Significant disparities in financial literacy were also observed across socio-economic groups. The results of regression analysis revealed that marital status, social category, age, education, income, and size of landholding are significant predictors of financial literacy. Conclusion: The study showed that overall, the financial literacy among the farmers in the study area is low. It found that most of the farmers lacked a positive financial attitude. Additionally, the descriptive analysis showed that farmers engaged in both farming and non-farming occupations have higher financial literacy than farmers engaged solely in farming occupations.