Development of a multidimensional scale for assessment of financial literacy in India

Financial inclusion is one of the top priorities on the global development agenda. Financial literacy is identified as one major challenge in promoting financial inclusion. The paper develops a validated and reliable scale for assessing the financial literacy of the rural population in India, using data from villages in Maharashtra. The study considers the factors of knowledge, behavior, and attitude for the development of the scale. The scales are developed through five studies, including focus group interviews and survey data collection. Exploratory and confirmatory factor analysis are used for testing and validation of scales. Further, ANOVA is used to explore the relationship between the factors of financial literacy and socioeconomic parameters. The study uses both qualitative and quantitative methods. The study concluded that financial literacy is higher among people with bank accounts. Income level, education, and gender are found to be related tofinancial literacy. Financial literacy is lower among the female population, and it increases with income level and age, and varies by occupation. The study has implications for policymakers. Financial literacy can be enhanced by including it in the school curriculum, offering financial literacy programs for women, and raising awareness of government schemes and interventions.