Rural-Urban Financial Literacy Divide in India: A Comparative Study of Kerala and Uttar Pradesh
N. P. Abdul Azeez
*
Department of Economics, Aligarh Muslim University, Aligarh, Uttar Pradesh, India.
M. Nasira Banu
Research Department of Economics, EMEA College of Arts & Science, Kondotti, Malappuram, Kerala, India.
*Author to whom correspondence should be addressed.
Abstract
One of the significant competencies required in the contemporary scenario is an awareness or knowledge of varied financial affairs and the skill to handle matters apropos of finance. The dearth of financial literacy precludes rural people from the country's formal financial system and created a rural-urban financial divide, especially in the digitalized era. Effective incorporation of financial literacy in formal education will lead to greater access to financial services. This paper tries to find the rural-urban financial literacy divide based on the primary data collected from two states of India, namely Kerala and Uttar Pradesh. A total of 400 samples respondents were taken by using the multi-stage sampling technique. A comprehensive approach for measuring financial literacy is developed by constructing the Financial Literacy Index (FLI), which comprises financial knowledge, financial behaviour, and financial attitude. The results concluded with the rural-urban financial literacy divide findings as the financial literacy in rural areas is consistently lower than in urban. The results expose the need for a persistent and prolonged intervention from all the stakeholders, including policymakers, to enhance and sustain financial literacy to accomplish a bright financial decision making by the rural people.
Keywords: Financial literacy index, financial knowledge, financial behaviour, financial attitude, rural-urban divide