Financial Literacy Among Rural Areas of North India

A Case Study

Scientific Study, 2020

19 Pages


Table of contents

1.1 Concept of financial literacy
1.2 Theoretical Approach To Finance
1.3 Theoretical Base Of Financial Literacy
1.4. Number of Villages in Himachal Pradesh, 1951-2011


3.1 District-wise Analysis:
3.2 Growth in Literacy
3.3 Male-Female:





Financial Literacy Among Rural Areas of North India: Case Study

Dr. Harish Kumar Banga1, Ms. Sunita Kumari2

Abstract: This study analysed main differences in Financial literacy across different districts of Himachal Pradesh.The purpose was to understand Importance of financial Literacy among people of rural areas and to identify the differences in financial literacy based on gender of rural areas. A questionnaire was designed including some financial knowledge seeking questions. Descriptive analysis and one way Anova was peformed to identify main factors for both genders.The researcher has considered in Himachal Pradesh as an area of study and that too in rural province of the area. It was observed in the process of study that nevertheless how much a female is educated or expert in financial matters they have to look forward to male members of the family for approving their decision regarding financial matters.

Keywords - Financial knowledge,Financial Literacy, Financial Matters, Rural people


Adequate knowledge of financial matters leads a person to self-confidence and prompt decision making in finance related matters. It is a proven fact that if a person is financially literate then he or she is going to contribute in the main stream economy of the country and the fruits of this contribution will be distributed all over the economy. Any type of economic activity is not possible unless and until the users of the same are not having appropriate financial knowledge and the same fits to the women as well. Taking financial decision is not something that can be learned by experience or any other mode, rather a person is liable to have appropriate knowledge of financial terms and behavior of the same in open market.

As far as the rural areas of the country are concerned, there are a number of programs and initiatives that are for the direct benefit of rural people but then again education and basic literacy are the major constraint that may be restricting the rural people to take the benefit of the same.Whenever there is a discussion about financial literacy, the focus is on learned people and it is a common thought process that in the rural area people are not able to manage their finances. As a matter of fact the respective government has taken a lot of steps to improve the scenario and a number of schemes are on the run. Apart from the efforts of state and central government, a number of agencies are involved in the process and doing everything to improve the scenario. After series of discussions, meeting, surveys is was decided that if the agencies are able to add all the poor and deprived people from all the rural and urban areas then there is a possibility that further development of such people is possible. But then again, to make this drive success it is necessary that all such prospects are financially literate hence first it is required that efforts must be make the respondents financially literate.

1.1 Concept of financial literacy

Hailwood et al (2007)stated that “for some, financial literacy is a wide-ranging concept, incorporating an understanding of economics and how household decisions are affected by economic conditions and circumstances while for others, it means focusing quite narrowly on basic money management skills – budgets, savings, investment, insurance.” This is a well-known truth that in the present scenario every developed economy has taken care of its population at the bottom of pyramid and attached them to the main stream financial system. This present research is an effort to evaluate the scenario of financial literacy of rural people in the district of Mandi in Himachal Pradesh.The findings of the study can be normalized with all other states of the country. Financial information and financial behavior are the pillars of financial literacy and any agency keeping the track of the same has to consider these both pillars. Cutler (1997), Volpe et al (1998), conducted studies in UK and stated that even in the urban areas people are not financially literate and a formal training should be given to all the respective stakeholders. Garman et al (2009)conducted a study in USA and findings of the study stated that financial literacy is directly related to job related productivity of people also Liu et al (2010), stated in the results of their study that the level of knowledge for managing personal finance is poor in urban people and even university students.

Financial literacy is important for all the rich, poor, rural and urban people, starting from the counting of currency notes to making investments in mutual funds, financial literacy is having an important role to play. Financial literacy of man or a woman confirms the financial well-being of the family because there are a number of issues that require sound financial knowledge.

Financial literacy is having a lot of possibilities and opportunities, as in the present times this is essential for each and every person and may be the way of living for rural people. The main objective of financial literacy and agencies incorporating it need to ensure the spread of the same. If a common man is able to manage his or her own money then this can be viewed as the success of the drive of financial literacy and even nationwide initiative of financial inclusion.

Beck et al (2007)stated that the barriers of financial literacy can be cross country as well, as per this study knowledge of a person, service by the agency and integrity of financial institutions are the pillars of financial growth of people in a given country. As the location of person changes financial aspects also change and it becomes necessary for a person to adjust with the new dimensions of financial aspects. There is a negative correlation between access to financial service and usage of the same.

In the present times Himachal Pradesh is in the process of achieving proper financial growth and SHGs (Self Help Groups) are taking active part in the same, apart from this a number of initiatives are taken by state and central government to improve the scenario. PMJDY or the drive of financial inclusion is the important examples of the same. Financial institutions are considering micro finances a base for the development of these areas

1.2 Theoretical Approach To Finance

Approach to Finance shown in Figure 1

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Figure 1: Approach to Finance

Financial literacy can lead to financial wisdom as it brings following benefits to individuals Matin (2002):-

- Knowledge and ability to management available amount of money.
- Money management is not only for present situation but then again iti s more concerned with the need of the same in future.
- if a person is financially literate then he or she can assess the present financial condition and estimate the avenues for future arrangement of money.
- Available resources are the basis of future creation and the same applies to money as well.
- Respective financial institutions and even the banking system will be happy and comfortable to deal with a person who is financially literate.

1.3 Theoretical Base Of Financial Literacy

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Figure 2: Process of Financial Inclusion

It is a belief that information is the key to success and the same stands true in case of financial literacy as well, even the financial behavior of a person is also governed by the respective amount of financial knowledge. “Well-informed and well-educated consumers can create economic ripples” as stated by M. Hogarth of the USA Federal Reserve Board, ‘Financial Education and Economic Development presented at the Financial Literacy International Conference’(2006). The author further states that “they make better financial decisions for themselves and their families, increasing their economic security and wellbeing and these economic ripple effects can be significant. Drop a rock into a lake or pond, the ripples extend outward with wider and wider effects. So it is also with financial education.” Process of Financial Inclusion as shown in Figure 2.

The main concern of this section is to evaluate the economic and demographic features of the rural people and the comparative situation of the same with overall state. Due to the limited space, the mountains / hills are too large for human settlements to form a road system. Thus, geography determines the location and distribution of cities. The location of the mountainous and mountainous region of Himachal Pradesh is more important than considering the fact that all aspects of human life in this mountainous region are related, politically, economically and indirectly affecting his learning.

1.4. Number of Villages in Himachal Pradesh, 1951-2011

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On the basis of above discussion it can be said that Himachal Pradesh have a high range of rural areas and the state is in the process of development. The trend of growth and literacy is increasing at a slow pace and agencies are required to pay attention for the same.


State of H.P. lies in the lap of great Himalayas and is cursed with uneven topography, even the stride of development is not able to bring about many changes in the same.Here it is important to mention that people living in the villages and rural areas have either adopted themselves according the physical conditions or bent the physical conditions according to their living hood.This scenario calls for the evaluation of the demographic profile of the state and critically analyzing the resource pool of local people. As in most of the cases large amount of settlements are near the basic natural resources, like agricultural land, water sources and appropriate climate. In a state like H.P. the cluster of residents is uneven and it is more vivid in case of rural areas.

Therefore the availability and accessibility to schools are an outcome of the demographic setting of an area. Thus, the study of demographic setting assumes prominence. This study includes the following aspects:

Table 1: District-wise Population of Himachal Pradesh, 1981-2011

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Distribution then boom about populace - Kangra is the just close area together with 22.02 percentage regarding the populace among 2011 and 23.14 percentage into 1981. Mandi is within 2d vicinity with 14.8 percent into 2001 then 15.06 percent within 1981. Both areas bear a honest climate, then agriculture is lead to an amplify into population. Shimla ranks third among the area including a populace about 11.88 percentage into 2011 and 11.94 percentage into 1981. Shimla, as is the headquarters about the country, additionally displays a sizeable population. It was a gray summer into India in the course of the British period, so the advance trees grew in the region.About partially ofthe populace over the regime is ripe between the districts regarding Kangra, Mandi then Shimla.

In every the districts on Solan, Chamba, Sinnur, Una, Hamirpur, Kulu and Bilaspur live 5 in accordance with viii percent about the population. The dominance concerning the populace of Himachal Pradesh was Kinaur - 1.38 percentage of 2011 or 1.39 percentage into 1981 or Lahul Spiti - 0.55 percent into 2011 and 0.75 percent among 1981. Due in conformity with terrible roads yet provincial difference. Apart from the Camba, Solan, Sirmahur and Kullu areas, which had an increase in population from 1981 to 2011, other provinces experienced a decline at the same time.


1 Department of Mechanical Engieering, Guru Nanak Dev Engineering College, Ludhiana, Punjab- 141006, India

2 Department of Buisness and Managment, Abhilashi University, Mandi, HP – 175028, India

Excerpt out of 19 pages


Financial Literacy Among Rural Areas of North India
A Case Study
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financial, literacy, among, rural, areas, north, india, case, study
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Ph.D Harish Kumar Banga (Author)Sunita Kumari (Author), 2020, Financial Literacy Among Rural Areas of North India, Munich, GRIN Verlag,


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