Financial Literacy among Farmers: Empirical Evidence from Punjab

Including individuals in the mainstream financial system does not serve much benefit until they are financially literate. In fact, despite financial inclusion, financially illiterate people are most likely to commit many mistakes on financial front. Financial literacy therefore, is rapidly being recognised as a core skill in an increasingly complex financial environment and the governments around the world are putting all efforts to improve financial literacy amongst their citizens. Since providing financial education effectively requires evidence on the current levels of financial knowledge, this paper provides an evidence on the current financial literacy among farmers in the state of Punjab, which on one side helps feeding whole of the country, but on the other side has one of the highest debt levels among its farmers. We find that the farmers generally were financially literate as 37 per cent farmers had sound financial literacy and 47 percent had fair financial literacy. In addition, farmers had greater literacy in terms of interest, compounding, or inflation but were comparatively weaker on the front of time value of money and basic financial principles. A strong positive association was also seen between level of financial literacy and educational qualifications, annual income, and land holding size of the farmers. The findings of this study can serve as a benchmark for any training programme in provision of financial knowledge and skills to the farmers and a basis for policy formulation.