Assessing Financial Literacy in Rural Gujarat

Dvija Mehta

Abstract: The importance of financial literacy is often overlooked. Rural people (N=305) in Ambaliyara, Chandisar, and Dhuljipura, Gujarat, performed poorly on financial literacy tests. The areas measured include: Compound interest/inflation, investing, borrowing, and insurance. Respondents were selected on convenience basis, and cross-sectional descriptive research design was adopted. The survey had 8 questions. To investigate local financial knowledge and practices, the rural visit involved active interaction with local residents, administering questionnaires, and data collection. The mean percentage correct score (PCS) on the basic financial literacy topics was 36.61% and on the sophisticated financial literacy topics was 20.22%. Financial literacy is lower in Gujarat, India than in developed nations. The results showed that men outperformed women. Commerce students have stronger financial knowledge than science or arts students. Financial literacy was also affected by parental involvement. These findings highlight the necessity, for targeted education that involves parents and emphasizes practical application training to enhance financial literacy.

Keywords: Financial Literacy, Compound Interest, Inflation, Time Value of Money, Investing, Stocks, Mutual Funds, Borrowing, Insurance