Assessment of Financial Literacy of Farmers and Its Impact on Farm Financial Management: Heckman Two-Stage Model

Abstract

In India, financial education is essential due to the widespread low literacy rates and the significant portion of the population that remains excluded from the formal financial system. The present study assessed farmers' financial literacy and its impact on farm financial management. A sample of 120 respondents was collected from the Madurai district. The Heckman selection two-stage model was employed to analyze the study results. The study revealed that factors like age, education, experience, size of landholdings, relationship with bank, frequency of bank visits, and ownership of a bank account had significant and positive influences on planning financial literacy. In the second stage of the model, age, education, experience, size of landholdings, relationship with the bank, frequency of bank visits and owning a bank account significantly influenced the adoption of financial planning. It is concluded that the increased knowledge of financial planning enhanced the adoption of financial planning.