Abstract
Financial literacy plays an important role in influencing financial behavior and knowledge of individuals. In this study, the impact of informal financial literacy training on rural smallholder farmers was assessed. Propensity score matching approach was used to assess training effects on distinct dimensions of financial knowledge. The study used a sample of farmers who are members of village savings and loans associations. Findings indicate higher scores (70.6% for training beneficiaries and 68.5% for the control group) in financial goals and the lowest scores (48.0% for training beneficiaries and 43.0% for control group) in planning and managing finances. Although the descriptive statistics show higher scores for the trained farmers, overall financial literacy scores in the different dimensions for trained farmers were not significantly different from those that were not trained. The result was attributed to spillover effects through networks given the period between training and evaluation. More financial education programs could be useful to empower communities with knowledge for informed financial decision making. Key words: Financial literacy, financial decisions, smallholder rural farmers, informal training
Highlights
Whereas modern technology and liberalization have made new financial products and services more available, majority of the population especially those in rural areas remain excluded from the financial market and are not well informed to make sound financial decisions (Lusardi and Mitchell, 2007)
Results show a positive relationship between household size and participation suggesting that famers with a big number of household members are more likely to participate in village savings and loans associations (VSLAs) training
We observe a significant negative relationship between experience in VSLA and participation, implying that farmers who have been members for a longer period are less likely to participate in VSLA trainings
Summary
Whereas modern technology and liberalization have made new financial products and services more available, majority of the population especially those in rural areas remain excluded from the financial market and are not well informed to make sound financial decisions (Lusardi and Mitchell, 2007). The study is based on the financial literacy training that was offered by different agricultural projects funded by aBi Development Limited in Uganda between 2014 and 2018. It is part of a comprehensive evaluation of the VSLA approach on smallholder farmers in Uganda, which was conducted in January, 2020. The original goal of VSLAs was to provide members especially rural women with access to credit, to meet subsistence needs or invest in income generating activities (Greyling and Rossouw, 2019)
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