The Impact of Financial Literacy on Women’s Economic Empowerment in Developing Countries: A Study Among the Rural Poor Women in Sri Lanka

Abstract

The World Bank, in 2016 defined women’s empowerment as a principle for sustainable development and for the fulfilment of the Millennium Development Goals (MDG). Economic empowerment has been identified as a main section of women’s empowerment in literature. Economic empowerment directly influences the improvement of women’s decision-making power and their financial well-being. Previous researchers have explored many antecedents of women’s economic empowerment; among them financial literacy is the most significant determinant in literature. Financial literacy defines as a combination of financial knowledge, financial skills and financial attitudes. Further many researchers argue that financial literacy has greater importance for increasing economic empowerment among women. However, the most important argument is whether financial literacy is a significant determinant of women’s economic empowerment in Sri Lankan context. Therefore, the present study mainly focuses on exploring the impact of financial literacy among rural poor on their economic empowerment in the context of Sri Lanka. The sample for this study was drawn from under privileged families who are living under the poverty line in 09 provinces in the country. Altogether 426 questionnaires were distributed and 386 completed questionnaires were taken for final analysis. There were 24 items employed to represents 5 main dimensions to measure the women’s economic empowerment (i.e.: 1. Decision-making power, 2. Control over the use of income and expenditure, 3. Leadership in the community, 4. Control over time allocation and 5. Financial wellbeing). And financial literacy was tested based on 25 items which was employed to determine the 04 key factors (i.e.: 1. Financial awareness, 2. Financial knowledge, 3. Financial skills, 4. Financial attitude and 5. Financial behavior). The reliability was measured by Cronbach’s Alpha coefficients. Data were collected with the assistance of a researcher administrated questionnaire. The sample was selected based on the multilevel mixed sampling method and the unit of analysis was the women headed households in rural areas representing 25 Districts represented each province of the country. Furthermore, a partial least squares structural equation model (PLS-SEM) was employed as the principle data analysis approach, and Smart PLS 3 was employed as the main analytical software. However, descriptive analysis was done by using SPSS 22.
 The findings revealed that, the financial literacy has significant impact on women’s economic empowerment among the rural poor. However, when it was considered under separate dimensions, financial wellbeing and control over time allocation have significant impact on financial literacy among rural women. Further it was noted that all the hypotheses were accepted after the analysis. Therefore, researcher concluded that financial literacy can be considered as a significant determinant of women economic empowerment in Sri Lankan context as well. Finally, the researcher provides some suggestions for government policy decision makers to develop financial literacy level for enhancing women’s economic empowerment in Sri Lanka.