Financial literacy and financial inclusion among the tribal communities in Kerala

Abstract

Financial literacy refers to the set of skills and knowledge that allows an individual tomake informed and effective decisions with all of their financial resources. It is thecapacity to have familiarity with and understanding of financial products and services.Financial inclusion is the process of delivering affordable financial products andservices to underprivileged and low-income groups within a population. Theseservices include savings, remittances, payments, insurance, loans and all the financialadvisory support facilitated by the formal financial system. Access to a bank accountinstills a sense of recognition, identity, trust and empowerment in the minds of themarginalised communities. The objectives of the study are: to assess the level offinancial literacy and the level of financial inclusion among the tribal communities inKerala, to analyse the role of financial literacy in promoting financial inclusion amongthe tribal communities and to examine the status of financial planning, financialanxiety and financial confidence among the tribal households. The sampling unit forthe study consists of the financial heads of households from tribal communities inKerala and the determined sample size for the study is 450. Multistage RandomSampling Method has been used in this study and nine tribal communities wereselected accordingly. Descriptive statistics such as: frequencies, percentages, mean,and standard deviation were used for the purposes of summarising socio-demographiccharacteristics and for displaying the general states of financial literacy and inclusion.Inferential statistical methods including independent samples t-tests, chi-square tests,One-Way Analysis of Variance (One-Way ANOVA), Friedman test, Scheffe’s post-hoc test, Sobel test, Pearson correlation, Simple linear regression, Multiple linearregression and Structural Equation Modeling (SEM) were used in accordance with theobjectives of the study. The results of the study revealed that, despite considerableadvancements in enhancing access to financial services for Scheduled Tribes inKerala, significant deficiencies remain in terms of usage, effectiveness andsustainability. The levels of financial literacy were found notably low across various communities with disparities influenced by factors such as education, income, age,occupation and regional factors. This limited financial literacy adversely impacts bothbasic digital financial literacy and financial inclusion which emphasizes the necessityfor integrated approaches rather than isolated initiatives. Strengthening financialliteracy, generating confidence in financial decision-making and minimisingprocedural barriers are requisites for transforming passive access into meaningfulinclusion. At the same time, enhancing insurance coverage, encouraging diversifiedsavings practices and promoting trust through culturally sensitive service delivery cansignificantly contribute to long-term financial security. Policy-level interventions,community-based initiatives and innovative financial products must work in synergymode to bridge existing inequalities.