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Financial Literacy: Farmers Perspectives

Research · April 2023

DOI: 10.13140/RG.2.2.35675.23843

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KCG- Portal of Journal

Continuous Issue – 34 December – January 2020

Financial Literacy: Farmers Perspectives

Abstract:
Financial literacy is literacy about finance. If anyone has knowledge or skill to manage finance, a person is
financially literate. The researcher defined financial literacy in Indian farmer’s perspectives using
conceptual research method. Financial literacy consists of two distinct words ‘Finance’ and ‘literacy’, both
with a distinct historical defining background. Farmers are financially literate in his field of agriculture or
not, for such a decision required a conceptual understanding of financial literacy and farmers agricultural
activities. Financial literacy is level awareness about the basics of money management (cash inflow and
outflow) and controlling while agriculture consists of various agricultural activities. With the use of
conceptual model financial literacy from farmer’s perspectives is defined and that can be useful for study
financial literacy among farmers.
Keywords: finance, literacy, financial literacy, agriculture.
Introduction
In layman’s language financial literacy means literacy about finance. If anyone has knowledge or skill to
manage finance, we say a person is financially literate. Different authors/organizations define financial
literacy in different words. In this article, we define financial literacy in farmer’s perspectives using
conceptual research. Conceptual research is related to some abstract idea(s) or theory. It is for the
development of new concepts or to reinterpret the existing one. In farmer’s financial literacy, it consists
of distinct words Farmer, Finance and literacy. Conceptual understanding of above words and its
combination helps author to interpret farmer’s financial literacy. Researcher first discuss conceptual
understanding of literacy, finance and financial literacy then frame conceptual definition of financial
literacy from Indian farmer’s perspectives.
Literacy
The United Nations Educational, Scientific and Cultural Organization (UNESCO) defines that literacy as
the ability to identify, understand, interpret, create, communicate and compute, using printed and
written materials associated with varying contexts. Literacy involves a variety of learning in enabling
individuals to achieve their goals, to develop their knowledge and potential, and to participate fully in
their community and wider society (UNESCO, 2006). UNESCO definition defines literacy in detail, the first
part of the definition includes various parameters (variables) to understand literacy like – identify,
understand, interpret, create, communicate and compute. The second part represents literacy is a variety
learning process for goal achievement, knowledge and potential development and last part include that
literacy helps individual to full participation in their community and society. Literacy not only about
competency in reading and writing skills, but goes beyond this to include the critical and effective use of
the above-mentioned variables in peoples' lives, and the use of language (oral and written) for all
purposes. This definition involves critical thinking about what one reads, as well as expanding the term to
encompass oral forms of literacy. Osama Manzar writes in his article of change literacy’s definition
(Manzar, 2011), Illiteracy is defined as an inability to communicate in writing or through reading. But
that is because before the advent of digital communication as a medium we had to rely on written
communication through papers, books, pens, pencils, ink, and printing. Now we can easily communicate
orally using digital tools such as cell-phones, multimedia, the Internet, etc. on the other hand Manthan
award winner, Eko, provides means of opening bank accounts and does financial transactions through
mobiles. This is meant to target those who are illiterate, unbanked and have mobile phones. Illiterate
people use devices such as mobiles, telephones, remotes, etc., without going through any formal literacy

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class. Need has driven them to learn the basics of literacy through acquaintance with modern tools. Hence
literacy definition is change according to environmental, technological and economical condition of a
person as well as country.
Finance:
Modern English word finance came from the Latin word Financius, from the noun finis means ‘end’. It
migrated from Latin to old French as Finaunce, from finer means to pay a ransom (payment), whence also
English fine means to pay a penalty (Marcel, 2016). Hence the notion is of ending something due. The
French senses gradually were brought in to the English language: “ransom” in the mid 15th century,
“taxation” in the late 15th century; the sense of management of money, a science of monetary business is
first recorded in English 1770 (Etymonline). In other definition, finance is a field that deals with the study
of investments. The investment includes the combination of assets and liabilities over time under
conditions of different degrees of uncertainty and risk. And the obtaining of funds or capital is financing
(Webster, 2018). According to Cambridge Advanced Learner’s Dictionary “The management of a supply
of money / to provide the money needed for something to happen is financing (Cambridge). Hence
finance relates to the management of money, money is in the form of assets or liability or debt or
investment or else. When a person manages the money we say it doing a financial activity. According to
food and agriculture organization of the United Nations, 70 percent of Indian rural households still
depend primarily on agriculture for their livelihood, with 82 percent of farmers being small and marginal.
In 2017-18, total food grain production was estimated at 275 million tones (Nations, 2019). It’s a big
amount in finance. In agriculture, farmer is in origin; hence his understanding of finance is importance for
betterment of heath of economy of India.
Financial Literacy:
Literacy and finance both words have distinct meanings and understanding. When a conjunction of
means literacy about finance. Zucchi defines “financial literacy is the confluence of financial, credit and
debt management and the knowledge that is necessary to make financially responsible decisions –
decisions that are integral to our everyday lives”. Financial literacy includes understanding how a
checking account works, what using a credit card means, and how to avoid debt. In sum, financial literacy
impacts the daily issues an average family makes when trying to balance a budget, buy a home, fund the
children’s education and ensure an income at retirement (Zucchi, 2018). In other simple words, financial
literacy is the possession of the set of skills and knowledge that allows an individual to make informed
and effective decisions with all of their financial resources (Wikipedia, 2018). Financial literacy gives a
psychological view of managing financial resources or cash flow (cash inflow or cash outflow). The
National Financial Educators Council defines financial literacy as: “Possessing the skills and knowledge
on financial matters to confidently take effective action that best fulfills an individual’s personal, family
and global community goals” (NFEC). A financial literate farmer has possess the skill and knowledge on
the financial matter to manage financial resources that fulfill personal, family and agricultural goals.
The research defines a lack of basic level of understanding and ability to deal with money in one's life at a
functional level. One need not be an accountant to understand the basics of interest, for example, and
how it can help or hinder when it comes to savings or debt. Even the most basic financial concepts are
rarely taught in schools here, so research would caution against assuming that someone knows little
about money because they are incapable of understanding. A researcher would also be very careful not to
equate poverty with financial illiteracy. Not having access to money and not being cautious or educated
about money are two separate things. Indeed, it can be extremely costly (not to mention draining on
metal energy) to have limited money. Some people living in poverty are also very resourceful and very
frugal, to make every dollar count. (Betsy Megas, 2018). Financial literacy, to me, is “having a basic,
functional understanding of money and how to manage it.”
The President's Advisory Council defines Financial Literacy as “The ability to understand the basic
principles of business and finance” (NFEC). As per the Economic Survey 2017-18, which was released in
Parliament on Monday ahead of the Union Budget 2018 had key implications for the agriculture sector

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which employs more than 50 percent of the total workforce in India and contributes around 17-18
percent to the country's GDP (Express, 2018). Agriculture is an important industry and like all other
industries, it also requires capital. Capital requirement depends on agricultural activities, in agricultural
practices activities are starting from preparation of soil, sowing, adding manure and fertilizer, irrigation,
protecting from weeds, harvesting, and storage. Each activity requires small or large amount of capital for
short or long term time period. Farmers capital requirement of farming is fulfilled by own capital or
credit from bank, co-operative society and other unorganized source. In every agricultural activity
various financial decision are taken by farmer like credit period, interest rate, choosing appropriate
source of capital, amount of capital, investment on agricultural machinery, Agri-labour payment. Farmer
aware about various government programs that helps in various economical grounds. Farmers centric
government schemes that helps farmers like subsidies on seeds, fertilizer, crop storage, drip irrigation,
agricultural machinery, Minimum support price (MSP) of crops, agricultural insurance (Pradhan mantri
Fasal Bima yojna - PMFBY), Farmer pension scheme ( Pradhan Mantri Kisan Maan-Dhan Yojana). Hence
farmer’s financial literacy means, the farmer can understand the basic principles of agricultural business
and finance. As per The Cambridge Business English Dictionary defines as “The combination of
knowledge, skills, attitudes and ultimately behaviors that translate into sound financial decisions and
appropriate use of financial services”(NFEC).
Conclusion:
Research encompasses the knowledge and skills for agricultural financial planning, the selection of
financial services, budgeting and investing, developing an insurance program, credit management, rights
and responsibilities, and decision-making skills for all aspects of agriculture that relates to farm
management as consumers, labour and businessman. From Farmers perspectives financial literacy is
about the ability of farmer to understand basic principles of agriculture business and its financial
management like, Farmer has to aware about the time value of money, cash flows, purchase, credit
management, inventory management, debt management, market awareness, etc. in simple word
researcher can define financial literacy from farmers perspective as “the ability of farmer to understand
basic principles of agriculture and finance”. This definition includes the ability of farmers, take
agriculture as a business and aware of financial management activity, starting purchasing of seeds,
fertilizer to end with the selling of finished product or crop.
Bibliography

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https://www.quora.com/What-does-being-financially-illiterate-mean

II. Betsy Megas. (2018, 3 13). Quora. Retrieved 3 14, 2018, from https://www.quora.com:
https://www.quora.com/What-does-being-financially-illiterate-mean

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accounting-magazines/financial-literacy

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VII. Gurg, C. R. (2014). Research Methodology. (3, Ed.) New Delhi, India: New Age Publications.

VIII. Manzar, O. (2011, 11 21). Change literacy’s definition: Digital World. Retrieved 3 16, 2018, from
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education-so-important.asp

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Mitesh J. Patel
PhD Research Scholar
Faculty of Management Studies
Sankalchand Patel University
Visnagar
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