Determinants of Financial Literacy: with Special Reference to Consumers in Financial Service Industry

The financial literacy is a key dimension which determines the demand of the financial services in the economy. However, most of the previous studies and financial decision makers believe financial literacy in different perspectives. Therefore, it is timely important to identify the main determinants of the financial literacy among potential customers in financial service industry. Accordingly, present study is mainly focused on identifying and verifying the key determinants of the financial literacy in the customer’s point of view in the financial service sector. The study adopted the positivism epistemology and quantitative approach. At the initial phase of the study, the extensive literature review was carried out with the purpose of identifying the determinants of financial literacy. In the second phase, a survey was conducted among 500 potential financial services customers representing nine provinces in Sri Lanka, 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 head of households in Sri Lanka. 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. Degree of financial literacy was tested based on 22 items identified by previous researchers and Principle Component Analysis was employed to determine the key factors of financial literacy. The reliability of scales was measured by Cronbach’s Alpha coefficients. The findings revealed that in general, all financial literacy dimensions have significant impact to determine the level of financial literacy. However, when it considers under separate dimensions, financial knowledge is the most significant determinant among the other determinants to determine the level of financial literacy. Therefore, researcher concluded that financial knowledge can be considered as a main determinant of financial literacy among potential customers of financial services in Sri Lanka. And the financial awareness is identified as the least significant determinant. Finally, the researcher provides some suggestions for marketing practitioners of financial service industry and government policy decision makers to develop financial literacy level by promoting financial knowledge for absorbing more consumers towards formal financial system and products of financial services.


INTRODUCTION:
Although financial literacy is frequently discussed in the national arena there is no clear definition of financial literacy; this ambiguity has led to multiple definitions. Financial literacy was defined by Mason and Wilson (2000) as "an individual's ability to obtain, understand, and evaluate the relevant information necessary to make decisions with an awareness of the likely financial consequences".
According to Noctor, Stoney and Stradling (1992), financial literacy is the ability to make informed judgments and to take effective decisions regarding the use and management of money. This definition was adopted by several scholars for their studies (E.g. Adam  It also means learning about finance and money which will help one to take better financial decisions in the life (Sheetal, 2013). According to aforesaid definitions, financial literacy means knowledge about finance. In layman's language it means providing financial knowledge to those people who are not aware of financial products and services (Sheetal, 2013). Accordingly, financial literacy can be simply defined as peoples' ability to process economic information and make informed decisions about financial planning, wealth accumulation, debt, and pensions .
Financial literacy facilitates the growth and the moulding of finances in an apt manner. As it influences not just the welfare of people, but also their financial empowerment, the significance of financial literacy is not to be underestimated. As the conversion of economy from general literacy to financial literacy is fundamental to old and young, men and women, domestic and working populations, financial literacy accommodates them all. Well informed financial decision making is turning into a requirement for financial wellbeing of an individuals, as a result of constant shifting in the financial market and the intensification of individual responsibility. During the last few years, the financial literacy has been a popular area which was investigated most energetically around the world, as financial knowledge was considered to be the key element for making sturdy financial decisions (Al- Tamimi  Financial literacy and proper financial inclusion are two indispensable factors for the financial welfare and financial empowerment of people (Kumari, 2017). For a better maintenance and wellbeing, financial planning and independent decision making on income and its effective management is a key factor. As citizens of a developing country, Sri Lankan people have to confront many challenges so as to obtain financial knowledge. Further she explained that, the majority of people are poor in financial literacy and particularly, lack of knowledge and proper financial attitudes and therefore, poor in financial decision making.
In comparison to a number of other Asian countries, Sri Lanka has a financial inclusion rate as high as 73.6%, as stated by the Little Data Book on Financial Inclusion, 2018. All adults (above 15 years) who possess an account in formal financial sector were considered as "Financially Inclusive" table 1.
demonstrates that the Sri Lankan population is deprived of any form of financial services (S&P Global Fin Lit Survey, 2018). This exclusion of the formal financial market is the outcome of financial illiteracy and lack of a sound financial attitude. Lankan consumers is totally different than the perceived value of consumers in the western countries.
Therefore, the financial literacy can be an antecedent of consumer perceived value towards the financial services. In some circumstances, consumer impulsiveness of less literate customers will be high and it can be affected to make un planned decision of Sri lankan customers in terms of the consumer's products as well as services (Karunaratne & Wanninayake, 2018). Hence the key objective of this study is to identify the determinants of financial literacy and examine the most significant determinants to decide the level of financial literacy in Sri Lanka in customers' perspective. Accordingly, the researcher attempts to identify various individual determinants of financial literacy based on the previous literature and select most appropriate determinants relating to the customer buying behaviour of financial service market.
The significance and the expected knowledge contribution of this study will veer into three aspects. In general, this study will draw attention to the determinants of financial literacy as an important phenomenon for researching different contexts. It will aim at providing suggestions for further researches. In the empirical perspective, this study will contribute to developing a comprehensive understanding and application of consumer financial decisions in different contexts. In the practical aspect, this study will aim to provide guidelines to marketers of the financial service industry and policy decision makers in the Sri Lankan economy to develop strategies to improve the financial literacy level of the customers of financial services by improving their degree of financial inclusion. In this article the researcher will first discuss the current meaning and scope of the financial literacy along with the critical literature review to identify the key determinants of financial literacy. Then, will continue by presenting the conceptual framework, hypotheses and methodology. Discussion of the results will be presented in section four, followed by the conclusion in the final section. Sandra 2010). Therefore, it is worth to further investigate about those perspectives to understand conceptual background of financial literacy.

Measures of Financial literacy:
However, there remains a lack of a consensus in the academic field about the instruments for measuring financial literacy. In recent years, many studies have been conducted in the USA, such as those by Chen   With considering aforesaid discussions, it is clear that financial knowledge can be considered as a main determinant of financial literacy.

Financial Skills:
Financial skills mean the ability to use the knowledge of financial services implied in financial literacy

Financial Attitude:
Financial

Financial Behavior:
Financial behavior can be considered as another aspect of financial literacy (Lusardi & Mitchell, 2007).
Even though an individual has financial knowledge, skills and positive attitudes towards financial system, behavior will be the last determinant for better financial decisions (Taliaferro et al., 2011). The nature of financial decision-making has changed a lot in recent years, as individuals are faced with a wider range of products, many of which are more complex than products available in the past.   According to the research objectives, it is needed to examine the most significant determinants of the financial literacy among Sri Lankan consumers. As per the findings discussed in the above paragraph, all the respective path coefficients are estimated as statistically significant. Therefore, the results demonstrate that all the five hypotheses were accepted and all the objectives were achieved. Therefore, the overall findings implied that all the determinants are a statistically significant and positive impact on the degree of financial literacy in Sri Lanka. Therefore, the results confirmed that objectives supported through literature as well as through empirical evidence in the present research context.
According to the previous literature, financial literacy was measured by using different dimensions in different contexts. In the most of the countries, the researchers adopted to same dimensions employed in the present study. Even though those studies were carried out in the various socio-cultural contexts, the very few studies have been focused on this issue in the customer point of view. Accordingly, the present study was revealed that the most significant determinant of financial literacy is financial knowledge with the highest t value among the other determinants. The financial skills were recognized as the second most influential determinant to determine the degree of financial literacy in Sri Lankan financial sector consumers. Financial awareness was identified as the least significant determinant due to the respective path coefficient has the lowest t value. Therefore, it can be emphasis that present research is able to fill the literature gap emphasized by the researcher based on the relationship between determinants and financial literacy.

CONCLUSION
Based on the research findings, it was revealed that financial knowledge has made the highest significant contribution to the degree of financial literacy of consumers in financial service industry in Sri Lanka. And the financial awareness level identified as the least significant determinant of financial literacy. In Sri Lankan context, most of the government and private institutes determine the degree of the financial literacy by considering the awareness level. However, it is not reliable indicators to the decision making on the financial products and services. On the other hand, if customer has awareness about the attributes and the benefits of the financial products, they may create the behavioral intension towards the buying decision with having sound knowledge on those products and services. Therefore, policy decision makers should always think about just awareness programme about the formal financial system may not have significant impact of the financial literacy level. Therefore, it is a good finding for the policymakers to pay their attention to the financial knowledge as the highest significant factor for further improvements. According the findings of this study, the financial awareness is the basic requirement for creating the potential customers for the financial service sector. Therefore, the marketers should use appropriate promotional strategies to provide real knowledge about the pros and cons of formal financial instruments to do their transactions. Subsequently, the potential customers may