The IUP Journal of Bank Management
The Influence of Financial Literacy and Peer Effect on Financial Outcomes in Self-Help Groups in India: A Study Using the PLS-SEM Approach

Article Details
Pub. Date : Feb, 2022
Product Name : The IUP Journal of Bank Management
Product Type : Article
Product Code : IJBM10222
Author Name : Nishi Malhotra* and Pankaj Kumar Baag
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 22



Financial literacy is gaining importance in ensuring the sustainability of the collectives and self-help groups. Rather than simply measuring the impact of financial literacy on the financial savings and credit behavior of the poor members of self-help groups, this paper seeks to measure the impact of financial literacy on financial attitude and its impact on financial behavior. The partial least square method has been used for the purpose of analysis, and the results establish that financial knowledge and attitude have a positive impact on behavior. In the case of collectives, peer influence and the mutual relationship among members become important in ensuring positive financial behavior. However, peer influence does not have any significant impact on financial attitude.


Globally, 1.7 billion people are excluded from banking and financial services (Demirguc-Kunt and Singer, 2017). Micro-borrowers are unable to access finance due to the lack of collateral. Formal financial institutions do not have information about the creditworthiness of these micro- borrowers, which leads to financial exclusion and market failure (Ray, 1998).

The UN Sustainable Development Goals highlight the importance of financial inclusion and banking to promote development with equity. Cole and Shastry (2009) highlight the importance of training and social intermediation in providing access to financial services to the poor. Marcolin and Abraham (2006) highlight the lack of financial literacy among the poor and also its importance in ensuring universalization of banking services to them. Financial literacy is defined as the ability of a person to understand the financial terms, concepts and procedures. There is a lack of effective conceptual framework to understand the impact of financial literacy on financial behavior. Remund (2010) defined financial literacy as: (1) knowledge of financial concepts, (2) ability to