De La Salle University – Manila

Ramon V. Del Rosario – Graduate School of Business

Statistical Analysis for Business Research | COB 517M

DETERMINANTS OF FINANCIAL LITERACY IN THE PHILIPPINES

Submitted by:
Bucio, Eduard S.
Minggoy, Mae D.
Turla, Love Rence

Submitted to:
Dr.Rechel Arcilla
April 20, 2023
1. INTRODUCTION

1.1 Background of Study

Financial literacy involves grasping the concepts of personal finances and ability
to manage it effectively. This allows individuals to be equipped in making wise financial
decisions. In the Philippines, many Filipinos struggle with debt, low savings, and limited
access to financial products and services. Hence, it is essential to improve the financial
literacy rate in the country.

In the global study by Standard & Poor's (S&P Global Ratings), it was revealed
that the Philippines only incurred a 25% rating in terms of financial literacy. This makes
the country belong to the bottom rank, being 30 among the 144 surveyed countries. In a
separate survey administered by the Bangko Sentral ng Pilipinas (BSP) in 2019, it was
found that only 8% of the adult Filipinos were able to correctly answer all three questions
relating to financial literacy. Along with this, only 53% have a savings account, and 55%
of Filipinos incurred loan from informal sources (eg. family and friends) due to lack of
access to formal financial services.

Several studies have been conducted in the Philippines to understand the factors
that contribute to low levels of financial literacy among Filipinos. One study conducted by
the Philippine Institute for Development Studies (PIDS) in 2018 found that the lack of
access to financial education and financial products, coupled with the low level of financial
knowledge and awareness, are the primary reasons for the low level of financial literacy
in the country.

The lack of financial literacy has significant implications for the financial well-being
of Filipinos. It can lead to poor financial decision-making, such as taking out loans with
high-interest rates or acquiring more risk in engaging into investing in scams.
 To help contribute in addressing this issue, the researchers will conduct a study
that will center on the financial literacy rate of the Filipinos. Specifically, this paper aims
to evaluate the factors that are perceived to affect the financial literacy status in the
country by conducting several statistical analyses that best fit our data.

2. THEORETICAL FRAMEWORK

2.1 Social Learning Theory (SLT)

In Bandura (1977) Social Learning Theory, it highlights the importance of modeling

and observational learning in the development of human behavior. This theory claims that
people pick up new skills through observation, imitation, and environmental feedback.
SLT argues that individuals develop their financial literacy not just through formal
schooling but also through observing the financial actions and judgments of others,
particularly family members and peers.
According to this theory, four key elements of SLT that are particularly relevant to
the development of financial literacy involve attention, retention, reproduction, and
motivation. Along with this, SLT believes that reinforcement plays a significant role for
establishing behavior. People are more likely to repeat actions that have been positively
reinforced than those that have been reprimanded. As a result, people are more likely to
adopt and sustain financial behaviors and decisions that result in favorable results, such
as saving money or making wise investments.
Therefore, SLT presents a theoretical framework for analyzing how people gain
knowledge about handling finances through modeling and observation, as well as how
reinforcement affects the formation and maintenance of financial behaviors and
decisions. According to this approach, programs for financial education should also
provide opportunities for people to see and learn from the wise financial decisions and
behaviors of others, in addition to formal training.
 2.2The Theory of Planned Behavior (TPB)

The Theory of Planned Behavior by Ajzen (1991) is a recognized psychological

theory that can be applied to explain and predict human behavior in various kinds of
circumstances. This theory claims that the most significant component in influencing
someone's actual action is their intention of performing it out. Three components that
influence this intention includes perceptions of behavioral control, subjective norms, and
attitudes toward the conduct.

In relation to Financial Literacy, the said theory can be applied to better understand
why some individuals engage in actions that support financial literacy while others do not.
Personal beliefs, money management experiences, and perspectives on the advantages
of financial literacy are just a few examples of the factors that might affect attitudes toward
financial literacy. The influence of family members, peers, or financial advisors who
encourage or discourage financial literacy habits is an example of a subjective norm.
Finally, characteristics like knowledge, skills, and resources required to practice financial
literacy may be included in perceived behavioral control.

3. THE HYPOTHESIS OF THE STUDY

These hypotheses have been established in relation to the literature review.

H1: Men are more likely to join the group.

with greater financial literacy than women.
H2: Individuals who are young or old are less likely than middle-aged people to
belong to the group with the highest level of financial literacy.
H3: Compared to unmarried people, married people are more likely to belong to
the group with better financial literacy levels.
 H4: People who are employed are more likely than those who are jobless to
belong to the group with better financial literacy levels.
H5: The individual is more inclined to belong to the group with better financial
literacy levels the more educational attainment they have.
H6: The possibility that an individual will belong to the group that has higher
financial literacy levels increases with income level (both individual and family).

4. METHODOLOGY

This study utilizes research since its conclusions are useful in helping address
practical issues and therefore the results obtained can be utilized in actual-life decision-
making conditions. using a design based on descriptive statistics, this investigation
conducted a framework thus it’s suitable for aiming to investigate the relationship between
the variables. With the help of stratified random technique, respondents were chosen.

4.1 Data - love

Datasets were requested from the Financial Inclusion Department of the Bangko
Sentral ng Pilipinas (BSP). Survey questionnaires were developed by The Center for
Learning and Inclusion Advocacy of BSP. While data gathering, encoding and processing
were administered by Nielsen Philippines.
The survey comprises a sample size of 1200 cases with residences both within
and outside Metro Manila. Respondents aged 15 years old and above were considered
to represent the 2019 census with 72 million adult population in the Philippines.
For the purpose of this study, the researchers will only center on the demographic
factors and questions relating to the financial literacy status of the respondents.
Participants were assessed based on their understanding of the concepts of inflation,
annual interest, and compounding interest rates.

Table 1 below shows the detailed summary of the variables that will be considered in the
analysis.
 4.2 Statistical Analysis

Seven multiple-choice variables were also included in the questionnaire for data
collection in addition to the respondents demographic details. Mean, standard deviation,
and other descriptive statistics education and income are correlated among the others
with demographic factors using Karl Pearson product moment correlation. A t-test for
independent samples was performed to examine the variations in according to the
respondents gender, age group, marital status, working status, educational attainment
status, household income . Chi Square Test was once more used to examine the
differences in financial literacy acros economic and demographic variables according to
gender, age group, marital status, working status, educational attaintment status,
household income. When analyzing the data for this study, Jamovi statistics at �
statistically significant value of 0.05.

5. RESULTS AND DISCUSSION

Table _ exhibits the descriptive statistics of the different variables used in this study with a sample
of 1,200 Filipino respondents in the Philippines with ages ranging from 15 to 70 years old. 50.42%
of the respondents were male, 83.17% were identified as non college graduates and 73.75 were
already married. 50.83% were employed individuals and 51.17% were residing in Urban areas.
With respect to the dependent variable which is the level of Financial literacy, only 8.50% of the
respondents were determined to have a high level of financial literacy all over the country.
 Chi-square test of Independence for the relationships of the variables

Table 2 displays the relationships of socio-economic and demographic variables

with the dependent variable, which is financial literacy. Among the identified determinants,
only the Educational Attainment was proven related to the dependent variable at a 5%
significance level (x2 = 7.3955; p < 0.05) using the statistical test Chi-square test of
Independence. This means that education attainment and financial literacy are related or
dependent on each other. This is to support the evidence from previous studies that a
high level of financial literacy is usually possessed by those individuals who have obtained
a higher education level that leads to a better access for financial information. The rest of
the identified determinants are found not related to financial literacy or not significant.

Inferences about proportions of two independent populations

Table 3 illustrates the inferential statistics between the dependent and independent variables
through the use of Z-Test for difference of two populations and Chi-Square Test. At significance
level of 5% it is proven that Males do not have a higher level of financial literacy than female
respondents ( z=1.3302; p > 0.05) as opposed to the findings of Chen and Volpe (1998); Agarwal
et al. (2009); Lusardi and Mitchell (2011); Atkinson and Messy (2012); OECD (2013). The
data shows that financial literacy of women is higher than men at 55.88%. Education and
information is now more accessible to both genders and women nowadays are becoming
more empowered and more vocal about their rights. This may support the result obtained
as women are gaining greater access to a lot of information offline and online. The result
also rejects the claim that the average age from 30 to 40 years is associated with higher
levels of financial literacy (Z = 0.6890; p > 0.05). And that financial literacy is low among
young and elderly respondents. This rejects the findings of Agarwal et al. (2009); Lusardi
and Mitchell (2011); Atkinson and Messy (2012); OECD (2013); Scheresberg (2013).
When regards to the marital status of the respondents, the results lead to the rejection of
the claim that singles are more prone to have lower financial literacy levels than married
individuals (Z = 0.7443; p > 0.05). In the Philippine National Demographic and Health
Survey, 1 in 6 Filipino girls are married before they are 18 years old or on the legal age
of majority. This phenomenon has been practiced by indigenous and muslim community
in the country. There are a lot of reasons why early marriage is prevalent in the country.
It can be personal choice, some are forced due to poverty so parents can lessen the
burden of providing for their children once they are married off while some want to escape
their abusive family members. Being inside marriage doesn’t guarantee to increase
literacy in finance. Due to the great responsibility embraced at an early age of marriage,
individuals often neglect the value of information and education to be able to make proper
decisions when it comes to financial matters.

Furthermore, the obtained results when regards to working status of the respondents
leads to the rejection of the claim that those employed individuals have higher financial
literacy level because of greater familiarity with economic and financial subjects (Z =
0.7972; p > 0.05). This is against the findings of Chen and Volpe (1998); Research
(2003); Kim and Garman (2004); Calamato (2010). This shows that not all employed
Filipino individuals are capable of financial decision making and management and not all
employed respondents were able to finish their studies that limited them for the access to
essential information which could help them become more critical and rational thinker
towards their finances. And as for educational attainment variable, the findings shows
that the levels of financial literacy of those who have graduated from college are not equal
to those who are non college graduates (x2 = 7.3995; p < 0.05) which is aligned with the
claims of Chen and Volpe (1998); Amadeu (2009); Lusardi and Mitchell (2011).

Lastly, the researchers tested also the correlation between the household income of the
respondents and their level of financial literacy using correlation matrix and the results
obtained revealed that the household income of the respondents have a strong direct
linear relationship with financial literacy (r = 0.0679 p < 0.05). This has proven the claim
from the previous study that financial literacy is related to wealth and that it has a small
but significant effect on financial literacy (Monticone, 2010; Hastings and Mitchell, 2011).

6. CONCLUSION

Financial literacy is crucial for successful adult life and plays a significant role in
forming responsible attitudes and actions regarding the management of personal
resources. This article, which explores by estimating a model that seeks to explain
financial literacy level from these variables, seeks to advance the field by analyzing, in
the philippine context, the influence of socioeconomic and demographic variables on the
individuals' level of financial literacy (Potrich, Vierira and Kirch 2015). The role of
demographic factors such as gender, age group, marital status, working status,
educational attainment status, household income was investigated in this study. The
result showed several important details. Education and Income have been proven to be
financial literacy of responders is positively predicted by, Different findings have emerged
from studies looking at how socio economic and demographic variables affect financial
literacy. A higher education level is correlated with higher levels of financial literacy. This
supports the results of previous studies by (Jayanthi and Rau 2019). As mentioned
earlier, various studies have resulted in contradictory findings about demographic factors
and financial literacy. Some limitations, such as the method and variable selection, apply
to the contributions of this study. There may be other scales developed and evaluated as
indicators of financial literacy.
REFERENCES

Bangko Sentral ng Pilipinas. (2020). 2019 FINANCIAL INCLUSION SURVEY.

bsp.gov.ph.

Boone, T., Reilly, A. M., & Sashkin, M. (1977). SOCIAL LEARNING THEORY Albert

Bandura Englewood Cliffs, N.J.: Prentice-Hall, 1977. 247 pp., paperbound.

Group & Organization Studies, 2(3), 384–385.

https://doi.org/10.1177/105960117700200317

Jayanthi, M., & Rau, S. (2019). Determinants of rural household financial literacy:

Evidence from south india. Statistical Journal of the IAOS.

https://doi.org/10.3233/sji-180438

Kim, H., Kim, J., & Kim, Y. (2019). Predicting financial literacy behaviors of college

students using the theory of planned behavior. Journal of Financial Counseling

and Planning, 63–73.

Nayebzadeh, S., Taft, M. K., & Sadrabadi, M. M. (2013). The Study of University

Professors’ Financial Literacy. International Journal of Academic Research in

Accounting, Finance and Management Sciences, 3(3).

https://doi.org/10.6007/ijarafms/v3-i3/42

Potrich, A. C. G., Vieira, K. M., & Kirch, G. (2015). Determinantes da Alfabetização

Financeira: Análise da Influência de Variáveis Socioeconômicas e Demográficas.

Revista Contabilidade & Finanças, 26(69), 362–377.

https://doi.org/10.1590/1808-057x201501040

S&P Global FinLit Survey | Global Financial Literacy Excellence Center (GFLEC).

(2023, January 11). Global Financial Literacy Excellence Center (GFLEC).

https://gflec.org/initiatives/sp-global-finlit-
 survey/#:~:text=The%20Standard%20%26%20Poor's%20Ratings%20Services,%

2C%20numeracy%2C%20and%20interest%20compounding.

DESCRIPTIVE STATISTIC
CORRELATION

Financial Literacy & Age Group

Financial Literacy & Educational Attainment
Financial Literacy & Marital Status
Financial Literacy & Gender
Financial Literacy & Working Status
Financial Literacy & Location
Z-TEST FOR DIFFERENCES IN TWO PROPORTIONS

MALE & FEMALE

Contingency Tables

Contingency Tables

Gender

Financial Literacy 1 2 Total

Level

0 Observed 560 538 1098

Expected 553.575 544.425 1098.000

0 0 0

% within row 51.00 % 49.00 % 100.00 %

% within 92.56 % 90.42 % 91.50 %

column

1 Observed 45 57 102

Expected 51.4250 50.5750 102.0000

% within row 44.12 % 55.88 % 100.00 %

% within 7.44 % 9.58 % 8.50 %

column

Total Observed 605 595 1200

Expected 605.000 595.000 1200.000

0 0 0

% within row 50.42 % 49.58 % 100.00 %

% within 100.00 100.00 100.00 %

column % %

χ² Tests
 Value df p

z test difference in 2 proportions 1.3302 0.0917 ᵃ

N 1200

ᵃ Hₐ: Gender P(1) > P(2)

AVERAGE AGE & COMBINED

YOUNG, ELDERLY AGE

Contingency Tables

Contingency Tables

AGE 2

Financial Literacy 0 1 Total

Level

0 Observed 191 907 1098

Expected 188.490 909.510 1098.000

0 0 0

% within row 17.40 % 82.60 % 100.00 %

% within 92.72 % 91.25 % 91.50 %

column

% of total 15.92 % 75.58 % 91.50 %

1 Observed 15 87 102

Expected 17.5100 84.4900 102.0000

% within row 14.71 % 85.29 % 100.00 %

% within 7.28 % 8.75 % 8.50 %

column
 % of total 1.25 % 7.25 % 8.50 %

Total Observed 206 994 1200

Expected 206.000 994.000 1200.000

0 0 0

% within row 17.17 % 82.83 % 100.00 %

% within 100.00 100.00 100.00 %

column % %

% of total 17.17 % 82.83 % 100.00 %

χ² Tests

Value df p

z test difference in 2 proportions 0.6890 0.2454 ᵃ

N 1200

ᵃ Hₐ: AGE 2 P(0) > P(1)

EMPLOYED & UNEMPLOYED

Contingency Tables
Contingency Tables

Working Status

Financial Literacy 1 0 Total

Level

0 Observed 562 536 1098

Expected 558.150 539.850 1098.000

0 0 0

% within row 51.18 % 48.82 % 100.00 %

% within 92.13 % 90.85 % 91.50 %

column

1 Observed 48 54 102

Expected 51.8500 50.1500 102.0000

% within row 47.06 % 52.94 % 100.00 %

% within 7.87 % 9.15 % 8.50 %

column

Total Observed 610 590 1200

Expected 610.000 590.000 1200.000

0 0 0

% within row 50.83 % 49.17 % 100.00 %

% within 100.00 100.00 100.00 %

column % %

χ² Tests

Value df p
z test difference in 2 proportions 0.7972 0.2127 ᵃ

N 1200

ᵃ Hₐ: Working Status P(1) > P(0)

SINGLE & MARRIED

Contingency Tables

Contingency Tables

MS 2

Financial Literacy 1 0 Total

Level

0 Observed 978 120 1098

Expected 979.9650 118.035 1098.000

0 0

% within row 89.07 % 10.93 % 100.00 %

% within 91.32 % 93.02 % 91.50 %

column

1 Observed 93 9 102

Expected 91.0350 10.9650 102.0000

% within row 91.18 % 8.82 % 100.00 %

% within 8.68 % 6.98 % 8.50 %

column

Total Observed 1071 129 1200

 Expected 1071.000 129.000 1200.000
0 0 0

% within row 89.25 % 10.75 % 100.00 %

% within 100.00 % 100.00 100.00 %

column %

χ² Tests

Value df p

z test difference in 2 proportions -0.6567 0.7443 ᵃ

N 1200

ᵃ Hₐ: MS 2 P(1) > P(0)

Contingency Tables

Contingency Tables

EAS

Financial Literacy 0 1 Total

Level

0 Observed 175 923 1098

Expected 184.830 913.170 1098.000

0 0 0

% within row 15.94 % 84.06 % 100.00 %

 % within 86.63 % 92.48 % 91.50 %
column

1 Observed 27 75 102

Expected 17.1700 84.8300 102.0000

% within row 26.47 % 73.53 % 100.00 %

% within 13.37 % 7.52 % 8.50 %

column

Total Observed 202 998 1200

Expected 202.000 998.000 1200.000

0 0 0

% within row 16.83 % 83.17 % 100.00 %

% within 100.00 100.00 100.00 %

column % %

χ² Tests

Value df p

z test difference in 2 proportions -2.7195 0.9967 ᵃ

N 1200

COLLEGE GRADUATE & NON

COLLEGE GRADUATE

Contingency Tables
Contingency Tables

EAS

Financial Literacy 0 1 Total

Level

0 Observed 175 923 1098

Expected 184.830 913.170 1098.000

0 0 0

% within row 15.94 % 84.06 % 100.00 %

% within 86.63 % 92.48 % 91.50 %

column

1 Observed 27 75 102

Expected 17.1700 84.8300 102.0000

% within row 26.47 % 73.53 % 100.00 %

% within 13.37 % 7.52 % 8.50 %

column

Total Observed 202 998 1200

Expected 202.000 998.000 1200.000

0 0 0

% within row 16.83 % 83.17 % 100.00 %

% within 100.00 100.00 100.00 %

column % %

χ² Tests

Value df p
χ 7.395 1 0.006
² 5 5

N 1200