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Asian Social Science; Vol. 16, No. 2; 2020
ISSN 1911-2017 E-ISSN 1911-2025
Published by Canadian Center of Science and Education
The Impact of Financial Literacy on Women’s Economic

Empowerment in Developing Countries: A Study Among the Rural
Poor Women in Sri Lanka
Kumari D.A.T.1, Ferdous Azam S. M.1 & Siti Khalidah1
1
Management and Science University, Malaysia
Correspondence: Kumari D.A.T., Faculty of Business Studies and Finance, Wayamba University of Sri Lanka, Sri
Lanka. Tel: 94-71-753-8467. E-mail: datkumari@gmail.com/datkumari@wyb.ac.lk
Received: December 5, 2019 Accepted: December 27, 2019 Online Published: January 31, 2020
doi:10.5539/ass.v16n2p31 URL: https://doi.org/10.5539/ass.v16n2p31
Abstract
The World Bank, in 2016 defined women’s empowerment as a principle for sustainable development and for the
fulfilment of the Millennium Development Goals (MDG). Economic empowerment has been identified as a main
section of women’s empowerment in literature. Economic empowerment directly influences the improvement of
women’s decision-making power and their financial well-being. Previous researchers have explored many
antecedents of women’s economic empowerment; among them financial literacy is the most significant
determinant in literature. Financial literacy defines as a combination of financial knowledge, financial skills and
financial attitudes. Further many researchers argue that financial literacy has greater importance for increasing
economic empowerment among women. However, the most important argument is whether financial literacy is a
significant determinant of women’s economic empowerment in Sri Lankan context. Therefore, the present study
mainly focuses on exploring the impact of financial literacy among rural poor on their economic empowerment
in the context of Sri Lanka. The sample for this study was drawn from under privileged families who are living
under the poverty line in 09 provinces in the country. Altogether 426 questionnaires were distributed and 386
completed questionnaires were taken for final analysis. There were 24 items employed to represents 5 main
dimensions to measure the women’s economic empowerment (i.e.: 1. Decision-making power, 2. Control over
the use of income and expenditure, 3. Leadership in the community, 4. Control over time allocation and 5.
Financial wellbeing). And financial literacy was tested based on 25 items which was employed to determine the
04 key factors (i.e.: 1. Financial awareness, 2. Financial knowledge, 3. Financial skills, 4. Financial attitude and
5. Financial behavior). The reliability was measured by Cronbach’s Alpha coefficients. Data were collected 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 women headed households in rural areas representing
25 Districts represented each province of the country. 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. However, descriptive analysis was done by using SPSS 22.
The findings revealed that, the financial literacy has significant impact on women’s economic empowerment
among the rural poor. However, when it was considered under separate dimensions, financial wellbeing and
control over time allocation have significant impact on financial literacy among rural women. Further it was
noted that all the hypotheses were accepted after the analysis. Therefore, researcher concluded that financial
literacy can be considered as a significant determinant of women economic empowerment in Sri Lankan context
as well. Finally, the researcher provides some suggestions for government policy decision makers to develop
financial literacy level for enhancing women’s economic empowerment in Sri Lanka.
Keywords: decision making power, financial literacy, financial wellbeing, women’s economic empowerment
1. Introduction
The Organization for Economic Cooperation and Development (OECD) in 2018, defines financial literacy as “a
combination of financial knowledge, skill, attitude and behaviour necessary to make sound financial decisions
and ultimately achieve individual financial wellbeing”. Financial literacy (Fin Lit) is one of the important
determinants of women’s economic empowerment (WEE). With more Fin Lit, empowers individuals’ financial
31
ass.ccsenet.org Asian Social Science Vol. 16, No. 2 2020
decision making power, financial wellbeing, and facilitates to development and affords protection against
poverty. Fin Lit will be secured from adverse selections and direct the formal financial system. Accordingly,
some vulnerable groups such as low income rural women can increase their incomes, acquire capital, manage
risks, empower and work their way out of poverty (Kumari, 2017). Therefore, one of the most important
potential consequence of Fin Lit is WEE, which refers to the authority of women to make their own decisions
regarding the use of their resources, and leads to the prosperity of families and communities. Thus, many people,
particularly the underprivileged and women, show a reluctance to access banking and financial services since
they lack knowledge and awareness of finance and financial products. Therefore, they are excluded from
financial markets. In addition, in comparison to men, women are lesser accomplished financially on a number of
facets. Since the financial welfare of people heavily depends on Fin Lit and as it empowers them economically in
the end, the implications of the Fin Lit are not to be undervalued. As a result, during the last few years, the
economic empowerment of women by means of Fin Lit has become an area of serious discussion throughout the
world (Batra, 2013; Beckmann, 2013; Bhushan, & Medury, 2013; Arrondel, & Savignac, 2013; Maheswari, &
Revathy, 2016; Roy & Jain, 2018; Kumari & Aluthge, 2018a; Angela, John, & Ting, 2019). Sri Lanka, a country
which aims to be amazing and craves the title “The miracle of South Asia”, currently holds a position of lower
middle income level in the income category (Global Financial Development Report/GFDR, 2018). Nevertheless,
Sri Lanka is a country with an abundance of labour. As stated by the analysis of Sri Lankan sex ratio, the country
has a female oriented population with a ratio of 0.96 (male/female) between the male and female population
(GFDR, 2018). However, it is regrettable that, in Sri Lanka, a major portion of the unemployed population
consists of women. According to the survey report of Department of Census and Statistics (DCS), in the first
quarter of 2019, the ratio was 3.4 to 6.9 between the male and female populations (DCS, 2019).
In the local context, the labour force partaking based on gender is 78.9% male in contrast to 38.5% female
(Global Gender Gap Report/ GGGR, 2018). As citizens of a developing country, Sri Lankan women in rural
areas have to confront many challenges so as to obtain financial knowledge. A 52% of the entire Sri Lankan
population is composed of women, and when it comes to the life expectancy rate, women (79%) and they are 7
years ahead of men (72%) (GFDR, 2018). Thus, their expenses spread over a longer period of time. In face of
these realistic situations, many women are compelled to confront monetary problems. Furthermore, according to
the Standard and Poor’s Rating Services Global Financial Literacy Survey 2018, around 90% of women are the
sole breadwinners of their families after the death of the spouse or a divorce (S&P Global Fin Lit Survey, 2018).
Fortunately, only an 8% of women among them are illiterate in a general sense. Among them, rural poor women
are lacking in Fin Lit and particularly, lack in financial 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 73.4%, 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”. Further the report mentioned that Sri
Lanka is at the top with the highest rate in women’s financial inclusion at a rate of 73.4%. On the other hand, a
26.6% of 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. As demonstrated by the S&P Global Fin Lit Survey in 2018, in almost every country there
exists a material gap between the male and female population. When it comes to attributes such as gender, level
of education, income and age, Fin Lit rates fluctuate in significant ways. Globally, a 35% of men are financially
literate as opposed to a 30% of women. As revealed in Sri Lankan adult population, only a 35% are financially
literate and this turns out to be a severe drawback in women’s Fin Lit and their wellbeing. Due to the large gap of
print literacy (91%) and Fin Lit (35%) of female, majority of female are being financially weak (DCS,2018).
Other than that, the labour force survey data in 2018 stated that, within Sri Lankan economy, a 74.4% of female
population is economically inactive (DCS, 2018). Hence, the majority of women are being dis-earners and poor.
Furthermore, according to the Census of Population and Housing Sri Lanka in 2016, 83% of adult population in
Sri Lanka represents the rural sector. Pertaining condition of women’s poor living status results the weak
economic empowerment of them. Therefore, this paper is mainly focused on investigating the role of Fin Lit for
enhancing the economic empowerment of rural women.
2. Literature Review
Empowerment has been discussed by most of researchers (e.g. Golla, Malhotra, Nanda, & Mehra, 2011; Siddik,
2017) in terms of economic perspective. Economically empowering women is vital both to apprehend women’s
rights and to achieve broader development goals such as economic growth, poverty reduction, and social welfare.
According to Golla et al., (2011), women are said to be economically empowered when women have the ability
32
to succeed and advance economically as well as have the power to make correct economic decisions. Many
researchers and scholars (e.g. Batra, 2013) argue that WEE promotes inclusive growth in many developing
countries. Some researchers (Bongomin, Ntayi, John, Munene, & Akol, 2017) shows that a large portion of the
hard-core poor are the women, because they face social barriers in accessing formal finance such as savings and
credits that make it is much harder for them to overcome poverty. Also, because they are more susceptible to
becoming poor when they lose the male earning member of the family due to abandonment, divorce or death.
Furthermore, Siddik (2017), pointed out that continued disparities between women and men in employment and
income opportunities, education, Fin Lit and control over assets demonstrate that development activities are
centered on the men.
On the other hand, WEE is vital in defining women’s rights (Singh & Kumar, 2017). Economy and organizations
start to realize that women empowerment is a win-win situation not only for women but also for the economy as
a whole (Kumari, 2017). Further Deka (2015) argued that economically empowered women are more able to
enjoy wellbeing and also help in increasing productivity, economic growth, reducing poverty and enhancing
efficiency. Sustainability develops and determines, based on equilibrium structure of society, a society that does
not make discrimination or is biased against any social group or gender (Bahmar, 2012). Therefore,
empowerment of women promotes sustainable development of a community (Vithanagama, 2016). Further,
sustainable social structure comprises social and economic empowerment, Fin Lit and financial freedom of
women to access the formal financial system (Siddik, 2017). These factors promote their active involvement in
the development of their own, society and whole nation (Savitha & Polepeddi, 2011). Women being the majority
population of society get chances in all spheres of life and definitely become a part of sustainable development
(Saha, 2016). According to Kabeer, (2005), as women hold responsibilities of many facets of family structure,
which falls under the category of human resources development, empowering women means empowering the
whole family. Therefore, Mayoux (2000) noted that women by sitting idle at home but watch the progress of the
activity of the family members and interfere in the matter to promote their careers.
According to above discussion, women economic right is definitely an important indicator for enhancement of
their status. Therefore, women’s financial knowledge should be encouraged in terms of Fin Lit by educating
more employment avenues and financial awareness etc., thereby creating economic freedom in women (Hung,
Yoong, & Brown, 2012). This dimension covers strength of financial decision making that benefits the economic
growth, financial access, credit, social cohesion, local participation and interaction of formal financial
transactions, etc., for betterment of their lives (Mayoux & Hartl, 2009). In this regard, developing countries give
priority to Fin Lit for more for financial inclusion in order to improve the economic empowerment of their
women. However, in the new global economy, women’s empowerment has become an important hurdle for
countries to be able to achieve development goals such as economic growth, poverty reduction, health, education
and welfare (Golla et al., 2011; Maheswari & Revathy, 2016; Kumari & Subrahmanyam, 2017; Roy & Jain,
2018; Lyons, Angela, John, & Ting, 2019). Therefore, researchers are interested to investigate the relationship
between WEE and Fin Lit.
2.1 Measures of Women’s Economic Empowerment
According to the previous literature, there are many measurement indicators for the WEE. Out of them, 26 items
were considered for the exploratory factor analysis and factor laddered into 5 main measures. And finally, 24
items which were taken based on their high reliability representing high Cronbach alpha values for present
research context. Therefore, as explained in following section, five main dimensions such as economic decision
making power, control over the use of income and expenditures, leadership in the community, control over the
time allocation and financial wellbeing can be employed in the present study to measure economic
empowerment of the rural women.
Decision making power
As defined by Domingo, Holmes, O’Neil, Jones, Bird, Larson, Presler-Marshall, & Valters, (2015),
“Decision-making power is the ability to influence decisions that affect one’s life – both private and public”. It is
important for women to have formal access to positions of authority and to decision making process in order to
have a decision making power in the public domain (Islam & Reza, 2012; Haque & Zulfiqar, 2016; Hung, Yoong,
& Brown, 2012). The power of decision making is a combination of access, capabilities and actions that
determines whether women have effect over the society or their private life. When studying, economic
empowerment, the decision making power is considered under the financial point of view (Deka, 2015;
Karunathilake, 2016). Therefore, based on the previous researchers’ definitions and explanations, in the present
research context, the decision making power is referred as: to the power of poor rural women to make household
33
economic decisions for achieving short and long term economic wellbeing in their households.
Control over the use of income and expenditures
The next important issue is the control over the use of income and expenditure, because not having a proper
control over this factor will result in spending money out of track. To control the income and expenditure, it is
best to directly prepare the detailed document on controlling an income and expenditure, while developing the
budget (Deka, 2015; Rai, 2019). The household budget should be communicated with all the relevant staff.
Under the WEE, controlling power of the income and expenditure of family members as well as controlling
herself is a significant phenomenon of her empowerment (Deka, 2015; Domingo et al., 2015; Adami, Carosi, &
Sharma, 2018). Therefore, based on the previous researchers’ definitions and explanations, in the present
research context, controlling the use of income and expenditure termed as; authority and willingness of poor
rural women to control the over expenditure of their families with the purpose of using this resources to
productive ways.
Leadership in the community
Over the years, women have been the linchpin of communities as they are actively involved in community
initiatives in various ways. Even though it is not noticed oftentimes, the role of these unrewarded heroes of
community actions has become indispensable (Deka, 2015). Especially, in some communities like rural poor,
women have established themselves as leaders in community development and acquired the skills that have
brought positive change to their communities. Women leaders also play key roles in establishing and maintaining
important relationships and networks among the members of the community (Gilabert, Gilabert, Dietz, & Grabs,
2016; Karunathilake, 2016). They face cultural, economic, and social barriers in leading the community and in
many cases overcoming those barriers become their motivation. It can be observed that, even though their
involvement and contributions have uplifted the evolution and the nature of community development, they have
not been given proper acknowledgement for those contributions. The results of previous studies provide deeper
insights into women’s thinking about leadership and community development (Arora, 2016; Maheswari, 2016;
Haque et al., 2018; Bonga et al., 2016; Singh et al., 2017; Lusardi et al., 2017; Roy et al., 2018). Therefore,
based on the previous researchers’ definitions and explanations, leadership in the community for present study
means the extent to which poor rural women can influence the common decisions of community and degree of
other community people willing to accept their views.
Control over the time allocation
A study conducted by Hoque and Itohara (2009) reported that the time allocation is contributing to an extent in
planning family activities and participating in family leisure time based on the decision making power of the
rural women. The authors also stated that the time spending programme among family members contributes to
develop the leadership of the rural women (Singh & Kumar, 2017; Deka, 2015; Karunathilake, 2016). This study
was conceptualized by considering five important dimensions of WEE that identifies the basic five principles in
which empowerment is achieved, in which control over the time allocation was identified as an important
dimension (Swamy, 2014; Deka, 2015; Lusardi et al., 2017; Roy et al., 2018). Therefore, according to this
research context, control over the time allocation means the ability and willingness of poor rural women for
allocating their time for different tasks and the ability to decide their leisure time in between their day to-day
work schedule.
Financial wellbeing
Another sub-dimention of the study is financial wellbeing, contributing to some extent in generating economic
empowerment and participation in financial decision making power of the rural women (Dash, Prasad, & Koshy,
2016). Financial wellbeing determines whether women are capable of making decisions about household matters
like buying household assets and managing financial resources, having access to bank, having future financial
security, having ability to make choices or having enough assets to do day to day financial transactions (Deka,
2015; Maheswari, 2016; Haque et al., 2016; Bonga et al., 2016). Therefore, based on the previous researchers’
definitions and explanations in this research context, financial wellbeing referred as: ability of poor rural women
to fully meet current and ongoing financial obligations and feel secure in their financial future, and is able to
make choices that allow them to enjoy life.
2.2 Measures for Financial Literacy
Most of the previous researchers identified that measurement of Fin Lit should be differentiating to match with
respective socio economics contexts (Saha, 2016; Singh et al., 2017; Roy & Jane, 2018; Lusardi et al., 2019).
Moreover, previous researchers have measured the degree of Fin Lit in most of the developing countries such as
34
India (e.g. Setty, 2012; Bhushan & Medury, 2013), Bangaladesh (Ferdous & Polonsky, 2013; Khandker, &
Cartwright, 2006), Zimbabwe (e.g. Bonga & Mlambo, 2016) Pakistan (e.g. Zulfiqar, 2016). Comparatively
researchers have paid less attention for the Sri Lankan context to determine the level of Fin Lit. However,
Heenkenda (2014) has done a comprehensive study to determine the degree of Fin Lit in general context. As
measurements adopted by previous researchers provide direction to select most appropriate dimensions to the
present context, some of the studies have been identified financial knowledge and financial behavior as main
dimensions of Fin Lit. Most of the previous researchers, irrespective to the nature of the country, have adopted
the financial knowledge to determine the level of Fin Lit in the respective countries. Further financial education
and financial well-being are also considered as important dimensions. However, Thapa (2015) stated that
financial education is an input for developing Fin Lit. But on the other hand, Morgan, & Trinh, (2019) argued
that financial decision making and financial well-being are actually the consequences of Fin Lit. Further several
researchers (e.g. Mouna, & Anis, 2017) emphasised that Fin Lit of rural communities should be determined in
knowledge as well as behavioral perspectives. Moreover, Heenkenda (2014) noted that financial knowledge can
be convert into behavior based on financial skills and financial attitudes. Based on an empirical research done on
Indian women, Arora (2016) found that three parameters—financial knowledge, financial behavior and financial
attitude can be used to assess the level of Fin Lit and also studied that the general awareness about financial
planning tools and techniques among women remains poor. Furthermore, this study concluded that women are
better in terms of financial attitude and behaviour as compared to financial knowledge.
Therefore, with the support of previous research, this study used 30 factors to measure the Fin Lit in exploratory
factor analysis and those factors were categorized into 5 main dimensions; such as financial knowledge, financial
awareness, financial skills, financial attitudes and financial behavior as they can be considered as the most
suitable dimensions for defining Fin Lit. Further, while considering the reliability there were 5 factors removed
out of 30 due to the low level of Cronbach alpha in the present research context.
2.3 Women’s Economic Empowerment as a Consequences of Financial Literacy
Most of the previous researchers elaborated consequences of Fin Lit in different perspectives. Mainly most
prominent recent researchers (E.g. Bonga & Mlambo, 2016) argued that a financialy literate individual is
someone who can deal with the formal financial system in the country and make a considerable contribution to
their local economy. Furthermore, Bhushan, & Medury, (2013) explored that people may move into the formal
financial system by empowering the decision making ability of individuals through Fin Lit. However, Aggarwal,
(2014) emphasised that economic decision making power is just one dimension of people’s economic
empowerment. On the other hand, some researchers (e.g. Bahmar, 2012; Kumari, & Aluthge, 2018b) discussed
ultimate result of Fin Lit is making financial well-being of those individuals. According to Aggarwal, (2014),
personal financial well-being contributes to the efficiency and prosperity of the national economy. Moreover,
Arora, (2016) noted that Fin Lit is a component of human capital that can be used in financial activities to
increase expected lifetime utility from consumption (i.e., behaviors that enhance financial well-being).
Accordingly, a composite definition of Fin Lit that is built of those given by Presidents Advisory Council on
Financial Literacy (PACFL) (2008) and various researchers is that Fin Lit is the knowledge of basic economic
and financial concepts, as well as the ability to use that knowledge and other financial skills to manage financial
resources effectively for a lifetime of financial well-being (Bahmar, 2012). Therefore, Fin Lit can be considered
as the ability to process financial information and make informed decisions about personal finance. Recently,
developed countries have shown a growing interest towards the concept of Fin Lit while in the developing world
it is now being considered as potentially a vital determinant of household well-being (Adam, Boadu, &
Frimpong, 2018). As a result, individuals’ Fin Lit is fundamental in achieving their financial well-being.
Although this situation is influenced by several external forces such as economic factors and policy structures
adopted by government and private sector, decisions are ultimately made by individuals (Kumari, 2016a).
Therefore, financial satisfaction is an individual’s subjective perception of his or her contentedness with financial
resources (Lusardi, 2019). Financial empowerment has long been acknowledged as a component of well-being
(Saha, 2016) and has received attention in finance related studies such as financial strain, risk management
issues, lack of financial skills and empowerment issues (Kumari, 2017; Lusardi, & Scheresberg, 2017).
Therefore, the researchers noted that economic empowerment of the society become direct consequences of Fin
Lit and it can happen through the financial empowerment process.
However, the present research focuses on rural poor women for analyzing the Fin Lit and its impact on WEE.
Most of the researchers argued that rural women don’t have sufficient opportunities to develop their financial
knowledge (Lusardi & Olivia, 2008). Further, some are emphasizing that sufficient financial infrastructure is not
available in rural areas, (e.g. Aggarwal, 2014), making the situation even more crucial when they become poor
35
(Singh et al., 2017). Moreover, researchers have revealed that the level of Fin Lit is significantly different among
different genders of developing countries.
Gender is one of the main variables researched, and the majority of the evidence indicates that women generally
show lower indices of Fin Lit than men (Kumari & Aluthge, 2018a; Lusardi & Mitchell, 2011; Lusardi &
Wallace, 2013; Lusardi, & Olivia, 2014; Morgan & Trinh, 2019; Lusadi, 2019). This broadens the evidence that
women face greater difficulties than men in making financial calculations, which, in addition to not having the
basic knowledge about financial concepts and lower level of skills, make responsible financial decisions more
difficult to achieve. This can be considered a worrisome factor because women are entering in the labor market
and engaging more in making financial decisions, income management and indebtedness in addition to the usual
role of being responsible for the household. Further Lusardi, (2006) found that having little Fin Lit, women faced
difficulty in retirement calculation and they are much more likely to rely on family, friends and advisers for their
financial planning. Furthermore, Dash, Prasad, & Koshy, (2016) found that women are not participating fully in
investment planning and not as comfortable as men in seeking financial advice. The previous authors further
reveals that education plays an important role in the Fin Lit of women. Maheswari, & Revathy, (2016) suggested
that improvement of Fin Lit would support making better financial decisions and proper utilization of financial
services and products among women. It would also help in wealth accumulation and financial wellbeing which
will lead to their personal development as well as social development. Singh et al., (2017) found that the most
popular investment method among the females in Pune, India is systematic investment plan. According to the
above discussion, measuring Fin Lit among rural women and its impact on WEE become practically an
important research area to be further investigated. Therefore, based on the previous literature, researcher
developed a conceptual framework as to examine the causal relationship between these variables as follows.
Financial Literacy Women’s

Economic
Financial Awareness Empowerment
Economic decision
making power
Financial Knowledge
Control over use of

Income and Expenditures
Financial Skills
Leadership in the
Community
Financial Attitudes
Control over Time

allocation
Financial
Behaviour Financial Wellbeing
Figure 1. Conceptual Framework

3. Hypothesis Development
There are several studies that directly investigated the impact of Fin Lit on WEE in some perspective. Specially,
Fin Lit has a positive influence on economic decision making power (e.g. Lusardi & Tufano, 2015; Lusardi &
Scheresberg, 2013; Deka, 2015 etc.), control over use of income and expenditures (e.g. Arora, 2016; Peter &
Long, 2019; Joshi, 2013etc.), leadership in the community (e.g. Siddik, 2017; Golla et al., 2011; Krishna, 2003
etc.), control overt the time allocation (e.g. Udegbe, 1996; Ravallion & Chen, 2003; Bhalla, 2007 etc.), and
36
financial wellbeing (e.g. Zulfiqar, 2015; Taft, 2013; Bhabha et al., 2014; etc.) of women. Based on the former
discussion, the researcher has developed some testable hypotheses to determine the relationship between Fin Lit
and WEE. One main hypothesis was developed as H1 to examine the direct relationship. Additionally, 5
sub-hypotheses were developed to test the dimensional relationship of WEE and Fin Lit. Sub-hypotheses helped
to identify the most significant dimensions of WEE which has been mostly affected by the level of Fin Lit on
rural poor women’s context. Therefore, hypotheses were developed as follows.
H1: Financial literacy is positively influenced on the economic empowerment of rural poor women in
Sri Lanka.
As H1 is mainly concentrated on the relationship between Fin Lit and economic empowerment of rural women
in Sri Lanka, it is important to check the relative influence on financial literacy for each dimensions of WEE.
Accordingly, five sub hypotheses were developed as well.
H1a Financial literacy is positively influenced on the economic decision making power of rural women in
Sri Lanka.
H1b Financial literacy is positively influenced on the control over use of income and expenditures of rural
women in Sri Lanka.
H1c Financial literacy is positively influenced on the leadership in the community of rural women in Sri
Lanka.
H1d Financial literacy is positively influenced on the time allocation for the leisure activities of rural
women in Sri Lanka.
H1e Financial literacy is positively influenced on the financial wellbeing of rural women’s in Sri Lanka.
4. Method
The research problem was identified based on certain issues relating to empowerment of women in rural areas in
Sri Lanka. The identified research problem was justified by literature based on the theoretical and literature gaps.
Conceptual framework and hypotheses were developed based on the theory and literature. After refining the
conceptual framework, the main study was designed by adopting the positivist research paradigm. This study
focused on the impact of Fin Lit on the economic empowerment of rural women. The conceptual model has been
developed by deductive reasoning of existing theories and literature. Accordingly, deductive quantitative
approach was adopted by considering empirical nature of the study.
There are five main variables Fin Lit in the conceptual model, such as financial awareness, financial knowledge,
financial skills, financial attitudes, and financial behaviour based on the recommendations of previous
researchers. Further, it was recommended to employ 05 variables to measure women empowerment which are
more applicable in determining WEE in developing countries like Sri Lanka. Those are economic
decision-making power, control over use of income and expenditures, leadership in the community, control over
the time allocation, and financial wellbeing. Those factors were identified from several previous studies (e.g.
Alkire et al., 2012; Pauline et al., 2016; Siddik, 2017) conducted in similar socio cultural contexts. The
exploratory factor analysis was conducted with respective two variables. Accordingly, this study revealed 5 main
factors with 25 items out of 30 for Fin Lit and found another 5 factors with 24 items out of 26 items for WEE.
In present research context, since the researcher attempts to analyze latent factors represented by multiple
variables in Fin Lit, and economic empowerment of rural women, the Structural Equation Modeling (SEM) was
adopted as a most appropriate approach for data analysis (Hair, Hult, Ringle, & Sarstedt, 2017). And also, the
researchers specified the Smart-PLS 3 as the main analytical software due to the nature of the second order
construct in the present study. The target population for the study was defined as “Rural poor women in Sri
Lanka with fixed consumption expenditure per month below Rs. 4,677”. According to Household Income and
Expenditure Survey in 2016 conducted by Department of Census and Statistics Sri Lanka, overall poverty head
count index in Sri Lanka was reported as 4.1%. That means 843,913 of people in Sri Lanka are below the
poverty line. Sample was selected by adopting to several stages recommended by well-known authors of social
researches. Accordingly, it was decided that the appropriate sample size is 386, based on the Cochran’s sample
size estimating formula. As present study intends to adopt SEM as the main statistical techniques, minimum
sample size should be 384 (Litze Hu & Bentler, 1999; Kenny, 2012; Kline, 2011). Even though, Sekaran &
Bougie, (2016) noted that non response rate is minimum in collecting data from researcher administrated
questionnaire, the researcher decided to increase the sample size by considering 10% contingency factor
accounting to some possible missing data. Accordingly, the total sample size was calculated as (384/90X100=
426) 426. As data collection was done from all 09 provinces in the country, it was decided to administrate the
37
questionnaires by well experienced data enumerators. The multilevel mixed sampling method was adopted to
selecting the sample.
5. Findings and Discussion
Initially, the model was tested in theoretical and literature perspective and then it was statistically justified by
confirmatory tetrad analysis (CTA). According to the findings of CTA, Fin Lit and WEE were recognized as
reflective latent variables in the present model. Therefore, measurement model assessments criteria should be
tested with respect to the reflective nature of the variables (Memon, Cheah, Ramayah, Ting, Chuah, & Cham,
2019). As per the Hair, Gudergan, Ringle, & Sarstedt, (2018) when two variables are in reflective second order
constructs, repeated indicator approach should be followed. But, latent variable must have the equal number of
indicators of low order constructs (Hair, Sarstedt, Ringle, & Gudergan, 2018). Due to the different number of
indicators in different dimensions, the researchers employed the two-stage approach in PLS-SEM. And followed
the basic statistical test for reflective variables in measurement model as well as the structural model.
Fin Lit and WEE were identified as reflective variables as explained by the previous studies (Thorat, 2006;
Aduda & Kalunda, 2012; Demirg-Kunt & Klapper, 2013; Kelegama et al., 2014; Park, 2015; Bonga & Mlambo,
2016). In the main hypothesis, it described the direct relationship of the independent and dependent variables.
According to the main objective of the study, it is needed to examine the influence made by overall Fin Lit on
WEE and influence of Fin Lit on each dimension of the economic empowerment among rural poor women in Sri
Lanka. Therefore, the two constructs were measured as reflective, second-order constructs in the structural
model. Accordingly, reflective higher order constructs were adopted with latent variable scores and results are
given in Figure 2 and detailed results in Table 1.
Figure 2. Direct relationship between Fin Lit and WEE

Source: Survey Data 2019
Table 1. Significance of the Direct Relationship between Fin Lit and WEE
Standard Hypothesis
Sample
Path β Deviation T Statistics P Values Bias 5.00% 95.00%
Mean (M) H1
(STDEV)
fin Lit ->

0.362 0.36 0.052 6.93 0.000 -0.001 0.273 0.445 Accepted
WEE

As per the findings revealed in Figure 1, R2 value (coefficient of determination) is reported as 0.131 and
respective path coefficients are estimated as statistically significant (b = 0.362, t = 6.93, p = 0.000). The BCa
confidence intervals were at an acceptable range (lower = 0.273 and upper = 0.445) (table 1). Therefore, the
results demonstrated that 13.1% of WEE is represented by Fin Lit among the rural poor women in Sri Lanka.
Further respective β value noted that when Fin Lit increased by one unit, WEE will be positively changed by
0.362 units in the present research context. The overall findings imply that Fin Lit has a significant positive
impact on the level of economic empowerment of rural poor women in Sri Lanka. Therefore, it is noted that
main hypothesis (H1), “financial literacy is positively influenced on the economic empowerment of rural poor
women in Sri Lanka” was supported by the empirical evidences of present research context. Accordingly, the
results clearly indicated that Fin Lit has a significant positive influence on WEE in rural poor women in Sri
Lanka.
Further, the researcher has developed several sub hypotheses with the purpose of determining the most
38
significant dimension of WEE influenced by Fin Lit. In order to test aforesaid sub hypotheses, the following
structural model was constructed to determine the path coefficients from Fin Lit to each dimension of WEE (see
Figure 2). The statistical outcomes of the same model are summarized in Table 2.
Figure 3. Specific Relationship between Fin Lit and WEE Dimensions
Table 2. Significance of the specific Relationship between Fin Lit and WEE’s dimensions
Sample Standard
Path β T Statistics P Values Bias 2.50% 97.50% Hypotheses
Mean (M) Deviation
Fin Lit ->
0.253 0.260 0.055 4.646 0.000 0.006 0.139 0.353 H1a: Accepted
EDMP
Fin Lit ->
0.245 0.253 0.047 5.230 0.000 0.008 0.15 0.334 H1b: Accepted
CUIE
Fin Lit ->
0.212 0.223 0.049 4.371 0.000 0.01 0.118 0.296 H1c: Accepted
LC
Fin Lit -> H1d:

0.280 0.286 0.048 5.831 0.000 0.005 0.18 0.367
TA Accepted
Fin Lit ->
0.537 0.538 0.038 14.007 0.000 0.002 0.456 0.604 H1e: Accepted
FW
The findings revealed that the economic decision-making power of rural poor women is found to be positively
influenced by Fin Lit by recording a statistically significant path coefficient (b=0.253, t =4.646, p=0.000) with
acceptable range of BCa confidence intervals (Table 2). Further, findings revealed (table 2) that Fin Lit has a
positive significant impact on the control over the use of income and expenditures (CUIE.) within the households
of rural poor women due to the respective path coefficients which were statistically significant (b=0.245, t
=5.230, p=0.000). The BCa confidence intervals are at an acceptable range (lower = 0.15 and upper = 0.334).
The third dimension of WEE is identified as leadership in the community (LC) among rural women. Most of the
literature strongly supported the positive impact of Fin Lit on LC and it is tested in the present structural model
as well. According to the findings, the path coefficients are found as statistically significant (b=0.212, t =4.371,
p=0.000) and BCa confidence intervals are at an acceptable range (lower = 0.118 and upper = 0.296). The fourth
dimension of WEE is nominated as time allocation (TA) which is to what extent the rural women has power and
authority of control over their time and the time of other members living in a household. According to the
findings, the TA of rural poor women is positively influenced by Fin Lit with statistically significant path
coefficients (b=0.280, t =5.831, p=0.000) in an acceptable range of BCa confidence intervals (lower = 0.18 and
39
upper = 0.367). Finally, Fin Lit is found to have a significant influence on financial wellbeing (FW) of rural
woman by reporting significant path coefficients (b=0.537, t =14.007, p=0.000) with acceptable range of BCa
confidence intervals (lower = 0.456 and upper = 0.367). According to the overall findings, all p values are below
0.05 and all the t value are above 1.96. Therefore, all 5 sub hypotheses are empirically supported.
6. Conclusion and Implications
The results of aforesaid analysis revealed that the most significant dimension of WEE influenced by Fin Lit is
financial well-being (FW) with highest t value among the other dimensions. The leadership in the community
was recognized as the least influential variable of WEE as the respective path coefficient has the lowest t value.
Further, it was observed that Fin Lit has a significant positive influence on each dimension of WEE in the
present research context. The findings of this study is confirmed by previous literature as well. According to the
previous literature, most of the studies found that, there is a positive relationship between Fin Lit and WEE
(Singh & Kumar, 2017; Bhargava, 2017; Arora, 2016; Wellington & Mlambo, 2016; Bannier & Schwarz, 2018).
Further findings of the present study were confirmed that economic decision-making power is significantly
influenced by Fin Lit among the rural women in Sri Lanka. This finding is fully aligned with the previous
literature on Fin Lit and economic decision-making power of rural women (e.g. Lusardi & Tufano, 2015; Lusardi
& Scheresberg, 2013; Deka 2015 etc.). Furthermore, the outcome of structural model implied that Fin Lit has
significant impact on control over use of income and expenditure (CUIE). This relationship is also tested in
previous literature (e.g. Arora, 2016; Mathivathani & Velumani, 2014; Joshi, 2013 etc.) which identified the
same positive relationship between those two variables. Fin Lit has a significant contribution for developing
community leadership among the rural women in Sri Lankan context. Accordingly, the results of the present
research further confirmed by the empirical results revealed in most of the previous studies (e.g. Siddik, 2017;
Golla et al., 2011; etc.). Moreover, outcome of the structural model implied that there is a significant impact of
Fin Lit on the time allocation (TA) of rural women in Sri Lanka. The relationship between Fin Lit and (TA) as a
dimension of WEE is also explained in some previous literature (eg: Zulfiqar, 2015; Devi, 2016; Kasman,
Heuberger, & Hammond, 2018 etc.,) as a positive relationship and those findings are aligned with the results of
the present research. Finally, it was further noted that Fin Lit has significant impact of the financial wellbeing
(FW) of rural women. The previous literature also emphasizes that Fin lit is playing a main role for enhancing
the financial wellbeing of rural poor communities (Hashemi, Schuler, & Riley, 1996; Madhubhashini, 2015;
Sanjib, 2016; Klapper, Lusardi, & Van Oudheusden, 2015; Singh & Kumar, 2017) and the findings confirmed in
the present research context as well.
According to the previous literature, WEE is considered in different aspects but no one considered all the
dimensions together to determine the WEE. Moreover, there isn’t any research study which was conducted on
local context where rural poor women are focused. Therefore, it can be concluded that present research is able to
fill the literature gap emphasized by the researcher based on the relationship between Fin Lit and WEE. Even
though the present study revealed that there is a significant relationship between Fin Lit and WEE, as per the
economic indicators poor women are severely facing the financial illiteracy problem in Sri Lankan context.
However, print literacy level and education level of the country is at high level. Therefore, academics should
investigate the reasons behind this gap between print literacy and Fin Lit among population groups living in the
country.
Policy makers of the country mainly represent government and non-government agencies. It is the responsibility
of a government to develop economy and achieve developmental goals. When improving the living condition of
population, more attention should be paid to the rural poor category. In Sri Lanka, 74% of people are living in
rural areas. Further, 1.4 million of households are headed by females (Source). Therefore, improving the living
condition of rural poor women can be considered as a key aspect of the development process of Sri Lanka.
Therefore, enhancing WEE of rural sector should be enhanced by improving Fin Lit and financial inclusion.
Therefore, the separate division of finance ministry should be assigned to enhance the economic empowerment
of rural women and to conduct the awareness programmes about the formal financial sector together with both
public and private sector formal financial institutions. Further the researchers recommend to include some
information about the formal financial instruments into the school syllabus of primary education with the
purpose of minimizing the gap between Fin Lit and print literacy. Further, some practical components should be
included in to those syllabuses to give hands-on experience to children about the application of new technology.
Finally, government can incorporate the welfare programmes with economic empowerment among women.
Otherwise, special welfare scheme like Sumurdi can be implemented for rural poor women to enhance their
economic empowerment. Accordingly, rural poor females may become economically sound to take part an active
role in economic decision-making in their households and leadership in their communities.
40
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Foudation item: The year 2018-2019 Fundamental Research Funds for the Central Universities and Graduate
Student Innovation Fund of Donghua University “ Research on the development of sizing technology in China ”
(Project No., CUSF-DH-D-2019105) stage of achievements.


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