India's financial literacy worse than Sri Lanka, Myanmar, Pakistan, BRICS nations: Top rating agency S&P

By Our Representative
A new survey released by well-known rating agency Standard & Poor (S&P) has found that just 24 per cent of the adult Indians are financially literate, which is worse than not just the “competing” BRICS economies but two of its important neighbours Pakistan and Sri Lanka. Pakistan’s 26 per cent and Sri Lanka’s 35 per cent adults are financially literate, it says. Bangladesh's financial literacy rate is 19 per cent.
What makes the survey particularly significant that two the three authors of the report based on it, titled “Financial Literacy Around the World”, are with the World Bank – Leora Klapper and Peter van Oudheusden, both belonging to the World Bank Development Research Group. The third author, Annamaria Lusardi, is with the prestigious George Washington University School of Business.
As for the BRICS countries, the report says, “In the major emerging economies—the so-called BRICS (Brazil, the Russian Federation, India, China, and South Africa)—on average, 28 percent of adults are financially literate. Disparities exist among these countries, too, with rates ranging from 24 percent in India to 42 percent in South Africa.”
Contrasting this with the developed world, the report says, “On average, 55 percent of adults in the major advanced economies–Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States–are financially literate, though adding, “But even across these countries, financial literacy rates range widely, from 37 percent in Italy to 68 percent in Canada.”

The report finds that “Denmark, Germany, the Netherlands, and Sweden have the highest literacy rates in the European Union: at least 65 percent of their adults are financially literate”, though adding, “Rates are much lower in southern Europe. For example, in Greece and Spain, literacy rates are 45 percent and 49 percent, respectively.”

The report does not think that incomes explain worldwide differences in financial literacy. It says, while it true that “in richer countries, proxied by GDP per capita, financial literacy rates tend to be higher”, however, it underlines, “The relationship only holds when looking at the richest 50 per cent of economies. In these economies, around 38 percent of the variation in financial literacy rates can be explained by differences in income across countries.”
As for the poorer half of economies, the report says, “With a GDP per capita of $12,000 or less, there is no evidence that income is associated with financial literacy. What this likely means is that national-level policies, such as those related to education and consumer protection, shape financial literacy in these economies more than any other factor.”
The report finds that “financial literacy rates differ in important ways when it comes to characteristics such as gender, education level, income, and age”, saying, “Worldwide, 35 percent of men are financially literate, compared with 30 percent of women. While women are less likely to provide correct answers to the financial literacy questions, they are also more likely to indicate that they ‘don’t know’ the answer, a finding consistently observed in other studies as well.”

Pointing out that this gender gap is found in “both advanced economies and emerging economies”, the report says, “Women have weaker financial skills than men even considering variations in age, country, education, and income. The average gender gap in financial literacy in emerging economies is 5 percentage points, not different from the worldwide gap, though it is absent in China and South Africa.”
“There is also a gap in financial literacy when looking at relative income in the BRICS economies. Thirty-one per cent of the rich in these economies are financially literate, compared to only 23 percent of the poor”, the report states.