Measuring Financial Capability of the Street Vendors

Abstract

Financial capability of an individual is the ability to use and manage financial products for current and future financial needs with adequate financial knowledge. This paper examines financial capability on four dimensions- financial management to meet current needs, future financial planning, financial products management, and financial knowledge using a sample of street vendors in Bhubaneswar, India. A financial capability index for each individual in the sample has been calculated in a manner that satisfies monotonicity, anonymity, normalization, uniformity, shortfall sensitivity and hiatus sensitivity to level axioms. We find that education, age, business experience, and daily turnover significantly affect the financial capability of an individual. Moreover, street vendors in regions with higher number of bank branches are found to have significantly higher financial capability.

Keywords: Financial capability, financial literacy, financial inclusion

JEL Classification: O18, R58, O20