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A study of financial literacy and its impact on customer satisfaction with special reference to banks of Bagalkot district

A study of financial literacy and its impact on customer satisfaction with special reference to banks of Bagalkot district
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In this study a set of research questions were asked to the respondents to identify the impact of financial literacy on customer satisfaction towards banking services. It was found that level of financial literacy was low among the respondents and there is no significant impact of financial literacy on overall customer satisfaction.

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  1. International Journal of Management (IJM)
    Volume 7, Issue 6, September–October 2016, pp.43–50, Article ID: IJM_07_06_006
    Available online at
    http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=7&IType=6
    Journal Impact Factor (2016): 8.1920 (Calculated by GISI) www.jifactor.com
    ISSN Print: 0976-6502 and ISSN Online: 0976-6510
    © IAEME Publication

    A STUDY OF FINANCIAL LITERACY AND ITS
    IMPACT ON CUSTOMER SATISFACTION WITH
    SPECIAL REFERENCE TO BANKS OF BAGALKOT
    DISTRICT
    Prof. P. K. Gupta
    Research scholar, Kousali Institute of Management Studies,
    Karnatak University Dharwad, India.

    Dr. U. M. Kinange
    Professor, Kousali Institute of Management Studies,
    Karnatak University Dharwad, India.

    ABSTRACT
    Financial literacy in simple words is the knowledge about various financial products. Financial
    literacy is considered to be an important tool to achieve financial inclusion and hence inclusive
    growth. It enables an individual to understand his financial need and hence plan accordingly. The
    knowledge of financial concepts is essential for personal financial planning. The S&P Global Fin
    Lit Survey shows that Country-level financial literacy ranges from 13% to 71%. Hence the main
    objective of this study is to measure the financial literacy of the respondents.
    In this study a set of research questions were asked to the respondents to identify the impact of
    financial literacy on customer satisfaction towards banking services. It was found that level of
    financial literacy was low among the respondents and there is no significant impact of financial
    literacy on overall customer satisfaction.
    Key words: Financial literacy, financial inclusion, and customer satisfaction.
    Cite this Article: P. K. Gupta and Dr. U. M. Kinange, A Study of Financial Literacy and its Impact
    on Customer Satisfaction with Special Reference to Banks of Bagalkot District. International
    Journal of Management, 7(6), 2016, pp. 43–50.
    http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=7&IType=6

    1. INTRODUCTION
    The Organization for Economic Co-operation and Development (OECD) has defined financial literacy as
    “a combination of awareness, knowledge, skill, attitude and behavior necessary to make sound financial
    decisions and ultimately achieve individual wellbeing”.
    Financial literacy in simple words is the knowledge about various financial products. Financial literacy
    is considered to be an important tool to achieve financial inclusion and hence inclusive growth. It enables

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  2. P. K. Gupta and Dr. U. M. Kinange

    an individual to understand his financial need and hence plan accordingly. Therefore the knowledge of
    financial concepts is essential for personal financial planning.
    The research conducted by various organisations indicated low level of financial literacy across the
    globe. The S&P Global Fin Lit Survey found that worldwide only 33.33% of the adults are financial
    literate. Further only 27% of the adults are financial literate in Asia. The policy makers across the globe
    have expressed concerns about the low level of financial literacy. Hence in 2008, the Organisation for
    Economic Co-operation and Development (OECD) has created an International Network on Financial
    Education (INFE) to tackle the issue of financial literacy by creating an international platform for policy
    makers.
    Customer satisfaction is a frequently used term in marketing. It is a measure of how products and
    services of a company meet customer expectation. “Customer satisfaction is the key for many banks to
    survive in competition” (Mistry, D. S. H., 2013).

    2. REVIEW OF LITERATURE
    2.1. Financial Literacy
    Volpe et al. (2002) measured investment literacy of 530 online investors and found that level of investment
    literacy varied with people’s education, experience, age, income and gender. Men respondents had higher
    investment literacy when compared to women respondents.
    Cole et al. (2008) measured the level of financial literacy and its relationship to demand for financial
    services in India and Indonesia. The study indicated a strong relationship between financial literacy and the
    demand for financial products.
    Al-Tamimi and Kalli (2009) assessed the financial literacy of the UAE investors. The results indicate
    that the financial literacy of respondents is far below the needed level. The study also found that financial
    literacy is affected by income level, education level and workplace-activity.
    Almenberg and Soderbergh (2011) investigated the relationship between financial literacy and
    retirement planning of Swedish adults. It was found that there exist a significant difference in financial
    literacy between planners and non-planners. Financial literacy level was found lower among older people,
    women and those with low education or earnings.

    2.2. Customer Satisfaction
    Padhy, P. K., & Swar, B. N. (2009) made an empirical study of major quality improvement initiatives
    recently undertaken by two banks. The primary aim of the study was to enhance the understanding of
    service quality and to identify models that can be employed by the managers in service industry. The
    researcher investigated the role that technology played in banking and its impact on the delivery of
    perceived service quality. The SERVQUAL measuring instrument was used for the research. Three groups
    of banks (Private-ICICI and Axis Bank; Public – SBI and PNB; & Foreign Bank – Citi bank) were selected
    for the study, which was conducted in Orissa. Primary data was collected from a sample of 440
    respondents on judgmental basis of which 300 useable questionnaires were analyzed. It was found that
    service quality in public sector banks in India is poor. On the selected five dimensions foreign banks
    followed by private sector banks performed better than public sector banks.
    Dawar (2013) made an attempt to identify the main factors that influence the customer satisfaction in
    retail banking. A comparative research design has been chosen to elucidate the determinants of Customer
    Satisfaction. Factor Analysis was used for data analysis. The researcher applied KMO (Kaiser-Meyer-
    Olkin) and Bartlett’s Test to the collected data. Kaiser-Meyer-Olkin Measure of Sampling Adequacy test
    shows the value of .814. The researcher concluded his study by identifying factors that may be used by the
    bankers of small town to identify drive customer loyalty out of customer satisfaction.

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  3. A Study of Financial Literacy and its Impact on Customer Satisfaction with Special Reference to Banks of
    Bagalkot District

    Nippatlapalli, A. R. (2013) conducted a study to identify the factors that influences the customer
    behavior of SBI and to study the Satisfaction of customers towards the bank. The study was undertaken at
    Kavali region of Andhra Pradesh state with a sample size of 200. It was found that the customers were less
    aware about online transactions facilities provided by the bank. Further it was observed that the 84% of the
    Respondents were satisfied on financial transactions of the Bank.

    3. OBJECTIVES OF THE STUDY
    • To measure the level of financial literacy among the respondents.
    • To measure the customer satisfaction of respondents.
    • To study the impact of financial literacy on customer satisfaction towards banking services.

    4. RESEARCH METHODOLOGY
    The title of the study is “A Study of Financial Literacy and its Impact on Customer Satisfaction with
    Special Reference to Banks of Bagalkot District”. The Research Methodology is a blend of primary and
    secondary data.
    The questionnaire drafted by FINRA Investor Education Foundation consisting of five-questions is
    considered to test financial literacy and the questionnaire of Sabir, R. I., et al. 2014 has been considered for
    determining the customer satisfaction, with some modifications to accomplish the objective of this study.
    The data was analysed using means and combined means.

    4.1. Data Collection
    • Secondary Data: The secondary data includes an analysis of research works carried out on financial literacy
    in the past.
    • Primary Data: The primary data is collected using a questionnaire to translate the defined research objective.

    4.2. Sampling Framework
    • Population –Bagalkot district of Karnataka
    • Sampling Unit – Members of Self Help Groups
    • Sampling Method – Random sampling.
    • Sample size: 60.

    5. ANALYSIS AND INTERPRETATION
    The required data has been collected by way of a questionnaire and it has been analyzed and interpreted
    with the help of tables with relevant descriptions.

    Table 1 Demographic Variables
    Demographic Variables No. of Respondents Percentage
    Gender
    Male 11 18.33
    Female 49 81.67
    Age
    Under 20 0 0
    21 – 30 years 3 5
    31 – 40 years 15 25
    41 – 50 years 21 35
    50-60 years 16 26.67
    60 and Above 5 8.33

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  4. P. K. Gupta and Dr. U. M. Kinange

    Educational Level
    Primary 32 53.33
    Secondary 9 15
    Higher Secondary 7 11.67
    Undergraduate 0 0
    Graduate 12 20
    Post Graduate 0 0
    Profession:
    Business 13 21.67
    Service 17 28.33
    Student 4 6.67
    House wife 17 28.33
    Others 9 15
    Monthly Income (Rs.)
    Below 10,000 30 50
    10,000 – 20,000 12 20
    20,000 – 50,000 4 6.67
    50,000 – 75,000 2 3.33
    75,000 – 100,000 2 3.33
    100,000 – 200,000 0 0
    200,000 – 400,000 7 11.67
    400,000 and above 3 5
    Duration of Bank Accounts
    Operated by the Respondents
    Less than 1 Year
    1-3 Years 1 1.67
    3-5 Years 11 18.33
    5-10 Years 15 25
    More than 10 years 30 50
    3 5
    Frequency of Using Banking
    Services
    Daily 0 0
    Once in a week 1 1.67
    Once in 2 weeks 1 1.67
    Once in 3 weeks 9 15
    Once in a Month 49 81.67
    The table 1 reveals that 49 (81.67%) respondents surveyed were females and 11(18.33) were male.
    Most of the respondents 21 (35%) belong to the age group of 41 to 50 years. The literacy level speaks the
    full facts a) Primary level – 32 (53.33%), b) Secondary level – 9 (15%), c) higher secondary level – 7
    (11.67%), d) under graduate level – 0 (0 %), and e) graduate level – 12 (20%). Among the occupational
    categories, 17 (28.33%) respondents were house wife, 17 (28.33%) were in service, 13 (21.67%) are
    businessmen, 4 (6.67%) were student and 9 (15%) belonged to other categories.
    The income wise classification showed that the 30 (50%) were in below Rs 10,000 group. 12 (20%)
    were in the 10,000 to 20, 000 group, 4 (6.67%) were in the 20,000 to 50,000 group, 2 (3.33%) were in the
    50,000 to 75,000 group, 2 (3.33%) were in the 75,000 to 100,000 group, 7(11.67%) in 2,00,000 to 4,00,000
    group and 3 (5%) belongs to the group of 4,00,000 and above.
    Only 1 (1.67%) respondent was dealing with bank for less than one year, 11 (18.33%) were having
    account between 1-3 year, while 15 (25%) were dealing with this bank for 3 to 5 years. 30 (50%) were
    account holders for 5 to 10 years and 3 (5%) were dealing with the bank for more than 10 years. Out of the
    60 respondents selected for study, no respondent used banking services daily, 1 (1.67%) respondent used

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  5. A Study of Financial Literacy and its Impact on Customer Satisfaction with Special Reference to Banks of
    Bagalkot District

    banking once in a week, 1(1.67%) respondent used banking once in two weeks, 9 (15%) were banking
    once in three weeks, and 49 (81.67%) were banking once in a month.

    Table 2 Percentage of respondents giving correct answer on financial literacy questions.

    No. of Correct Answer 0 1 2 3 4 5

    Number of Respondents 10 14 14 12 5 5

    Percentage of Respondents 16.67 23.33 23.33 20 8.33 8.33

    Table No. 2 shows that 5 (8.33%) respondents have answered all the questions correctly. Further 5
    (8.33%) respondents have answered four of the questions correctly, 12 (20%) respondents have answered
    three questions correctly, 14 (23.33%) have answered only 2 questions correctly. 14 (23.33%) of the
    respondents have answered only one question correctly. 10 (16.67%) of the respondents answered all the
    questions in a wrong way. Hence only 22 (36.67%) respondents have given correct answer for minimum
    three questions and are considered to be having higher level of financial literacy when compared to
    remaining 38 (63.33%) respondents.

    Table 3 Perceptions of Customers about banks Tangibility
    Dimensions Respondents with high Respondents with low
    Financial Literacy Level Financial Literacy Level
    Mean Mean
    Premises 4.27 4.45

    Technology 4.50 4.37

    Employee Dress 4.14 4.13

    Complete Information 3.82 3.82

    Bank Statement 3.82 3.85

    Combined Mean 4.11 4.06

    The data in Table-3 brings to light the difference in the perceptions of the customers on tangibles. The
    data reveals that the combined mean of respondents with high financial literacy level is 4.11 and with low
    financial literacy level is 4.06. It clearly shows that level of financial literacy has very low impact on the
    tangibility factor of customer satisfaction.

    Table 4 Perceptions of Customers about banks reliability factor
    Dimensions Respondents with high Respondents with low
    Financial Literacy Level Financial Literacy Level
    Mean Mean
    Service of bank 4.00 3.92

    Handling a problem 3.73 3.58

    Satisfied with bank service 3.50 3.63

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  6. P. K. Gupta and Dr. U. M. Kinange

    Bank working hour 4.05 4.11

    Up-to-date record 3.64 3.71

    Combined Mean 3.78 3.79

    The analysis of reliability dimension of service shows no significant difference in the perception of
    respondents. Respondents with high level of financial literacy show comparatively less satisfaction on
    three dimensions as compared to the respondents with lower level of financial literacy.

    Table 5 Perceptions of Customers about banks responsiveness factor
    Dimensions Respondents with high Respondents with low
    Financial Literacy Level Financial Literacy Level
    Mean Mean
    Employee Promptness 3.95 3.82

    Willingness of employees to 3.64 3.68
    help customers

    Sending timely bank statement 3.91 3.76

    Combined Mean 3.83 3.75

    The data in Table-5 shows that the respondents with low level of financial literacy show comparatively
    low level of satisfaction on this dimension as compared to the respondents with high level of financial
    literacy.

    Table 6 Perceptions of Customers about banks assurance factor
    Dimensions Respondents with high Respondents with low
    Financial Literacy Level Financial Literacy Level
    Mean Mean
    Security of bank 4.55 4.66

    Employee eagerness 3.73 3.71

    Knowledge of employee 4.05 3.95

    Combined Mean 4.11 4.11

    The data in Table No. 6 highlights the difference in the bank assurance factor of the customers with
    different financial literacy level. The data reveals that the combined mean of respondents with high
    financial literacy level and with low financial literacy level is 4.11. It clearly shows that level of financial
    literacy has no impact on bank assurance factor of customer satisfaction.

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  7. A Study of Financial Literacy and its Impact on Customer Satisfaction with Special Reference to Banks of
    Bagalkot District

    Table 7 Perceptions of Customers about banks empathy factor
    Dimensions Respondents with high Respondents with low
    Financial Literacy Level Financial Literacy Level
    Mean Mean
    Understanding customers’ 3.41 3.50
    problem

    Individual attention of 3.64 3.63
    customers

    Combined Mean 3.52 3.57

    The data analysis of Table-7 discloses the fact that respondents with high level of financial literacy
    shows relatively less satisfaction on this dimension as compared to the respondents with lower level of
    financial literacy.

    Table 8 Overall Customer Satisfaction
    Dimensions Respondents with high Respondents with low
    Financial Literacy Level Financial Literacy Level
    Combined Mean Combined Mean
    Tangibility 4.11 4.06

    Reliability 3.78 3.79

    Responsiveness 3.83 3.75

    Assurance 4.11 4.11

    Empathy 3.52 3.57

    Total 19.35 19.28

    The data reveals that the overall total customer satisfaction of customer with high level of financial
    literacy is more than that of the respondents with the lower level of financial literacy. However the table
    shows that the respondents with higher level of financial literacy have higher satisfaction on the
    responsiveness dimensions but lower satisfaction on dimensions like reliability, and empathy when
    compared to the respondents with lower financial literacy level.

    6. CONCLUSION
    Financial literacy is considered to be an important tool to achieve financial inclusion and hence inclusive
    growth. The banking sector is undergoing major changes due to competition and the innovation of
    technology. The customers are looking for better service quality which enhances their level of satisfaction.
    Hence this study was an attempt to measure the level of financial literacy of the respondents and study the
    impact of financial literacy on customer satisfaction towards banking services. The study concludes that
    there is no significant impact of financial literacy on customer satisfaction.

    ACKNOWLEDGEMENT
    The authors acknowledge the generous financial support extended by Canara Bank Chair to undertake the
    research study “Financial Literacy and its Impact on Customer Satisfaction”.

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  8. P. K. Gupta and Dr. U. M. Kinange

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    [4] Nippatlapalli, A. R. (2013). A Study on Customer Satisfaction Of Commercial Banks: Case Study On
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    [8] Dr. Sonali N Parchure,”Influence of the Financial Literacy on the Investor Profile of the Individual
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    http://www.iaeme.com/IJM/index.asp 50 editor@iaeme.com

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