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India lags in financial literacy

News, 16 December 2015
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SINGAPORE: Financial services brands seeking to expand in India and the wider Asia region may face problems in reaching consumers who lack financial literacy, a new survey suggests.

The S&P Ratings Services Global Financial Literacy Survey, from financial advisor Standard & Poor's, was based on interviews with 150,000 adults in 140 countries, with people tested on their knowledge of four basic financial concepts: numeracy, risk diversification, inflation and compound interest.

Three quarters of Asian adults were not financially literate, the study found, compared to a global average of around two thirds, falling to one third in the UK.

In Asia, Singapore had the highest proportion of financially literate adults, at 59%, followed by Hong Kong and Japan, both on 43%.

In the region's biggest countries the figures were rather lower: in China 28% of adults were financially literate, while in India the figure was just 24%, the Times of India reported.

Indian respondents were, however, above average in their understanding of inflation: 56% grasped this concept, ahead of the global figure of 50% and a regional average for South Asia (excluding India) of 46%.

They also performed creditably on interest and compound interest, where 48% and 44% respectively of Indian respondents answered correctly, compared to the Asian averages of 46% and 39%.

Risk diversification proved more difficult to understand, with only 14% of Indians getting this idea, below the South Asian average of 18% and less than half the global average of 35%.

Income and gender were also factors that influenced understanding of financial concepts. In India, 26% of adults in the richest 60% of households were financially literate, compared to 20% of adults in the poorest 40% of households. And some 73% of men and 80% of women were not financially literate.

Data sourced from Times of India, The Hindu; additional content by Warc staff

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