Abstract:
The financial literacy is a key dimension which determines the demand of the financial services in the
economy. However, most of the previous studies and financial decision makers believe financial
literacy in different perspectives. Therefore, it is timely important to identify the main determinants of
the financial literacy among potential customers in financial service industry. Accordingly, present
study is mainly focused on identifying and verifying the key determinants of the financial literacy in
the customer’s point of view in the financial service sector. The study adopted the positivism
epistemology and quantitative approach. At the initial phase of the study, the extensive literature review
was carried out with the purpose of identifying the determinants of financial literacy. In the second
phase, a survey was conducted among 500 potential financial services customers representing nine
provinces in Sri Lanka, 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 head of
households in Sri Lanka. 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. Degree of financial literacy was tested based on 22 items identified by previous researchers
and Principle Component Analysis was employed to determine the key factors of financial literacy. The
reliability of scales was measured by Cronbach’s Alpha coefficients.
The findings revealed that in general, all financial literacy dimensions have significant impact to
determine the level of financial literacy. However, when it considers under separate dimensions,
financial knowledge is the most significant determinant among the other determinants to determine the
level of financial literacy. Therefore, researcher concluded that financial knowledge can be considered
as a main determinant of financial literacy among potential customers of financial services in Sri Lanka.
And the financial awareness is identified as the least significant determinant. Finally, the researcher
provides some suggestions for marketing practitioners of financial service industry and government
policy decision makers to develop financial literacy level by promoting financial knowledge for
absorbing more consumers towards formal financial system and products of financial services.