Empowering Indigenous Wealth: Analyzing Financial Literacy, Risk Preferences and Stock Market Engagement within Scheduled Tribes in India

Abstract

The purpose of this study is to address the enduring multi-dimensional poverty faced by nearly 65 million Scheduled Tribes (STs) in India, with one prominent cause being their limited investments in productive financial assets. Financial literacy has been identified as a crucial factor in enhancing personal financial management skills. The focus is specifically on investigating the relationship between financial literacy, sociodemographic factors and stock market participation among STs in Himachal Pradesh, India. Using a structured questionnaire, data was collected from 300 ST households. The study employed multinomial logistic regression to analyze the impact of financial literacy and sociodemographic variables on stock market participation. The findings indicate that a significant majority of STs (over 80%) lack financial awareness and do not participate in the stock market. Notably, financial illiteracy, risk tolerance, age, education and income were identified as significant factors influencing SMP. The insights derived from this research offer valuable guidance for policymakers, financial institutions and educators, urging the development of targeted interventions. These interventions should empower tribal individuals to make informed financial decisions and encourage their engagement in stock market activities.