Abstract:
Agriculture remains the primary source of livelihood in many districts of Sri Lanka,
especially in Anuradhapura district; however, farmers continue to face significant
challenges such as income instability, limited access to financial services, and
persistent indebtedness. In this context, financial literacy plays an important role in
enabling farmers to make informed financial decisions regarding budgeting, saving,
investing, and credit management. This study examines the impact of financial
literacy on farmers’ income, focusing on five key dimensions: education level,
farming experience, budgeting skills, investment knowledge, and credit management.
A quantitative research design was adopted, and primary data were collected from a
randomly selected sample of 384 paddy farmers using a structured questionnaire. The
data were analysed using descriptive statistics, correlation analysis, and multiple
regression analysis with the aid of SPSS. The results indicate that all five dimensions
significantly and positively influence farmers’ income. Among them, budgeting skills
emerged as the strongest predictor, followed by investment knowledge and credit
management, which contributed through improved financial planning, resource
utilisation, and debt management. Education level and farming experience also
showed significant positive effects through enhancing decision-making and practical
application. Overall, higher financial literacy improves income stability, reduces
dependence on informal lending, and strengthens long-term economic resilience. The
study contributes to the literature by providing empirical evidence from a rural Sri
Lankan context and offers practical implications for policymakers, financial
institutions, and development agencies. Targeted financial literacy programs can
improve farmers’ financial capabilities, leading to sustainable income growth and
improved economic well-being
