Roles of financial literacy and entrepreneurial orientation in economic empowerment of rural women entrepreneurs

Policy makers, particularly in developing countries, view entrepreneurship as a stepping stone for achieving women’s economic empowerment. However, simply attaching women to the labour market and providing them access to financial resources may not transform their economic well-being unless it is accompanied by agencies such as financial literacy and entrepreneurial orientation. In this context, we empirically test the seminal theoretical framework of Kabeer (1999) for understanding women empowerment, using primary data for 820 Indian rural women entrepreneurs. Employing alternate empirical specifications and using instrumental variable regression to address the potential endogeneity of financial literacy, we find that financial literacy and entrepreneurial orientation play important roles in enhancing financial well-being, our measure of economic empowerment. The results hold even after controlling for the experience of the entrepreneur, family support and strength of social network. The findings call for designing interventions to foster financial literacy among poor women entrepreneurs.