Champions of Financial Inclusion

Saturday, May 22, 2010

Financial Literacy: Evangelists and Skeptics!

“What is the need for Financial Literacy”, will it really help? Do you think poor don't know simple funda of saving money?. “This is a simple logic” told me my knowledgeable and “logical” microfinance-consultant friend during coffee break at a recent conference in the Indian city of Hyderabad last month. I did encounter similar echoing in an other conference from head of a leading microfinance research organization few months back when He said, “Even I don’t know, if I am financially literate” How could you be sure if masses in rural areas would really be financially literate because of any financial literacy programme? The two point of views are a dominant logic prevalent among a substantially large section of the elite group which is at the helm of affairs for driving the agenda of financial inclusion in India.
Yes, poor do understand the importance of savings and they deposit for lean times and that is the reason why poor keep their monies as a deposit with money keepers in rural and informal urban areas in countries like Bangladesh and India (Collins,Morduch, Portfolios of the Poor, 2009). They are wise enough to invest the informal savings instruments like chit funds (in rural Andhra Pradesh state of India).
However, what makes the difference is the institutional framework of micro banking which entails other developmental ripple effects. what masses at bottom of the pyramid lack today is not understanding of the importance of financial transactions but the awareness about availability of micro banking instruments and access to these instruments . It is here where the basic financial literacy can be of use by exposing the masses to this very dimension of financial inclusion. How far the efforts of financial literacy evangelists will go in India will be determined largely by the ability of these evangelists to share success stories and changemaking narrations with my skeptical friends across the table.