Financial Literacy : An Idea whose time has come

Time has come when financial literacy has rightly occupied the centre-stage among the supply side institutions --  banks, insurance institutions, MFIs, policy makers, national governments, financial regulators, civil society organisations, and end users, that is bottom & middle of the pyramid populations. 

Although the concept is defined usually at convenience by stakeholders, but its broad contours remain same, that is the ability to take informed deisions, make choices leading to empowerment. A few in industry view it as a corporate social responsibility, marketing strategy or a compliance requirement. However, this shall not arrest our intellect to the cliched statements and the GOOD part is: there is atleast running thread across different players.

While the concept may still be far from a universally accepted definition unlike financial inclusion, the OECD defines it as 'the process by which financial consumers/investors improve their understanding of financial products, concepts and risks, and through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being'.

There are good intentions & genuine concerns about vast groups of population still unaware of institutional banking concepts and the know-how to make informed decisions. This makes them vulnerable to exclusion from mainstream socio-economic framework.

Measures are being adopted across the world to systematically reduce financial exclusion; Indian policymakers brought a policy change in the way banking services were delivered particularly in rural India. In 2006 the RBI eased up the delivery model and made it possible for banking and financial service providers in India to reach out to end customer through business correspondents.

Business correspondent guidelines encouraged banks & other formal fnancial institutions to engage with entities like FINO which is a pioneer in agent led banking platform designed to propel benefits of financial inclusion to the bottom of the pyramid. FINO has a completely different expression on financial literacy.

In addition to delivery of financial services, FINO realised the gap in the system and came up with its strategically aligned Financial Inclusion Education Academy (FIEA) to bring behavioral changes amongst the target group, which in turn, has enabled people to seek for right products and services.

For FINO, financial literacy is an engine that will aid achieving comprehensive financial inclusion and hence financial freedom. Viewed from this standpoint, FINO has significantly established a positive correlation between financial literacy and the ability to make informed decisions. This is a boon to the inclusive growth agenda.

                                                                                              more in next post..........

P:S : This is the first part of three blogs series on Financial literacy 

- By Shilpi Yadav and Sarthak Luthra.