Why Financial Literacy is Important for Financial Inclusion
Indian School of Microfinance for Women
Financial Inclusion seeks to:Increase financial outreach to under-served and un-served populations.Improve access at a reasonable cost to these populations to a range of financial services and products.
Characteristics of Financial ExclusionLack of access to services/products.Lack of perception of the value of availing of formal services/products.Lack of information and knowledge of services/products.Inability to chose between alternate services/products
Formal institutions like banks seek to address financial inclusion by: Educating people about available services/products.- (financial education).Reaching clients.Being client friendly.Making access to no-frill accounts easy. (as a beginning).
There is a latent unmet demand for financial service/products.However there is also need to understand the lives and constraints of the poor. Poor have earning and spending patterns that are peculiar to their state of poverty.This in turn determines their savings patterns.
Financial Institutions have been more successful in tapping latent demand when they look through the eyes of the clients.Things that matter:Who you areWhere you liveHow you make your living
Understanding the poor and their world of work allows us to understand their earning and expenditure patterns.
This understanding has been used to create a curriculum of financial literacy that combines reflection and introspection.
What is financial literacy?Awareness, knowledge and skills to make decisions about savings, investments, borrowings and expenditure in an informed manner.
CITIGROUP CENTRE FOR FINANCIAL LITERACY
Indian School of Microfinance for Women
Financial Literacy was initiated by SEWA Bank in June 2002Focused within GujaratISMW started CCFL in 2005 with a commitment to spread it across the country.
ObjectivesSpread awareness and build skills of poor women on Clarity of financial concepts.Making better financial decisionsAccessing financial products & servicesBuilding assetsOvercoming vulnerabilityPlanning towards economic security
TNA with a prospective partner mFIsCampaigns with the ultimate beneficiariesConcept Sharing workshopMonitoring and EvaluationTraining of TrainersImpact Assessment
Concept Sharing Workshop and Campaigns
Training of Trainers (ToT)
Fundamentals of Financial Planning
Life-cycle needsFinancial Decisions Components of Financial Planning
Planner V/s Non-PlannerCurrent Status V/s Planned StatusCash Dealing to Managing Finances
Mature BorrowingsWhen-How and Why we borrow; from WhomPre and Post Borrowing FactorsReducing vs. Flat Rate of Interest
Borrowing for Productive purposeOptions available for borrowingsHow much debt should one take
Smart SavingsHow to SaveConcepts in SavingsSaver V/s Spender
Deciding your goalsRelationship between income/expense and savings
Wise SpendingDefine consumption: Need vs. WantAvoid wants and spend judiciously on needs
Managing Big-Ticket ExpensesCreating a Need Account
Intelligent InvestmentsFinancial IndependenceMake a Financial PlanMake a Budget
Keep InvestingMitigate RiskCapital Formation
A Glimpse of the Activities so far
Financial Literacy Workshops & Campaign
Training of Trainers (TOT)
Financial literacy can lead to financial wisdomAbility to manage money not just deal with it. Ability to use skills to take wise decisions for the future
A financially literate person can link her need for a product or service with those available within the banking system.
A demand for financial inclusion is created through an appreciation for what is available.
The formal banking system will find a financially literate person easier to approach.
A financially literate person will seek information about available services to operationalise her financial decisions and hence access what is available.
Financial literacy empowers the poor and womenFinancial literacy builds capacities to make decisions and take responsibility for those decisions. It increases their economic space.
Financial Inclusion empowers the poor and womenLinkage to formal financial systems mainstreams poor producers.Self esteem increases when their productive lives include mainstreaming into formal systems.
Financial literacy is a primary step for financial inclusion since introspection changes behavior which in turn makes people seek and receive financial services and products.
Lack of perception of the value of availing of servicesLack of information and knowledge of servicesInadequate access to services