What is Financial Literacy

J    Step Into A Bank, Step Out of Poverty J

ù  The objective of the Financial Literacy Guide is to create awareness and educate masses in a lucid manner about management of money, importance of savings, advantages of saving with banks, other facilities provided by banks and benefits of borrowing from banks.

ù  The objective of conduct of financial literacy camps is to facilitate financial inclusion through provision of two essentials i.e. literacy and easy access. It should aim at imparting knowledge to enable financial planning, inculcate saving habits and improve the understanding of financial products leading to effective use of financial services by the common man. Financial literacy should help them plan ahead of time for their life cycle needs and deal with unexpected emergencies without resorting to debt. They should be able to proactively manage money and avoid debt traps.

ù  In order to ensure that the knowledge provided through awareness results in inculcating banking habits literacy inputs need to be synchronized with access to financial services so as to enable the common man to use the information effectively to gain control over financial matters. It should also result in enhancement of their economic security aided by use of banking services.

ù  The banks as providers of financial services have an inherent gain in the spread of financial inclusion and financial literacy, as it would help them capture the untapped business opportunities. Small customer is the key and banks should harness the business opportunities available at the bottom of the pyramid.

ù  Hence, banks must view the financial literacy efforts as their future investments.  Banks must provide a bouquet of banking services comprising of a small overdraft facility, variable recurring deposit account, KCC, remittance transactional.

ù  People should be encouraged to make transactions in these accounts so that the cost of maintaining the accounts is recovered to make it a viable and profitable Business of the banks.

ù  The provision of adequate credit is also important not only in the interest of the customer, but also for the banks as the income earned through interest would make the exercise a commercially viable proposition. Banks must provide credit at a competitive though non exploitative rate but certainly not at a subsidized rate.

ù  Creating awareness and knowledge about various products and providing these products at their doorstep would be the first step in capturing the accounts.

ù  This guide is a ready reckoned for trainers involved in Financial Literacy and Financial Inclusion. It should be used as a standard text to be imparted to financially excluded people during the monthly financial literacy camps.

ù  In line with the objective of bringing the unbanked people into the banking fold, the strategy of conducting the literacy programs should also incorporate opening of accounts in camp mode followed by close monitoring of usage of accounts. In addition, a granular review would help in identifying the factors inhibiting the frequent use of accounts. The strategy should also include sorting out all such issues at the earliest.

ù  Moreover, while organizing financial literacy events, the involvement of Local Government officials and other prominent persons in the villages is also highly recommended. The banks may also consider associating NGOs with proven track record in the field of financial literacy. However the contents of this guide should be used as a standard text to be imparted to exclude people during the monthly financial literacy camps.