FINANCIAL EDUCATION WHY?

Without being inclusive, financial and economic stability cannot be sustainable.

Financial inclusion is about credible access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner from mainstream institutional players.

More recently, there has been a strategic shift in sustainable financial inclusion to the adoption of market oriented approach viewing financial inclusion as a viable business proposition.

It has been made possible by the availability of Information and Communication Technology required by the formal financial sector for penetrating widespread unbanked areas in a cost effective way and the realization that the “Poor is eminently Bankable”.

Financial inclusion is related to financial stability also through the key of financial education and literacy.

In my opinion, financial literacy is an integral part of financial inclusion of the public or users of financial products/services.

Financial literacy is instrumental in expanding financial inclusion and financial inclusion is itself helpful in further expanding financial literacy thus mutually reinforcing each other in a positive manner.

The knowledge about the risk and return framework holds the key to prudent participation in the market and welfare maximisation within the given constraints for each market player.

As financial literacy involves imparting the required knowledge of risks and returns of financial products to the users and suppliers of these products, it would help in controlling risks in the financial system thus helping in maintaining systemic stability.

It would be inappropriate to assume that financial literacy and inclusion are not global challenges.

At the present juncture as the global financial system is dealing with the aftereffects of financial crisis, it is not so much a question of access but advanced countries are more in need of financial literacy/education than ever before

. In India, it is a question both of access to financial products and services and financial literacy.

It implies not just providing access but also to educate all stakeholders about the fairness and other characteristics of the financial products/services, such as their risks and returns.