Friday, May 21, 2010

Financial Literacy : Evangelists and Skeptics !

What is the need of Financial Literacy”, will it really help? Do you think poor don't know a simple fundamental of life that they need to save money? “This is a simple logic” told me my knowledgeable “logical” microfinance-consultant friend during a coffee break at a recent conference in the Indian city of Hyderabad last month. I did encounter similar echoing in a conference from head of a reputed 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 points of views are a dominant logic prevalent among a substantially large section of the elite group which is at the help of affairs for driving the agenda of financial inclusion in India.
Yes, poor do understand importance of savings 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 devise the informal savings instruments like chit funds (in rural Andhra Pradesh state of India).
But 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 available the micro banking instruments and access to these instruments  and the basic financial literacy exposes 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 with my skeptical friends.
Your comments awaited!