Why Financial Literacy is Important for Financial Inclusion Indian School of Microfinance for Women

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    16-Jan-2016

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  • 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

  • Genesis.

    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

  • Approach

    TNA with a prospective partner mFIsCampaigns with the ultimate beneficiariesConcept Sharing workshopMonitoring and EvaluationTraining of TrainersImpact Assessment

  • Components

    Concept Sharing Workshop and Campaigns

    Training of Trainers (ToT)

    Research

  • 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

  • Conti

  • Training of Trainers (TOT)

  • Conti

  • 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.

  • Conclusion

    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.

  • Thank You

    Lack of perception of the value of availing of servicesLack of information and knowledge of servicesInadequate access to services

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