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 Exclusion
1. Lack of access to services/products.
2. Lack of perception of the value of
availing of formal services/products.
3. Lack of information and knowledge of
services/products.
4. 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 are
• Where you live
• How 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 2002
• Focused within Gujarat
• ISMW started CCFL in 2005 with a
commitment to spread it across the
country.
 Objectives
Spread awareness and build skills of poor
women on
• Clarity of financial concepts.
• Making better financial decisions
• Accessing financial products & services
• Building assets
• Overcoming vulnerability
• Planning towards economic security
 Approach
TNA with a prospective
partner mFIs

Concept Sharing
workshop

Campaigns with the

ultimate
beneficiaries

Training of Trainers

Monitoring and
Evaluation

Impact
Assessment
 Components

• Concept Sharing Workshop and Campaigns

• Training of Trainers (ToT)

• Research
 Fundamentals of Financial Planning

• Life-cycle needs • Planner V/s Non-

• Financial Decisions Planner
• Components of • Current Status V/s
Financial Planning Planned Status
• Cash Dealing to
Managing Finances
 Mature Borrowings

• When-How and Why • Borrowing for

we borrow; from Productive purpose
Whom • Options available
• Pre and Post for borrowings
Borrowing Factors • How much debt
• Reducing vs. Flat should one take
Rate of Interest
 Smart Savings

• How to Save • Deciding your goals

• Concepts in • Relationship
‘Savings’ between
income/expense and
• Saver V/s Spender
savings
 Wise Spending

• Define • Managing Big-Ticket

consumption: Need Expenses
vs. Want • Creating a Need
• Avoid wants and Account
spend judiciously
on needs
 Intelligent Investments

• Financial • Keep Investing

Independence • Mitigate Risk
• Make a Financial • Capital Formation
Plan
• Make a Budget
A Glimpse of the Activities so far
 Financial Literacy Workshops &
Campaign
Date Name of State/Region No of No of
MFIs/Organizations Participants Participants
in the in the
workshop Campaign
2nd February SEWA Bank Gujarat, 58 -
2004 Ahmedabad.

4th -6th Chaitanya Maharashtra, 40 800

January 2006 Pune

1st – 3rd SEWA Indore Madhya 23 350

February Pradesh,
2006 Indore
1st – 3rd Centre for Youth and Orrisa 33 350
March 2006 Social Development

4th – 6th April Bullock Worker’s Tamil Nadu, 46 1000

2006 Development Pondicherry
 Conti…
31st May- Ankuram Sangamam Andra 30 100
2nd June Poram Pradesh,
2006 Hyderabad
6th – 8th Sarba Shanti West Bengal, 30 100
July 2006 Ayog(SASHA) Kolkata

21st June Campaign on Financial Gujarat, - 1500

2007 Literacy. Ahmedabad

28th July Shephard Tamil Nadu, - 500

2007 Trichy

10th Village Welfare Kolkata - 300

September Society
2007
16th – 18th Access Development Madhya - 100
October Services. Pradesh:
2007 Bhopal, Gwalior
 Training of Trainers (TOT)
Date Name of State/Region No of
MFIs/Organizations (location of Participants in
represented TOT) the TOT
5th – 10th 1.SWADHAAR Gujarat, 17(from seven
December 2005 2.CYSD Ahmedabad states)
3.SKS
4.Chaitanya
5.BWDA
6.SEWA Indore
7.SEWA Bank
8.SEWA Bharat
9.FPI

19th – 22nd May Refresher training for Gujarat, 11

2006 ‘Chaitanya’ Ahmedabad
25th – 26th July Loyalam Bank Project Manipur 30
2006
 Conti…
19th to 27th 1.Development support team, Gujarat, 16
February 2007 Pune. Ahmedabad
2.SHEPHARD
3.Village Welfare Society
4.Chaitanya
5.Annapurna Parivar
6.SWABHIMAAN
7.Grameen Koota
8.BISWA
9.SEWA Bank

29th July 2007 Shephard Tamil Nadu, 70

Trichy
11th – 12th Village Welfare Society Kolkata 18
September (VWS)
2007
Financial literacy can lead to financial
wisdom

•Ability 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 women
•Financial literacy builds capacities
to make decisions and take
responsibility for those decisions.
•It increases their economic space.
Financial Inclusion empowers the poor
and women
•Linkage 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