Financial Literacy is a prerequisite for Financial Inclusion & Sustainable Growth : Study

According to a latest study entitled Measurement of Financial Literacy for Financial Inclusion among Urban Slum Residents authored by Ms. J. Thiravia Mary Gloria and Prof. P. Santhi from Avinashilingam Institute for Home Science and Higher Education for Women, Coimbatore published in the recently released issue of Finance India – Quarterly Journal of Finance published by Indian Institute of Finance, Financial literacy is a prerequisite for financial inclusion. The study concludes that vulnerable groups, weaker sections, low- income groups continue to remain excluded from even the most basic financial services. According to the study, an all inclusive financial system need to be simple to understand and easy to adopt and use to enhance the level of participation for secure and safe saving practices and thereby facilitating investments for sustainable growth and development.

India, requires capital formation through saving and investment that needs to be properly planned, promoted and channeled investment pattern among inhabitants.

The study covers of 600 urban slum households selected using stratified random sampling method to measure financial literacy among urban slum residents. The structured interview schedule was used to collect primary data and its content validity was verified by panel of experts. Annamaria Lusardi’s financial literacy instrument has been adapted to measure financial literacy. Chi-square and Logit regression model were employed for data analysis. Financial Inclusion is found to be a requisite for sustainable growth and development.

On the basis of the analysis, the following strategic suggestions have been drawn out of the study. Financial literacy programmes should impart regularity in saving, budgeting and planning for insurance. The income, expense, awareness and knowledge about finance vary according to the socio-economic status of urban slum residents. Hence different forms of motivation would serve the purpose. The agents, enumerators, business correspondents would act as a catalyst to promote financial literacy.

Promotion of advance financial literacy through advocating joint family system which provides scope for saving and investment and also to continue even during inflation.

Study suggests that imparting financial education at school enable early adoption of financial accountability and responsibility. Financial education programmes carried out in India incorporate the formal and non-formal education at different stages. But its benefit is not reaped either due to low income, high cost of living, low education and ignorance among urban slum residents. A strong implementation machinery for the welfare measures would have beneficial impact. Need for coordinated financial education by all concerned stakeholders is imperative.

To promote financial literacy delivery, Codes of conduct for the staff of financial institutions should be made compulsory. The weaker sections should be encouraged to borrow from bank. It is suggested that banks should counsel the borrowers on the rationale behind such procedures, which are in the interest of borrowers and bank staff.

According to the study, the Government of India is making all efforts to introduce novel products and measures, especially for the weaker sections. But due to improper monitoring and supervision, the true purpose of the initiatives are not fully achieved. So all the responsible bodies should monitor and supervise the schemes and measures launched by the Government of India so that the benefits go to the right people.

Indian Institute of Finance, setup in 1987 pioneered Business Finance Education in India.

Indian Institute of Finance
45A, Knowledge Park III
Greater Noida
Ph : 0120-6471004; 9811971002
www.iif.edu

This release was published on openPR.