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Why Financial Literacy is
Important for Financial Inclusion
Indian School of Microfinance for Women
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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.
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Characteristics ofFinancial Exclusion
1.Lack of access to services/products
.
2. Lack of perception of the value ofavailing of formal services/products.
3. Lack of information and knowledge ofservices/products.
4. Inability to chose between alternateservices/products
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Formal institutions like banks seek to
address financial inclusion by:
Educating people about availableservices/products.- (financial education).
Reaching clients.
Being client friendly. Making access to no-frill accounts easy.
(as a beginning).
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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 savingspatterns.
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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
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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.
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What is financial literacy?
Awareness, knowledge and skillsto make decisions about savings,investments, borrowings and
expenditure in an informedmanner.
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CITIGROUP CENTRE FOR
FINANCIAL LITERACY
Indian School of Microfinance for Women
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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 thecountry.
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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
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ApproachTNA with a prospective
partner mFIs
Campaigns with the
ultimate
beneficiaries
Concept Sharing
workshop
Monitoring and
Evaluation
Training of Trainers
Impact
Assessment
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Components
Concept Sharing Workshop and Campaigns
Training ofTrainers (ToT)
Research
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Fundamentals of Financial Planning
Life-cycle needs Financial Decisions
Components of
Financial Planning
Planner V/s Non-Planner
Current Status V/s
Planned Status
Cash Dealing toManaging Finances
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Mature Borrowings
When-How and Why
we borrow; fromWhom
Pre and Post
Borrowing Factors
Reducing vs. FlatRate of Interest
Borrowing for
Productive purpose Options available
for borrowings
How much debt
should one take
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Smart Savings
How to Save Concepts in
Savings
Saver V/s Spender
Deciding your goals
Relationship
between
income/expense and
savings
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Wise Spending
Define
consumption: Needvs. Want
Avoid wants and
spend judiciously
on needs
Managing Big-Ticket
Expenses Creating a Need
Account
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Intelligent Investments
Financial
Independence Make a Financial
Plan
Make a Budget
Keep Investing
Mitigate Risk Capital Formation
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A Glimpse of the Activities so far
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Financial Literacy Workshops &
Campaign
Date Name of
MFIs/Organizations
State/Region No of
Participants
in the
workshop
No of
Participants
in the
Campaign
2nd February
2004SEWA Bank Gujarat,
Ahmedabad.
58 -
4th -6th
January 2006Chaitanya Maharashtra,
Pune
40 800
1st 3rd
February2006
SEWA Indore Madhya
Pradesh,Indore
23 350
1st 3rd
March 2006Centre for Youth and
Social Development
Orrisa 33 350
4th 6th April
2006
Bullock Workers
DevelopmentA ciati n
Tamil Nadu,
Pondicherry
46 1000
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Conti
31st May-
2nd June
2006
Ankuram Sangamam
Poram
Andra
Pradesh,
Hyderabad
30 100
6th 8th
July 2006
Sarba Shanti
Ayog(SASHA)
West Bengal,
Kolkata
30 100
21st June
2007
Campaign on Financial
Literacy.
Gujarat,
Ahmedabad
- 1500
28th July
2007
Shephard Tamil Nadu,
Trichy
- 500
10th
September
2007
Village Welfare Society Kolkata - 300
16th 18th
October
2007
Access Development
Services.
Madhya
Pradesh:
Bhopal, Gwalior
- 100
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Training of Trainers (TOT)
Date Name of
MFIs/Organizations
represented
State/Region
(location of
TOT)
No of
Participants in
the TOT
5th 10th
December 2005
1.SWADHAAR
2.CYSD
3.SKS
4.Chaitanya
5.BWDA
6.SEWA Indore
7.SEWA Bank
8.SEWA Bharat
9.FPI
Gujarat,
Ahmedabad
17(from seven
states)
19th 22nd May
2006
Refresher training for
Chaitanya
Gujarat,
Ahmedabad
11
25th 26th July
2006
Loyalam Bank Project Manipur 30
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Conti
19th to 27th
February 2007
1.Development support team,
Pune.
2.SHEPHARD
3.Village Welfare Society
4.Chaitanya
5.Annapurna Parivar6.SWABHIMAAN
7.Grameen Koota
8.BISWA
9.SEWA Bank
Gujarat,
Ahmedabad
16
29th July 2007 Shephard Tamil Nadu,
Trichy
70
11th 12th
September
2007
Village Welfare Society
(VWS)
Kolkata 18
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Financial literacy can lead to financial
wisdom
Ability to manage money not justdeal with it.
Ability to use skills to take wisedecisions for the future
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A financially literate person canlink her need for a product orservice with those available within
the banking system.
A demand for financial inclusion
is created through an appreciationfor what is available.
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The formal banking system will find afinancially literate person easier toapproach.
A financially literate person will seekinformation about available services to
operationalise her financial decisionsand hence access what is available.
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Financial literacy empowers the poor
and women
Financial literacy builds capacitiesto make decisions and take
responsibility for those decisions.
It increases their economic space.
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Conclusion
Financial literacy is a primary step for
financial inclusion since introspection
changes behavior which in turn makes
people seek and receive financial servicesand products.
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THANK YOU