Financial literacy and its impact on inclusive finance

Dr. Atiur Rahman
Governor, Bangladesh Bank :
Mainstreaming of inclusive, environmentally sustainable financing figure high in BB’s priority; and stocktaking of financial knowledge base of the target population segments is therefore a very welcome step.
Findings of this research based on data gleaned from the InM’s 2014 national survey on access to financial services being consistent with those from previous empirical studies broadly affirms the validity of the approach taken by Dr. Khalily and Mr. Pablo Mia in their study. The main findings of the study include: i) enhanced knowledge about banking leads to greater formal access to finance; ii) age and education also have positive relationship with access to finances. We need such surveys both as baselines at the start, and also in periodical rounds of iterations assessing the cumulating gains in financial literacy and the impact thereof on our progress towards our financial inclusion goals.
Erudite panelists have already discussed the study at length; I do not need to dwell further on this other than pointing out that it opens up many new avenues for useful further investigation. I remember that group-based microcredit began in Bangladesh with short periods of pre-lending group training sessions rendering rudiments of financial literacy to the group members. A survey in the microcredit client segment can assess the usefulness of this approach if still in use, and look into reasons if not, including what has substituted it. SME lending promotion is ongoing for some years now; a survey can look into information packages being offered by lenders to their startup SME client segments, assessing the usefulness of the financial literacy content of the information packages for this target client segment. Similar surveys can usefully be conducted also on Mobile phone based Financial Service (MFS) client segment, green financing client segment, capital market investor client segment, insurance sector client segment, and so forth. Such a series of client segment focused surveys and analyses will bring out financial literacy gaps and needs on financial services at all strata, primary, secondary and tertiary.
The work burden of the segmented surveys and analyses can be shared among InM, SME Foundation, IDRA, BSEC, and BB. Reputed universities can also be co-opted to get some of this work done by their graduate students as part of thesis/project work course requirements.
BB’s 2015 Strategic Plan action agenda includes drawing up of a financial inclusion strategy paper for Bangladesh. The recently initiated UKAID supported Business Finance for the Poor Project has also a similar item in its action agenda. If taken up in right earnest, findings of the suggested client segment focused survey findings will provide crucially useful inputs for the financial literacy content of these strategy papers to be drawn up on financial inclusion.
It may be possible for BB to extend modest fund support for the surveys on SME, MFS, green financing client segments; and I presume that modest financing support sources for the other segments may also be possible from InM, SME Foundation, IDRA, and BSEC.