TomorrowMakers

It becomes difficult to fathom an equal world without empowering women with equal social and economic opportunities. Making them financially literate is one of the most important area.

How financial literacy can empower women to develop a financial identity

Personal financial literacy is being equipped with the knowledge and skill to manage one’s money effectively, and not squandering it. And that goes for both men and women. 

The Organisation for Economic Co-operation and Development (OECD) has defined it as “the process by which financial consumers/investors improve their understanding of financial products, concepts and risks, and through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being”.

But as it can be gauged, this definition is a broad sweep that seems to speak for an advanced economy as well as for the poor ones in a developing economy. But parameters of financial literacy can be hugely different in economies of different health. For instance, in a 2008 report by the Australian government pertaining to financial literacy among women in that country, the touch points include areas such as credit card management, stock market investments and retirement. These are areas that can be alien to low-income groups in India.

In India, financial education/literacy is often rudimentary, such as knowing how to open a bank account. For instance, Parinaam Foundation, a non-profit that works with urban poor to bring them out of poverty, has a financial literacy programme for women. Among  other things, it teaches them how loans and EMIs work, and how one should use bank account facilities such as ATMs, SMS alerts and cheque books.

The Reserve Bank of India (RBI) noted that “financial literacy is the ability to know, monitor, and effectively use financial resources to enhance the well-being and economic security of oneself, one's family, and one’s business.”

Indian Scenario

EY (formerly Ernst & Young) and trade association Assocham collaborated to prepare a report titled “Educate to empower: Embracing financial literacy for women”, which aptly summed up the situation in India noting that Indian women are “still happy playing second fiddle to their fathers and spouses when it comes to managing their money”.

The report also highlighted factors that profoundly influenced financial literacy among Indian women, which are:
  

  •  Lack of Independence
  •  Culture
  •  General Literacy
  • Lack of confidence
  • Access (to finance)

To add it all together, these factors create a situation where the woman finds herself deprived of the basic freedom to manage her finances independently. It is observed that the male members of the family make all major financial investment decisions: mainly the husband or the father, but often the brother and uncles as well. Sometimes the woman accepts it to maintain harmony in the family, but mostly they conform because they are conditioned to believe that “men know the best”.

So much so, says the EY-Assocham report, “Women, even if employed, cannot make any choice to use their earned income.” It also talks of the “intermittent career patterns” that women have to grapple with on account of childbearing and caring responsibilities.

"In the light of these prevailing barriers," the report concludes, "women are not engaged in financial matters of the family despite having knowledge and talent."

State Initiative

The situation has goaded the government to launch schemes aimed at boosting financial literacy among women. The rationale being, this would lead to greater financial inclusion in the country. These schemes encourage women to take up personal finance activities such as savings and investments.

In the process, the schemes also engage women in activities that allow them to participate in the process of capital formation, either directly or indirectly. The programmes also spread awareness of fundamental financial issues that impact their lives, and are designed to address the key components of financial literacy such as:
 

  • The need to save
  • Benefits of investing
  • The difference between saving and investment
  • The need for insurance
  • The need for a regular stream of income after retirement, or in their old age
  • The necessity of saving or investing regularly
  • The advantages of saving in banks

These apart, the schemes also strive to teach the target audience the rudiments of borrowing; which are:
  

  •  The advantages of borrowing from banks
  • The importance of borrowing from banks
  •  What is interest
  • How moneylenders charge high-interest rates
  • The importance of borrowing within limits
  • Borrowing as an income generating technique
  • Why it is important to repay loans
  • Why it is important to make repayments on time

RBI has supplemented government efforts with detailed guidelines of its own for NGOs and self-help groups engaged in spreading financial literacy, along with the teaching material on money management, savings as well as the various banking facilities. 

Various Initiatives

In a way, the RBI guidelines can be seen as one of the many initiatives in financial literacy and financial inclusion in India. Apart from being a ready-reckoner for trainers, they include a “Financial Diary” that in itself is a teaching tool on the way to keep a record of income and expenses. This introduces users to improved financial planning.

Similarly, RBI’s posters feature simple and appealing slogans and go a long way to explain the basics of money management, savings, borrowings and basic banking products pictorially. NGOs and self-help groups have used these to good effect at literacy camps, called the Financial Literacy and Credit Counselling Centres (FLCCs).

The FLCCs are organised at the district and panchayat levels by the relevant departments of the government, which has also taken several initiatives in this regard. Some of these are:
  

  • Beti Bachao, Beti Padhao Yojana: This scheme aims to generate awareness and improve the efficiency of welfare services meant for women; though not strictly finance-oriented, it does have a general literacy thrust – a critical component of improved financial literacy among women.
  • Sukanya Samridhi Yojana: A scheme designed to ensure prosperity for the girl child, its primary focus is to educate the targeted audience that the child is legally entitled to an equitable share of family resources and savings and is on par with the male child. Basically, this scheme works towards encouraging financial literacy among women through financial support for the girl child.
  • Pradhan Mantri Jan Dhan Yojana (PMJDY): A national mission on financial inclusion, PMJDY is one of the bigger government measures in this area. It seeks to enhance access for women and low-income groups to various financial services such as bank accounts, need-based credit, remittances facility, insurance and pensions. In a bid to make it successful, the government has made special arrangements to enhance financial literacy among targeted groups.
  • National Centre for Financial Education (NCFE): The NCFE was set up to implement the National Strategy for Financial Education (NSFE), with representation from all financial watchdogs in India. Apart from RBI, it is represented by the regulators for the capital markets, Securities and Exchange Board of India (SEBI) and the National Institute of Securities Markets (NISM), the Insurance Regulatory and Development Authority of India (IRDAI), and the pension fund sector (PFRDA).

Last words

Ironically, despite the best efforts of the government and various NGOs, one major stumbling block for a bigger spread of financial literacy is the basic infrastructural problem. The distance between the target audience (the women) and institutions like banks, post offices, insurance companies etc. often pose a challenge for rural women, although this connectivity is improving continuously. However, the challenge can be met through better use of mobile technologies as mobile phones have become increasingly available to the low-income group. Besides these have a look at 4 Myths about women and money you need to stop believing.

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