I dedicate the post this month to the subject of Financial Literacy. The jury is still out on what Financial literacy is, there seems to be no universal definition. What is financial literacy all about? Is it just about loans, savings and entrepreneurship? Is it only availability of bank accounts? Financial institutions seem to have taken leadership of this matter and unwittingly made this matter solely about them. Financial literacy is now associated with the introduction of special and specific products as a response meeting financial inclusion. Providing for the so-called ‘unbanked’ (financially excluded) is a crusade not only for financial inclusiveness but ready access and usage of instruments that facilitate commerce and wealth creation. As custodians of peoples’ money and creditors of loans, banks have a critical role in how they interpret and implement ‘financial literacy’. As it is, financial literacy equals financial institutions but there is still need for the ordinary person to internalize this concept and make it work for each one of them according to their needs.
From my observations, financial literacy means different things to different people. The banks want more enlightened customers who will take out loans and pay back and use any other services on offer. Financial institutions want recurring customers’ year on year to access even more facilities and an equally better ability to pay back. To the individual, financial literacy means information, knowledge and freedom to access financial services that meet their needs at reasonable cost and convenience. Financial services must be provided hustle free and convenient access to various services at a reasonable price. Who provides these services and where is not a concern of the customers. Choosing where to put my money, negotiating for interest rates is financial privilege; including using my bank account to make transactions that facilitate my business dealings at a price that is fair and reasonable. While financial literacy is focusing mainly on the financial institutions, one can also add that being financially or investment or business savvy is also being financially literate.
There are many new players in the financial space who are not financial institutions. This is financial sensitivity to its users! For example, Mobile phone service providers have revolutionized how people can participate in managing their commercial and personal transactions. Speed, cost and convenience still remain the ultimate consideration. To this extent, we are witnessing a convergence and collaboration or interface between the financial institutions, mobile and internet service providers and other actors in the economy coming together to serve the customer. I wonder if the customer realizes how central and important they are in this whole cycle.
Micro finance companies, insurance companies, providers of inputs are stepping up to facilitate provision not only short term, seasonal credit services but also risk cover as well. These facilities take care of inputs like seeds and fertilizers and marketing. These institutions are slowly offering savings and other custodial services as well.; maybe their users asked! Specific shops and supermarkets are now offering money transfer services, quick small loans to clients with minimum documentation. Supermarkets are now giving back, by allowing credit sales to their customers. It is also possible to get out cash against debit cards in supermarkets using the debit card; whereas previously these cards were strictly for point of sale and Automated Teller Machines (ATM) transactions. There is a lot going on, lots yet to be achieved. People must understand that financial instruments will be designed if and when people ask for them. Financial institutions do not design products in a vacuum.
Financial institutions are in business to make money. They charge users for access to their products through their infrastructure. So these services are not free. So as consumers, let us tell or ask for the products and services we want. The affordability of the service is a function of the number of users. The more users the cheaper the fee. Let there be a balance between the products available and their affordability. Financial literacy means a dialogue between the service provider and the service users. If there is no discourse between the parties, people will definitely be excluded.
You cannot have financial services providers who are not talking to their customers. Because of this lack of dialogue over time, people have increasingly been unable to access financial services on account of inability to access and or price. These are the numbers that this crusade is now trying to reach out to. I am of the view that the media has not enlightened the general public effectively. The media must interrogate the service providers and lay bare what each side is expecting from the other.
In my previous blogs I may have tackled this topic with respect to money, savings and entrepreneurship in a direct causal relationship kind of way. The three issues are mutually inclusive. Where money is saved it lends itself to many opportunities including to start businesses. Where there is entrepreneurial spirit, money and savings come in handy to get the ideas going. Where there is literacy or awareness regarding the role and behaviour and purpose of money, for sure there will be higher levels of expectations for plans to succeed. But this is not the whole story. Each time I read about this topic in the media it is not talking about the whole story.
At a wedding recently, I sat next to a young lady and the topic invariably switched to women’s empowerment. I say invariably because as coach and with a background in financial matters, I am always interested to find out from people around me, especially women what they think about business; the whole financial literacy thing. Almost always, people will be negative and tell me they cannot start a business because they don’t have the capital, they cannot rise in the job they are in because they do not have the requisite skills and have no money for training themselves. There is almost a perennial refusal to own the problem and take care of the answers.
My inner coach stopped me from offering ready and obvious answers. Instead, I probed a little more whether she identified any opportunities which were available to her and her friends. While we did not conclude our conversation to the point of her making a commitment to do something about her possibilities, I was happy that I was slowly pulling away from offering answers to people to sort out their problems. I was also happy that, to some degree, she started to look at the challenge as an opportunity which she could capitalise on. Every idea is a seed which must be nurtured for it to grow.
Even at the level of money management, the commitment to start savings or build up savings for a future project starts with a declaration. Where there is no commitment there is no accountability to follow through. Sowing the idea is just the beginning. The costs and availability of money is another step. It got me thinking that if people are going to start a business and dabble in entrepreneurship they needed to hear the whole story. Not only the financial literacy side, which is also very important but to hear also about what it took to moot a business that sustains into the long future. The kind of nurturing and support that they would require to steer the business to maturity.
What is my point? Financial Literacy is more than starting a business; more than saving up money in a bank. It is more than having motivated staff running financial institutions. In fact, financial literacy is not even about bank products alone. It is about an integrated web of goods and services available to support everyone to meet their needs. It must be said that everyone has their need. The financial exclusion is because some needs are not being recognised and provided for. The introduction of services outside of the brick and mortar called banks and building societies is a good indicator that these needs can be offered by anybody. Financial inclusion or exclusion must drive the narrative and stop it being about what banks are doing or not doing.
By interrogating people from different walks of life, the media can give customers a voice to speak for themselves. They will say what services are important to them and whether the systems are safe, secure and cost effective. The media must go to the schools and various other stakeholders to get an explanation what financial literacy means to them. Teachers and pupils alike, all have expectations.
Constant interactions among stakeholders is not just about finding solutions. Sometimes it is just about information and knowledge sharing. Thereafter, people can be free to use the information in seeking the services that they want. The services providers will use the dialogue and seek the opportunities to develop and offer cost effective product and services.
Financial literacy is a conversation.
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