(First step towards Financial Inclusion)
It refers to knowledge required for managing personal finance. It does not necessarily refer to formal education in finance. Instead it encompasses an understanding of how to use credit responsibly, manage money and savings, minimise financial risk and derive long term benefits of savings.
Financial literacy is an integral part of the financial inclusion. It is not just about imparting the financial knowledge and information. It is also about changing the behavior in the financial pattern and activities of individuals. The ultimate goal is empowerment of people to take action by them that is in their self interest. When the people know about the financial products available and when they are able to evaluate the merits and demerits of each product and suitability of the product for their specific needs, they are in a better position to decide what they want and feel empowered in a meaningful way. They will also know enough to demand accountability for the deficiencies in the service and also seek redressal of grievances.
The access to financial services viz, deposits, loans, money transfer and insurance to poor and the low income group households will help them to insure themselves against shocks such as illness of self or family members, loss of employment etc. and equip them to meet the eventualities in a better way and they need not be demoralised. It will also enable them to improve their income in their productive endeavors with help of bank credit at cheaper rates.
The financial education effort is to spread awareness, impart financial education to the less privileged by providing access to financial products and markets so that they can play a meaningful role in ensuring sustainable growth and prosperity of the mankind. It is first step towards the financial inclusion.