Education and trust can help change behavior among financially underserved markets, advocates IFC

Michael Klein, IFC Vice President and Chief Economist, was making a point about financial literacy and its significance to help support ‘unbanked’ people in financially underserved markets of developing countries at the IFC supported FT Financial Education Summit held in New Delhi last week. The Summit brought together a large international gathering of financial education experts and advocates who focused on the theme, Partnerships for Progress and Inclusion.

While giving the Opening Keynote Address, Klein advocated the need for building awareness amongst the financially underserved sections many of whom often need to be reminded about their other monetary needs with respect to farming materials, indebtedness, school fees, etc.

Citing instances from Mexico and Columbia, he explained that low income groups have limited knowledge of financial services and generally have preconceived notions that banks ‘rob or steal’. He made the case that by spreading access to finance there is a win-win for all: the banks as well as those who use the services of banks. It is not financial sophistication, but good loan management practices, transparency and a good understanding of local nuances for example that help generate profits for those who take credit and banks that offer credit to the ‘unbanked’.
The debate at the conference aimed at discussing how the longest-lasting period of economic growth the world has ever seen can improve the financial well-being of those who historically have been excluded from the mainstream economy. Financial literacy is a life-skill that can help close the widening poverty gap, stimulate entrepreneurship and wealth creation at all levels of society, and protect consumers and investors in turbulent times.

Over the two days of the conference, discussants dwelled on how to boost financial literacy levels, particularly in under-privileged areas, by tailoring financial education programs to meet the needs of specific communities, identifying best practices in content development and delivery, and encouraging effective multi-sector partnerships among governments, educational establishments, the private sector and non-profit organizations.

Contact: Minakshi Seth, Regional Communications Officer, South Asia, mseth@ifc.org