What is the issue?
The financial inclusion programmes of the government seem not to be materialising because of inadequate financial literacy.
What is the status of financial inclusion?
- With many initiatives in the past and the recent Jan Dhan Yojana financial inclusion has gone to unprecedented levels.
- However, a large number of accounts were frozen under the PMJDY owing to inactivity.
- Only 33% of all beneficiaries were ready to use their Rupay cards.
- Being a cash-intensive economy, India still remains among nations with the lowest access to digital payments.
- Financial illiteracy and safety and security concerns inhibit moving to a digital world of payments.
- Nearly 76% of India's adult population does not understand even the basic financial concepts.
- People buy insurance policies without proper planning and give up midway because they don’t have money to pay the premium.
- The customers end up losing heavily as penalties are very harsh.
What should be done?
- It is to be noted that merely opening an account does not ensure that the account is used.
- Financial literacy programmes should be backed by products that address real needs of consumers, with the support to use the product.
- People have to be imparted an ability to understand and execute matters of personal finance, including
- basic numeracy and literacy.
- financial awareness.
- knowledge and skills.
- attitude and behaviours necessary to make sound financial decisions.
- budgeting, investing, and risk diversification.
- Employing a service provider in areas of financial literacy programmes can make people better understand the products and use them regularly.
- A cascade training model where core trainers trained peer educators, who in turn trained community members can be adopted in rural communities.
- Quality of access, affordability of products, familiarity and comfort in use, sustainability for the provider of these services are other issues that need to be addressed.
