Financial Literacy Needs Regulatory Help

Sameer Kochhar, Author of ModiNomics, Defeating Poverty and Reforms Historian

Unlike hunger, need for financial literacy is not self-evident. If it was, there would have been no need for it to start with. Financial literacy requires mobilisation, counselling, classroom training with the relevant content and pedagogy. There seems to be an impression that all this can be achieved in batches of 80 being mobilised by one extension worker for Rs. 4,500 or Rs. 56.25 per head for four hours of classroom training. What was the cost of opening a bank account or issuing an Aadhaar compared to this? The thought itself under-resources the programme for failure.

This is a complete swing from allowing television channels to loot most of the investment protection funds in the garb of making the English business television viewing audience financially literate.

‘Poor are not bankable’ mindset was the single biggest reason for financial exclusion. Under Prime Minister Narendra Modi’s leadership, the myth has been busted and bankers today find Jan Dhan Accounts have crossed a trillion rupees in savings.

The same mindset in markets is preventing financial deepening. There is a thinking that Jan Dhan account holders do not need markets, social security, Exchange Traded Funds (ETFs), de-risking through commodities etc. Even if they do, it is sufficient to spend Rs. 56 per head to make them literate enough. This micro-management mindset must go.

Exclusion is both a financial sector and governance failure. This is what creates the need for agencies external to the government system to step in and prevent these failures. It is best to allow institutions and company boards to select their own implementation partners and their own choice of financial literacy programmes.

Ministry of Corporate Affairs (MCA) too is attempting to micro-manage CSR funds and what they should be used for. If government needs to decide this then CSR is income tax by just another name. Department of Public Enterprises (DPE) goes further by defining annual thematic areas, e.g., one year public enterprises will build toilets, the next year they will focus on education and the year after on water. No idea whatsoever on how capacity building and grassroots organisations work.

Quite a few well performing projects find themselves in a lurch and are closing down!!

(Sameer Kochhar can be reached at skoch@skoch.in)

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