The Role of Literacy in Financial Inclusion

Financial literacy is about being financially smart. It’s not just about knowing the policies, schemes, regulations, products and services being offered by various financial institutions, it’s also about using the knowledge to make smart financial decisions.

Many people think financial literacy is some exotic concept which is only privy to a certain class of people. This is not true.

Financial literacy isn’t just about learning the curves of the market and knowing about investments. It’s also about those basic concepts which are often taken for granted. Concepts such as savings and budgeting; be it household or for an organization. It involves knowing how to manage your cash-flow and how to allocate your assets and resources to meet set financial goals. Basically as stated earlier, it’s about being financially smart and to be financially smart it also helps to have a basic knowledge of banking.

However, the question remains ‘how can the unbanked be banked when they know little or nothing about finance, banking, and general financial education?’ The Central Bank of Nigeria in its efforts to enhance financial inclusion has projected about 10,000 bank branches and 62,440 ATMs by 2020, and while this may sound impressive, it may all be wasted effort if those for whom these institutions are built, products and services developed, do not understand nor buy into what these service offerings.

Thus it is almost impossible to have financial inclusion without financial literacy. The Reserve Bank of India (RBI) defines financial inclusion quite interestingly. According to the RBI, financial inclusion is the process of ensuring access to appropriate financial products and services needed by all sections of the society in general, and vulnerable groups such as weaker sections and low income groups in particular, at an affordable cost in a fair and transparent manner, by mainstream institutional players.”

In our part of the world, the most in need of these services are indeed the vulnerable such as the low income earners. They are the ones under the sun hawking their tray of tomatoes on the road. You find them in their small stalls in the market. They are the mechanics, the vulcanizers, the sachet water sellers that help quench our thirst after a long day. Yes, these are the ones that can have access to a better life, if they know the benefits of products and services offered by financial institutions such as the microfinance banks.


However, I believe that effective financial literacy among the unbanked should begin with educating financial service providers themselves. Often times I’ve been to some banks to inquire about some financial service and left dissatisfied as the staff had no clue about the service. It is possible that they could have helped but for lack of adequate training, they couldn’t.

Financial institutions need to better understand their customers if they are to serve them and expand the base of customers they serve. What are their needs? What do they require? What are the credit and operational risks involved while trying to offer a particular service, and how can these risks be minimized? How can the customer be served while not losing sight of profitability? It is also important that they understand every angle of their business including their products and services, and also the appropriateness of these products to respective customers. This will help in tailoring the right products to existing and potential customers.

All these would also go a long way in fostering the Central Bank’s financial inclusion cause as it would set the foundation for reaching previously unreached sections of the population.


The ripple effects of financial literacy can significantly change the course of our nation if and when executed strategically. For instance, a young youthful country as ours should have financial education as part of the educational curriculum. Simple concepts like savings and budgeting could be introduced at the primary school level. At the secondary school level financial literacy can be expanded to include concepts on entrepreneurship and this can be further expanded at the tertiary level. It shouldn’t just be a course of study at tertiary institutions alone. The interesting thing is that one financially literate person in a household could end up influencing their family and friends. The knowledge gained is spread and shared with family and friends. Thus, a ripple effect is created.

Today, it is usual to find young children teaching their parents and grandparents on the use of mobile devices, and the older generation accept the impartation with great interest and enthusiasm. In the same vein, financial literacy can be transferred.

Another interesting case is how the Ebola outbreak was eradicated. The massive campaign against the disease, especially in the rural areas, quickly put an end to the outbreak. This campaign strategy could be adopted in policy making to effectively entrench financial inclusion. In this regard, the media would be of great assistance.

Adequate financial education is the bedrock of a financially literate society. The key to improving financial inclusion lies in effective financial education.

Sincerely, thank you for reading.

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