Library Publications Role of Information Sources in Financial Capability

Role of Information Sources in Financial Capability

24 May 2013 2604
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The key to understanding poor people’s financial management is to understand how they make decisions and what influences the decision making. This research explores the role of information sources in poor households’ decision making processes. We explore what decision making paths people use to reach to a decision, and how information sources accessible to them influence the decision making process. As decision making ultimately reflects financial capability of the individual/household, we conclude with MicroSave’s approach of using information sources to build financial capability.  

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  • JR

    Dr.V.Rengarajan, International consultant- Microfinance -Independen on 1/6/13

    For breaking free from the myth of financial education in poverty sector, the two journeys ( product led & need led) under KSAP framework as referred to, would facilitate access finance but the desired outcome of access, reinforced with such educational input cannot emerge by default but it largely hinges on the process of functioning of the accessed finance later at house hold level. The actual performance or utilization of accessed funds vary from the initially intended purposes in most cases in poverty sector since social values system contextually both at individual level, house hold level and societal level act strong drivers of human behavior diluting or diverting the well nurtured financial capability from going towards indented goal. To wit, instances like the loans accessed with the intention of buying dairy animal or farm inputs for their respective needs of livelihood has been subsequently utilized for meeting the health expenditure for the client self or family members as the priority needs of the household . From ethical perspectives it is unfair and misutilisation in banking parlance but social values both at individual and household level force to perform for the immediate needs morally as the breadwinner of HH . Eventually compromised action in the above case leads to indebtedness to the borrower and NPA to the lender. This inevitable situation by and large prevails in the target segments principally due to omnipresence of health vulnerability and deprivation in Asian and African countries. Here the need and demand led journey need not confine narrowly to income generating or any productive activity of the household albeit necessary and should be based on holistic needs and demands of the poor household , the product should be designed in a manner it meet various purposes of the poor by the institutions either singly or collectively. That is say How to create eco system for enabling integration of the two journeys (product and need based) for serving holistically both in access process and after access process as well towards effecting the sustainability of desired outcome be it financial inclusion or poverty reduction. In this regard evidently innovative integrated products such as health insurance linked credit products, savings linked insurance product covering family members are being experimented in MF industry. There is a long way to go in this regard Another issue in demystification process is realization of desired outcome out of financial education or sustainment of the financial capability (FC) developed in group system (SHG) a major conduit for micro credit in South Asia. Here one need to carefully perceive who ultimately take the financial decision ( the purpose, size etc of the loan) whether group leaders collectively for all irrespective of needs of the individual member or individual members by herself irrespective of group collective decision despite given financial education. Further, related to gender issue, reportedly in patriarchal society in general, although women members of the group gain financial capability and avail but later grabbed by men counterpart in their houses for utilizing any purposes they desired defeating the very purpose of FC for women. Another snag in group system of inclusion which remain neglected , is persistent exclusion of the included subsequently in different manifestation like drop outs, push outs, defunct, group mortality cause wastages in the FC created at some cost. How to break this group based myth for sustaining the values of financial education and its expected outcome ? Further does CPP include financial education (financial capability) as its one of the components or principal one ? I strongly feel that the above issues deservingly merit the attention of Micro save and CGAP for further research on the subject.. Dr Rengarajan

  • JR

    Name Hailu Leta, Organisation Aggar Microfinance on 31/5/13

    Type your comment here...the information generated from this study will be helpful for microfinance instituions and other financial institutions that are working with poor clients, because it helps to design products that suit the needs of the poor households.

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