Every country still experiences economic growth as a result of having access to financial services, which also continues to act as an economic activity’s liquidity.
The issue of economic inclusion has taken center stage in federal discourse among politicians as economies around the world undergo rapid structural change following COVID-19. Therefore, one of the key economic indicators for equitable growth in any nation is economic participation.
It is impossible to overstate the advantages of a sound and robust financial services system in improving the distribution of financial opportunities among monetary agents, particularly the productive vulnerable groups. Financial inclusion holds enormous potential benefits for global financial markets. It is recognized as one of the key tools for achieving Sustainable Development Goals, particularly Goal 1 (no poverty) 2 (Zero Hunger), 5 (Gender equality), 8 (Decent work and economic growth), and 10 (Reduced Inequalities).
Financial education has earned the important position of being the cornerstone of diverse monetary systems that enable governments, businesses, and individuals to fully participate in the general financial system, manage their finances wisely.
The opportunity for reducing poverty, promoting economic growth, and improving the general well-being of the population can be created when financial education is promoted because it can close the gap between those who have access to financial service and those without.
The global financial market surroundings could greatly benefit from financial education. For instance, those who have received monetary education are usually in a better position than they would have been otherwise to make wise financial decisions.
People are typically faced with important career decisions and would likely need to choose between saving, investing, saving, purchasing coverage, and retirement planning. Participation in a proper economic structure is viewed as protection from peculiar dangers and unexpected surprises.
Access to financial services is viewed as a social stain, an obfuscation of fundamental human rights, and an impediment to innovation. Despite the advantages of having a solid understanding of finances, popular monetary poverty is reported globally.
With about 3.5 billion people regarded as financially illiterate, about one-third (33%) of the world’s population (just 1 in- 3 adults understand basic financial concepts) do so.
This is alarmingly high when compared to the 1.7 billion vulnerable people worldwide, which suggests that there may be around 1.8 billion economically illiterate people in the world. Denmark, Norway, and Sweden are the countries with the highest levels of financial education worldwide.
Ghana had a 32 percent economic education level, making it the continent with the worst performance. Ghana was one of the least scored/occupied the base spot, along with nations like Somalia, among others.
This suggests that despite all of the calls and initiatives made by stakeholders to support/engender rethinking of personal financial planning in these uncertain times, 68% of Ghanaians are financial illiterates, according to a Standard and Poor’s report on global financial literacy.
For example, despite their education, many people are still vulnerable to fraud, abnormalities, and Ponzi schemes. This can be attributed to the global issue of financial rejection, which is caused by large financial poverty rates, perhaps among highly educated people.
Additionally, financial institutions frequently focus their efforts on larger companies that generate sizable revenues rather than effectively educating the developing economies’ informal business.
Current discussions from developing nations, such as Ghana, emphasize the importance of financial literacy in fostering access to high-quality, reasonably priced financial companies. For instance, despite efforts to ensure that many people are financially included through financially innovative practices, the majority of the adult population in Ghana appears to be financially excluded (Account ownership and active usage with financial institutions excluding Momo). In order for financial inclusion in Ghana to achieve the desired results, it must be strengthened through ongoing monetary education initiatives.
Despite efforts to encourage economic addition, popular financial illiteracy still exists, making it vulnerable to fraud and irregularities. This phenomenon makes it difficult for economies to fully benefit from diverse economic systems and significantly contributes to the challenge of monetary exclusion.
Finding solutions to market failures like social hazards and bias information that alarm people and keep them from working in the financial field is necessary to promote access to affordable financial services for effective financial activities.
So, finding innovative and situation-specific solutions is necessary to address the problem of financial exclusion. Financial education is promoted by scholars, growth practitioners, and organizations as the most efficient way to close the considerable addition gaps among the uneducated and underbanked people in order to increase access to and use of financial services, particularly in developing countries.
Financial Exclusion
Access to economic resources has a significant impact on many socio-economic aspects and is not just an issue of economic convenience. Reduced financial risk, decreased income inequality, and lower unemployment rates are all directly correlated with a society’s ability to give its citizens access to financial services.
Regardless of income levels, educational attainment, or other relevant qualifications, inclusive economic mechanisms and processes work to ensure that everyone has easy access to a range of reasonable, secure, and suitable financial products and services.
These goods and services include fundamental financial services like savings accounts, repayment services, money transfer facilities, funds and loans, which can assist businesses and individuals in investing in life-changing initiatives like healthcare, education, or entrepreneurial ventures, risk and insurance management tools that you shield companies and people from financial shock, as well as financial education that provides people, from a variety of backgrounds, with the necessary financial knowledge and skills to create well-informed financial decisions.
In order to help impoverished families endure external shocks and distinguish between reputable financial institutions and false schemes, such as Ponzi schemes and untenable financial ventures, economic inclusion promotes fundamental habits for financial independence, self-reliance, and social and economic empowerment.
Even though it is required, the scope and scale of calculation of financial inclusion in recent times are flawed because simply having a financial product like an account with FI may be categorically regarded as such.
Instead, FI can be deduced when the owner of the financial product and/or service deliberately uses it for economic self-reliance and enterprising capacity development. Hence, a country’s dedication to promoting inclusive growth and achieving Sustainable Development Goals is crucially reflected in its commitment to monetary inclusion.
1.7 billion people worldwide still find themselves outside of conventional financial systems, classified as underprivileged or underbank, despite coordinated efforts from international development agencies.
The obstacles to financial inclusion are numerous, including verbal obstacles that make it difficult to communicate effectively with financial institutions, geographic restrictions that isolate rural populations, regulatory constraints that limit accessibility, and low levels of economic literacy. To realize the full potential of equitable development and sustainable development, it is essential to address these issues.
Financial education
Navigating the variety of financial products offered by organizations becomes a difficult job in an age where financial landscapes are becoming more complex, especially for those who are financially disadvantaged and pro-poor. People frequently have to make decisions that have a significant impact on their economic well-being due to the complexity of these financial services.
Recognizing this, financial literacy education becomes a vital tool for people to simplify the decision-making processes connected to these complex financial services.
Financial education is the capacity to make informed decisions about one’s finances and financial problems without feeling uncomfortable, make plans for the future, and react appropriately to life situations that have an impact on daily financial decisions, including those that affect the economy as a whole.
People who receive financial education education, particularly those from developing nations, are equipped with the knowledge and abilities necessary to understand the financial industry’s challenges. It aims to encourage knowledgeable usage of financial instruments and participation in financial industry.
Financial savvy includes, among other things, knowing where to find, control, preserve, and use money. Financial education is a fundamental requirement for everyone in order to prevent financial issues. Economic difficulties can arise if there are errors in financial management, such as a lack of financial planning or the use of credit, in addition to low income.
However, widespread economic ignorance prevents meaningful participation and keeps financial exclusion cycles going. Stress and small self-esteem can be brought on by financial constraints.
Governments all over the world are recognizing the economic education education’s revolutionary potential as a workable way to give people the tools they need to manage their finances and make wise decisions.
Economically literate people are in charge of their finances and can use them wisely for creative endeavors. This gives them the ability to properly manage their financial affairs, plan and manage life events like retirement and education, and encourage sustainable lifestyles.
Financial education influences a purchasing decision that prioritizes value.
The key is to instill in people the capacity to comprehend and use fiscal skills, and to foster financial literacy as a longtime asset.
This education goes beyond merely imparting knowledge; it also entails gaining the confidence and skills necessary to recognize economic opportunities and risks, make wise decisions, know where to look for assistance, and take efficient steps to enhance economic well-being.
Governments can open the door for a materially inspired community that is capable of actively participating in economic activities and contributing to an equitable and resilient nation by prioritizing financial education.
The Broken Link
The secret to enabling economic empowerment for both individuals and communities is financial education, which is frequently seen as the linchpin connecting economic exclusion and inclusion. It encompasses the sensible program of financial knowledge in real-world conditions and goes beyond the simple acquisition of knowledge about money.
A significant difference is created by a lack of enough financial literacy, which keeps people out of the economic world and exposes them to numerous difficulties.
Low economic education has far-reaching and significant effects. People without financial literacy skills frequently experience higher monetary costs, succumb to exploitative practices, make poor investment choices, and struggle with the challenges of managing debts. These effects cause a cycle of economic vulnerability, which impedes individual economic development and reduces the likelihood of economic prosperity.
Financial literacy levels are a bleak picture on global scale, with continual disparities that are especially pronounced in developing nations. The ubiquitous nature of economic illiteracy and its harmful effects on people and communities highlight the urgent need for extensive financial education initiatives.
Tips and Finish
In summary, it is clear that financial literacy is essential to Ghana’s efforts to achieve its financial inclusion goals and has the power to lift a community that is becoming more vulnerable and downtrodden. The following suggestions are made to increase financial education and economic participation:
1. Encourage organizations to implement effective financial literacy education programs, including the Bank of Ghana (BoG), NGOs, and financial institutions, among other industry players. These initiatives should aim to increase referral, sway decisions about green uptake, and do so economically for households. These programs can also help microfinance institutions (MFIs) find novel options and institutional structures, which helps policymakers develop policies that are economically empowering.
2. Increase household awareness, understanding, and depth of understanding of the advantages of financial participation. This action is crucial to removing social, cultural, and society barriers that influence demand-side choices related to financial participation. Addressing families’ low levels of confidence in their financial abilities and skills may remove significant barriers to the adoption of better economic practices.
3. Boost financial education initiatives and improve the financial decision-making abilities and knowledge of home heads. Increase financial literacy to help households with financial planning, resource allocation, record-keeping, fiscal discipline, responsible use of empty funds, and money sourcing for practical income-generating opportunities.
4. Increase awareness of financial education, wealth development, and wealth protection knowledge through exposure. To encourage better financial behavior and household financial status, involve stakeholders like MFIs, the BoG, Metropolitan, Municipal, and District Assemblies (MMDAs).
5. Start at the Junior High School level and continue through primary education by incorporating economic propriety and education education into the curriculum. This strategy instills economic skill in children from a young age.
6. pursue business development clinics in association with financial NGOs, MFIs, savings and loans institutions (S&L), and banks. To ensure accurate bookkeeping and wise enterprise management practices, work with third-sector players like market associations like GUTA.
7. To ensure efficient dissemination, decentralize financial literacy initiatives through neighborhood radio stations. Local actors and performers should also host community roadshows promoting financial wellness and health.
8. Include financial education and money creation instruction in Christian religion services on Saturdays and Sundays as well as on Sundays during Muslim congregational prayers. The need for fiscal discipline will be strengthened by this.
9. To help struggling MFIs promote financial inclusion and sustainability, create a special purpose vehicle (SPV) with support from the government and the BoG.
10. Banks should move beyond e-finance and adopt modern banking based on Fintech partnerships that you remove the restrictions of actual contact, smooth information, and intelligent customer interaction. As a result, the” triple-win” financial ecosystem will benefit from increased accessibility to financial information and knowledge through expanded contact points among other social media handles of vulnerable groups, improved bank performance, and encouraged sustainable development across the board.
11. intentional adoption and deployment of platforms/channels, digital infrastructure, and technology to broaden, enhance, or develop outreach at the most advantageous price. This can be accomplished by sharing geographical infrastructure with universal banks, telcos, and FinTechs in the vulnerable areas. Costs associated with tree expansion may be waived by BoG.
12. To encourage electronic financial participation, the government should think about abolishing the E-levy.