Financial Literacy: A Step for Clients towards Financial Inclusion

3. Consumer protection and awareness;
Consumer protection is a cornerstone of financial inclusion, leveling the playing field
between suppliers and consumers of financial services (Alliance for Financial Inclusion,
2010). While both have their respective roles and responsibilities, government is the
ultimate third party protector, especially in the absence of effective consumer advocacy
organizations. Public agencies such as central banks, superintendents of banks and policy
makers must ensure the consumer voice is heard. In addition, government must provide
the legal and enforcement muscle to supersede both financial institutions’ advantages of
power and their inherent conflict of interest in protecting consumers (Can financial
institutions be really committed to educating and empowering consumers to compare and
choose products across competitors?). Governments can embrace financial education in
form of public campaigns to broadcast key messages about consumer rights.
Thus, financial education and the financial literacy it builds are a winning proposition at
multiple levels, for multiple stakeholders. On an individual level, financial literacy helps
households to use scarce resources more effectively, choose the financial products that
best meet their needs and become pro-active decision makers. At the institutional level,
informed consumers make better clients, lowering institutional risk and contributing to a
stronger bottom line. At the market level, financially literate consumers are a key element
in effective consumer protection; placing pressure on financial institutions for services
that are both appropriately priced and transparent. (Nelson and Wambugu, 2008).
With multiple stakeholders, financial education is beginning to fill an heretofore empty
space in the movement towards financial inclusion. Section IV examines financial
education experience in developing countries around the globe, with examples of
programs from all three stakeholder groups described above that show how program
objectives shape the type of financial education offered.
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