Financial literacy vital
Global scenario more finance driven:
Sanjeevi Jayasuriya
At a glance
* Gradual increase in knowledge on financial market
*Financial literacy rate need to be improved
* Nearly 25-30 percent people depend on informed lending
Financial literacy is very important to the day-to-day life in
today’s modern world and the global scenario is more finance driven than
trade driven. Financial activities contribute more for the economic
development and the overall development of a country, said Institute of
Policy Studies of Sri Lanka Executive Director, Dr. Saman Kelegama.
The financial literacy rate in Sri Lanka needs to be improved if the
country is to benefit by the global financial activities. The knowledge
most of the people living in rural areas has is low on the financial
market, debt instruments and the Colombo Stock Exchange. They have the
traditional knowledge to engage in transactions with banks and not
beyond, though capital markets returns are higher than the interest
rates offered by the banks, he said.
A gradual increase in the level of knowledge on financial market is
there, but it is a slow process. The average of people in countries such
as Germany and France have knowledge on investment instruments. They
make a concerted effort to read the business pages to gain wider
knowledge and accumulate information to make prudent decisions, he said.
“It is necessary to shift portfolios to derive benefits from capital
market transactions. We need to have language proficiency as the English
language is a barrier for many. This has resulted in not venturing to
explore further on other saving schemes that give higher returns such as
the stock market, the property market, treasury bills and treasury
bonds, he said”.
It is important to create an awareness of the financial market among
the public to develop the market and increase the participation. “Nearly
25-30 percent of people depend on informal lending with higher interest
rates and we could avoid this situation, if the public is educated,” he
said. It is a positive move to incorporate study programs related to the
financial market, equity and capital markets in the University
curricula. The regional bank branches and financial institutions could
also play a role in educating the public to increase participation in
the capital market, he said.
Wealth Trust Corporation, Executive Director Mangala Boyagoda said
“as a country with a literacy rate as high as 92 percent it is important
to capitalize on this capability to improve our financial literacy”.
People need to have financial literacy in an advanced technological
world .Sri Lanka’s IT penetration is around 10 percent and financial
literacy is low as 2 percent, he said.
“We need to work towards educating the public and there is a long way
to go. We need to change our education system to incorporate practical
knowledge. Almost 50 percent of the Advanced Level students are
following the commerce stream and they would benefit from this. It is
necessary to provide training for the teachers too”, he said.
University of Colombo Professor of Business Economics, Prof. H.D.
Karunaratne said that it is essential for developing countries to have
financial literacy to direct the public on how to save money, how to
re-invest and how to accumulate returns.
“The reason for the developing countries to be poor is that we have
poor financial literacy. Our education system is not geared to
accommodate the necessary advancements in the financial sector. For
better economic development we need to improve financial literacy,” he
said.
“Our education system should be updated to match the changing needs
of the financial market. We also need to train our teachers to educate
the students in financial literacy. The country could benefit immensely
from a high financially literate population”, he said. |