Financial Education and Inclusion: The Role of Banks

Financial Education and Inclusion: The Role of Banks

Omar Alonso Patiño (Universidad EAN, Bogota, Colombia) and Laura Marcela Patiño Gutiérrez (UNICAFAM, Bogota, Colombia)
DOI: 10.4018/IJSECSR.2019010104

Abstract

Financial education is one of the aspects of economic development in countries that have been given great importance in recent years. It is considered that a country that increases the levels of financial literacy is a country that has a greater proportion of people who are banking and with this, the banking sector is dynamic and as a consequence the economy in general. Given this, banks have a great responsibility to develop alternatives that favor a greater percentage of the population using their services for which they should consider, not only the quality of services but also the interest charged for their loans and the retribution that has the money placed by each of its clients.
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Financial Education

Education has always been, but much more evident in recent years, one of the most important factors for the development of nations and accordingly, government policies have focused on ensuring the constant improvement of the quality with which children, young people, and even adults are being formed.

Strictly speaking, the greatest efforts have been focused on the development of skills and knowledge in reading, mathematics, and natural sciences. However, in terms of business development, the importance of financial education has been understood and by doing so, specific financial education programs that allow people to have some basic knowledge related to the use of money from an early age have been implemented from different international organizations and even governments.

In this sense, Hogart (2002) states that in financial education there are three fundamental elements that must be considered; the first one is the need to have the essential knowledge and necessary information about the administration of money and assets, services and products offered by the financial system (credit, savings, and investment) and taxes; the second is the understanding of those elements, evidenced by the change in the value of money over time and the use of interest rates, and finally, the articulation of these two, with knowledge, information and understanding of the concepts, which leads people to consider a decision-making process that involve planning, execution and evaluation of the same.

Thus, it is a logical strategy to strengthen financial education in order to ensure that a society educated in this area is able to generate greater opportunities for entrepreneurship, and broader options to guarantee the success of business initiatives that are developed in its interior.

Despite the fact that financial education is now considered a fundamental axis for the processes of formation of people, particularly of young people, its study and diffusion dates from few years ago, specifically, when the Organization for Economic Cooperation and Development (OECD) by 2005, publishes the first studies on financial education in its member countries.

For this organization, financial education is defined as: “the process by which consumers and financial investors improve their understanding on financial products, concepts and risks, and, through information, instruction and/or objective advice, develop the skills and confidence to be more aware of financial risks and opportunities, to make informed decisions, to know where to go for help and to take any effective action to improve their economic well-being “(OECD, 2005)

In this regard, Willis (2011) argues that the financial education is a fallacy according to which, the implementation of financial education programs is a politically correct decision, but the results are not the ones that are expected by its promoters, since they have not managed to considerably improve the behavior of users of the financial system. In addition, he argues that financial education programs have become a marketing tool rather than an activity that helps to solve financial problems.

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