Bankers, policy-makers and analysts have all accepted the need for financial literacy and its significance in the road towards wider financial inclusion. The practicalities of this belief have been further reinforced by studies on financial literacy initiatives and the financial needs of poor households at different points in time. The Reserve Bank of India, which has declared June 5 to 9 as ‘Financial Literacy Week’, with its announcement stressed on the need for financial literacy, which it admits, will bring forth financial inclusion for larger sections of the population.
While it has received a near-universal nod that MFIs make the perfect conduit in the process of financial inclusion, particularly in rural areas, microfinance providers have gained a position of prominence in policy documents and has gained more legitimacy with the government in their role as a pioneering force for providing financial inclusion. While this has found reflection in MFIs getting more mention in important policy documents, MFIs have also achieved success in initiating a form of social engineering that is not always noticed.
MFIs like VFS play three important roles in the process towards financial inclusion — helping impoverished households to meet basic needs, working on improving the overall economic situation of the household, and helping to empower women by supporting their entrepreneurial efforts with easy loans — that help create access to productive capital. This, when put together with human capital and mixed with education and proper training, can enable people to move out of poverty. MFIs also help in social engineering because simply by providing capital to a woman, her sense of dignity is strengthened and encourages them to empower others like themselves in turn, playing a positive role in the economy and society.
While this has received wide acclaim that spreading financial literacy is the first step towards wider financial inclusion, microfinance institutions have shown that in India, microfinance is not just a tool for financial inclusion. Even though the mission started off as one to include those people who are not serviced by commercial banking channels by providing them with unsecured loans, over time MFIs have turned out to be a conduit for social change, particularly in a country like ours, where a large percentage of the population live in poverty. VFS, being a leading MFI, runs several financial literacy programs, using these platforms to help individuals become self-sufficient so that they can have financial stability even in interior-most rural areas.