‘Trust’ is a critical aspect that binds consumers and financial brands together. The confidence that regulatory template for consumer grievance redressal would be available on time, every time; and would be available as an affordable mechanism is a basic consumer-requirement.
( There is an entity in the Indian financial services space that’s hardly known outside of a few circles. An entity that has the potential to deliver financial literacy and consumer empowerment, if only all the BFSI regulators come together : in-spirit and transcend their hierarchy-differences & staff the entity well and with meritocracy. And no fresh government spends are needed. Guess who !! )
• Insure their life, property, health etc (Protection)
Easier way to simply bucket any product sold by this sector is to figure which of the LIP product it is ! (Lending / Investing / Protecting ). In fact our regulatory system is also based on similar concept
Lending by any bank / non-bank like NBFC / HFC / MFI is regulated by RBI.
Investment products like Mutual funds are regulated by SEBI.
Protection products come under insurance sector regulator – IRDA.( Pension products, while being an investment product, comes under PFRDA.)
Indian Financial Services’ best kept secret
It won’t be surprising, even if you are a BFSI industry professional or stakeholder in India, and not heard of ‘National Centre for Financial Education’ (NCFE). It’s been around for many years and not heard outside of few circles !
NCFE is a Section 8 (Not for Profit) Company promoted by Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority (PFRDA). The Board of Directors of this entity comprises of senior officials from the promoter-regulators. It’s genesis was with an apt vision and with a focussed mission “to undertake massive Financial Education campaign to help people manage money more effectively to achieve financial well being by accessing appropriate financial products and services through regulated entities with fair and transparent machinery for consumer protection and grievance redressal”.
NCFE & financial literacy
The first National Strategy for Financial Education (NSFE: 2013-2018) went by and a review of its deliveries was undertaken by the Technical Group on Financial Inclusion and Financial Literacy (TGFIFL- Chair: Deputy Governor, RBI) under the Financial Stability and Development Council (FSDC-Chair : Hon’ble Union Finance Minister). Based on this review as well as the market & policy developments including JAM trinity, the revised “National Strategy of Financial Education 2020-2025” (NSFE) has been put together by NCFE, to create a financially aware & empowered India. The NSFE document intends to empower “various sections of the population to develop adequate knowledge, skills, attitude and behaviour which are needed to manage their money better and plan for their future”.
Its recommendations are a progressive step towards better consumer engagement. They have mooted the idea of adoption of a Multi-Stakeholder Approach.
Hopefully this should mean that the regulators would pool in their ideas, resources, consumer literacy budgets, instead of present-day fragmented and piece-meal finance-vertical led approach; and importantly, with a sense of urgency. At present, each of these regulators have a different approach to consumers’ financial literacy, and have their own budgets &/ literacy-dissemination mechanism.
Some of the key recommendations from this report include:
Content
Financial Literacy content for school children (including curriculum and co-scholastic), teachers, young adults, women, new entrants at workplace/ entrepreneurs (MSMEs), senior citizens, persons with disabilities, illiterate people, etc.
Capacity
Develop the capacity of various intermediaries who can be involved in providing financial literacy
Collaboration
Integrate financial education content in school curriculum, various Professional and Vocational courses (undertaken by Ministry of Skill Development and Entrepreneurship (MSD&E) through their Sector Skilling Missions and the likes of B.Ed./M.Ed. programmes.
Simple Idea : “Certified Financial Entrepreneur“ (CFE)
Can we look at a concept of creating a national grid of micro-financial-entrepreneurs, leveraging the independent networks of BCs, Insurance agents, Points of Sales individuals, Mutual Fund distributors, etc. ? This necessitates that these individuals should be trained, certified, licensed and regulated to offer multiple finance products cutting across BFSI regulators.
This will improve the access of financial products to our vast population, especially those underserved or unserved today. It would also create financial entrepreneurship as a career for those individuals in those markets and potentially can create micro-businesses across India & offer employment to many more. Industry bodies can leverage their awareness-funding-corpus to create models to encourage financial entrepreneurship.
If we look at the insurance industry alone, the active agents are less than 20% of the total agency/distribution workforce, as single product earning is simply not viable to even pay for their household expenses. Can insurance Industry set aside few ‘bps’ of its industry AUM for consumer education?Mutual Fund Industry generates a corpus of over Rs 600 crores, of which majority goes to marketing. Can 50% be invested in offering internships to new financial entrepreneurs? This can potentially create 60,000 financial entrepreneurs, with sustenance-stipend support for first 6 months !Can Banking industry set aside annually 10 bps (basis points) of their total assets for financial awareness & financial entrepreneurship programs ? On a current base of over Rs 2,00,000 crores, such a potential corpus could be game-changer budget, if spent right !
Can we merge the above ideas and have a relevant unified PPP for financial literacy & Financial entrepreneurship? This will not need government monetary support at all, as the money can be raised through Awareness & education budgets, as well as regulators’ consumer-literacy budgets.
It is time to bring together, various bits and pieces of financial literacy efforts, across all the BFSI verticals/industry programs / regulatory efforts, under one integrated approach; whatever they might be called now – be it “consumer awareness program” or “financial literacy outreach budget”, etc.
NCFE can play an impactful role as the (exclusive financial literacy) nodal implementation agency & work along with active collaboration of all BFSI regulators, Industry bodies, BFSI companies & private skilling enterprises on such employability & entrepreneurship initiatives. This would allow NCFE to integrate the certification programs of the various financial regulators to create a unified “Certified Financial Entrepreneur” (CFE) program.
NCFE can deliver only if it would create merit-based capacity for itself, to be able to allow for Multi-fold Multi-stakeholder efforts in war footing. Else it would need another NSFE project report to state the obvious, yet again, in 2025.
Imagine the power of such an universe of trained & licensed individual-financial advisors across Indian geographies, who can offer advise on all the financial verticals products . That could be the moment-of-truth for financial literacy !
—Srinath Sridharan is an independent markets commentator, startup mentor and CEO coach.
Original Article: https://www.cnbctv18.com/views/psst-its-a-secret-financial-literacy-10096901.htm/amp
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