Kathmandu, March 4
The Ministry of Finance (MoF) has started drafting the National Financial Literacy Policy to raise people’s access to financial services and ensure everyone has sound knowledge of savings, investment and borrowing.
The policy will primarily focus on making the financial sector more inclusive, generating awareness about the financial sector and products, development of infrastructure to raise people’s access to finance and entrepreneurship development.
“We hope these measures will raise financial literacy rate in the country, which, in turn, will make the
financial system more inclusive,” Surya Prasad Acharya, head of the Financial Sector Management Division at the MoF, told The Himalayan Times.
It is essential to make the financial system more inclusive because a big chunk of population, especially those who are
socially backward and from remote areas, has not been able to reap benefit from recent developments in the financial sector, according to Acharya.
Although the country’s financial sector has grown by leaps and bounds since the early 1990s, only around 40 per cent of the population currently has access to formal banking channel. Another 20 per cent of the population has access to other formal financial channels, while 21 per cent of the population relies on informal banking sector. The remaining 19 per cent of the population, on the other hand, still do not have access to any financial service.
One of the reasons for this is the rush to set up financial institutions in urban centres.
In Kathmandu, the Capital city, for instance, each bank or financial institution provides banking services to 3,654 people, says a report prepared by Nepal Rastra Bank. The situation is even better in Kaski, where each bank or financial institution (BFI) caters to 3,419 people.
In contrast, Bajura district, which ranks lowest in the country’s human development index, sees 72,026 people getting banking services from each BFI. The situation is the same in Bajhang, where each bank or financial institution provides banking services to 69,043 people, and in Kalikot, where each BFI caters to 48,962 people.
“This policy will recommend ways to bridge this divide and promote use of mobile and internet services,” Acharya said. “The ultimate aim would be to rope in everyone into the financial sector and ensure they have sound knowledge of savings, investment and borrowing.”
To achieve this goal, the policy will not only encourage people to park funds or borrow from formal banking institutions, but generate awareness about insurance products and the capital market as well.
Currently, only around 11 per cent of the population has been covered by insurance, while capital market has not fully grown outside of Kathmandu Valley. Also, many people are still not aware about bonds that the government floats, as a result of which these instruments are always undersubscribed.
“Our aim would be to generate awareness about all these sectors and financial products, and impart knowledge on how these sectors or products could be tapped to improve living standards,” Acharya said. “For this, we will push for overhaul of the school curriculum and adopt other measures as well.”
Among others, the policy will also include provisions to promote use of formal channels for fund transfers and recommend ways to develop entrepreneurship skills so that people’s reliance on financial sector increases.
“We hope these efforts will not only help in increasing financial literacy rate in the country, but support the development of agricultural sector, micro enterprises and rural energy sector, while promoting self-employment and skills development,” said Acharya.
A version of this article appears in print on March 05, 2016 of The Himalayan Times.