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.