Fatima can’t read, write and barely knows numbers. Her now deceased husband generally handled all the money in the family.

Increasing financial literacy during the pandemic essential for India’s recovery

Reportage. In Indian megacities millions of people have no access to banking services due to lack of knowledge or technology. Lack of universal education plays a big part.

Pia Heikkilä Photo Pia Heikkilä


Trucks, rikshaws, cars, even cows, all jostle for space on one of Delhi’s main highways Mathura Road. The noise from the traffic is deafening and fumes sting the eyes.

Fatima sits on her bed on the pavement.

“I live here,” she says, smiling. “Where else can I go?”

Fatima doesn’t know her real age, nor does she have an address. She says she is originally from the city of Lucknow, Uttar Pradesh, but she moved to Delhi decades ago with her now deceased husband. She gestures behind her, in an area known as Nizamuddin Basti, a known slum district.

“We came here after some relatives found us work. We had a small shanty home over there.”

Her three children are now grown-up and live far away, she doesn’t know where. Her husband died “some time ago,” she says.

The family lived on her husband’s meagre, uncertain income. He was a daily wage earner who worked as a labourer and carpenter, doing odd jobs here and there.

After her husband’s death, Fatima’s income ran dry and she was kicked out onto the streets where she has lived from hand to mouth, accepting support from the local mosque and occasionally getting some financial support from her son.

“He sends money by phone to the tea seller,” she gestures to her right.

She is unaware of the exact process, however. The tea seller takes a cut, but Fatima does not know how much because she can’t read, write and barely knows numbers. Her husband didn’t have a bank account and he generally handled all the money in the family.

She says she needs around 1,500 rupees (€20) a month to live but she worries about her future.

“Nowadays there is this disease and I am worried I will have to go to hospital. Who will take care of me then?”

Slowdown to hit the poor most

Fatima’s case is one of millions in Indian megacities like Delhi, where the poor or marginalised have no access to banking services due to lack of knowledge or technology.

According to the global rating agency Standard & Poor’s, less than one quarter of adults are financially literate in South Asian countries, and do not understand even the basic banking concepts. India is home to 17.5 per cent of the world’s population but approximately three thirds of its adults don’t have basic financial literacy skills, according to the Standards and Poor’s survey.

Once aware of the options, individuals realise that borrowing from formal systems can unlock opportunities.

Most transactions are still done with cash, loans arranged through families and friends and gold is hoarded for future security.

Understanding the region’s culture can help explain the lack of financial skills development. Lack of universal education plays a major part.

Then there is mistrust.

Lower-income workers in India generally do not trust banking authorities, which are mainly seen as a threat due to taxation or corruption. This lack of trust is compounded by the fact that many lending institutions have collapsed in recent years due to junk loans and irregularities, so people fear that their money could disappear overnight.

A nation’s financial literacy and stability are often seen as two key aspects of a healthy economy.

Financial literacy enhances individuals’ ability to ensure economic security for themselves and their families, but this means more than just having a bank account.

“It is a powerful way for the masses to gain access to formal financial systems and improve their monetary prospects. Once aware of the options, individuals realise that borrowing from formal systems can unlock opportunities, which not only help increase their wealth, but also increase their saving capabilities,” says Dr Venugopal Reddy, who leads a pilot project in financial literacy for the Indian government.

The difference between rural and urban areas is vast when it comes to financial literacy. People living in the cities have had to adopt digital tools faster than those living in isolated areas.

“While there has been an evolution of sorts in the urban and semi-urban areas, it is the masses in the hinterland who are missing out on the benefits,” Dr Reddy continues.

Need for financial literacy now crucial

The global economic situation today is more unpredictable than ever. Those who were living on meagre earnings before Covid, are likely to experience real hardship, even hunger, now that the virus is spreading fast.

India currently has the world’s second highest coronavirus count after the US with more than four million cases and with nearly 100,000 new infections recorded daily.

The United Nation’s International Labour Organization (ILO) says that about 400 million workers from India’s informal sector are likely to be pushed deeper into poverty due to Covid-19.

Helping the country’s poor to become self-sufficient and better prepared could prove to be the best weapon against the deadly virus.

Empowering the poor is vital to getting the country’s economic growth back on track.

“This pandemic is as much a social and economic crisis as it is a humanitarian one. Considering the uncertain path that lies ahead, helping the country’s poor to become self-sufficient and better prepared could prove to be the best weapon against the deadly virus,” says Shweta Saini from the Indian Council for Research on International Economic Relations (ICRIER), which has made calculations of the effect of Covid on India’s poor.

Financial literacy is one of the tools that can help people get jobs. Companies are more likely to employ someone with a bank account and with basic numeracy skills.

Adult education almost at standstill in India

India has for a long time tried to tackle the problem of its unbanked masses. It has introduced several nationwide initiatives to get people into the digital payment world and promoted platforms such as the United Payments Interface as part of a drive to accelerate financial inclusion.

Before Covid, the Reserve Bank of India set up financial training pilots programmes, the training of trainers, and harnessed social media to drum up more interest.

Giving away cash deposits can be one way of incentivising people to take up banking. Among the ‘unbanked’, a significant number are women.

In traditional parts of India, women are seen as homemakers and do not make monetary decisions beyond household expenses.

But the government has understood the importance of teaching women financial skills, especially during an economic crisis, says Dr Reddy.

Sending benefits to women ensures that the funds are spent on household goods and services, education and savings.

“What the government knows, and research affirms, is that sending benefits to women ensures that the funds are spent on household goods and services, education and savings.”

Therefore, as part of its Covid stimulus package, the Indian government announced that it would transfer 500 rupees a month to all women with Jan Dhan (a type of basic bank account), to help them manage household expenses during the lockdown.

State efforts have been getting support from NGOs and independent education institutes. There are a number of charities that work in Delhi alone to improve people’s financial literacy.

“People on low incomes need products well suited to their needs and education to adapt to these financial services. Bringing this about requires attention to human and institutional issues such as quality of access, affordability of products, familiarity and comfort in use, sustainability for the provider of these services, proper training and outreach,” says Dr Reddy.

But now resources are scarce. All face-to-face training has stopped and most NGOs don’t have the funds needed to create online courses and spread awareness about them.

One surprising hero is social media. Indians are avid users of various platforms and, in particular, local language videos on financial training on YouTube are hugely popular.

The Covid pandemic is not showing any signs of slowing down in India but is rather set to have a much longer-term effect on its economy than previously predicted. However, a more systematic approach to training adults to use financial tools is required to prevent the country’s marginalised people from falling deeper into poverty.