Wednesday, March 20, 2013

Financial Literacy - Ways of Making People Aware of Financial Services

Everyone needs financial services, even if they do not have a single penny. This is because it is impossible in this day and age to live without money and, hence, without financial services. However, a tiny fraction of the world population uses financial services, because outreach of banks and other financial institutions is small and also because people simply do not know about this 'need'.

Urban dwellers often use formal financial services offered by banks, insurance firms, small credit agencies, but people in rural areas, especially those in developing countries, rarely do. Instead, they rely on informal financial services, which have plenty of downsides.

For instance, loan sharks are rampant in areas where formal financial services are lacking, and these opportunistic lenders simply rip money off the borrowers. In many areas, where formal saving account services are scarce, communities have come together to form informal saving groups, however, they lack proper book keeping and security is a concern.

It is all the more important, as a result, to teach people about the benefits and variety of financial services available to them, but that is not an easy task. In less developed countries, the main question is, how can we reach all these people, scattered over large geographical areas? To make matters more difficult:

    They have different levels of formal education,
    Speak a variety of languages, and,
    Have disparate access to media.

Here are some basic ideas that can help convey some measure of utility to different audiences at a national or regional level.

Channels for Financial Literacy Campaigns

Training sessions, workshops, ads, etc., can be delivered through the following channels:

    Radio - ubiquitous nature helps reach the masses
    National TV network - good geographical reach and low cost of subscription
    Mobile phones - especially useful in countries with mobile banking
    Local convenience stores and post offices - suitable for distribution of pamphlets.

Tuesday, February 12, 2013

Financial Advisor Strategies: Understanding Low Risk Investment Options

When you're considering your investment options you must consider the risk you are prepared to take and it is highly advised that you consult with a financial advisor. Cash and Bonds are the lowest risk assets classes.

Cash is low risk asset class and so, in general, the funds invested in cash will not see a fall in value through the investment period.

In exchange for this security however you should only expect to receive very low rates of return on your investment.

Given the low rate of return, quite often you will find that the rate of inflation may be running higher than the cash deposit rate. In this situation while the value of the cash may not fall, the true value of the money or purchasing power will decrease and so provide negative real returns.

The advantage to cash investment is that it tends to be the most liquid form of investment and therefore it is easily accessible. Typically cash investing would be used to provide for your emergency funds and your day-to-day funds.

Cash investment is predominantly carried out through Banks using deposit and current accounts.


Bonds are typically considered low to medium risk depending on the type of bond that you invest in. However, there are also high risk bonds available and so careful analysis of the type of bond you are investing in should be carried out.

What are bonds?

Bonds can be described as loans given to a Corporate or Government body for a set period of time after which the principle amount is paid back in full. The issuer of the bond may undertake to pay a rate of interest on the principle amount. This is can often be known as the coupon rate. Obviously the higher the coupon rate, the higher the returns will be on your investment.