Financial literacy is defined as the possession of knowledge and skills by individuals to manage financial resources effectively so as to enhance their economic well-being. It also enables financial service providers to better understand their products, the associated risks and the needs of their customers. It includes trust, confidence and participation in the formal financial system.
Financial literacy occupies a center-stage in the quest to achieve financial inclusion, financial stability, economic growth and development. Inclusive growth in the economy can only be achieved where a larger proportion of the population participates in the financial markets. For this to happen, it is essential for the populace to know, understand and develop the ability to evaluate financial products and services as well as participate in the financial markets.
Financial literacy is also an essential requirement for consumer protection in the financial sector as it creates better awareness and understanding of policies, financial products, prices and practices.