Financial Literacy

Finance is defined as the management of capital and it’s involvement in investing, saving, lending, borrowing .

Financial literacy is knowledge about how money works. It may includes financial management, budgeting and investing. In context of Nepal Financial literacy is very low and latest exact data is unavailable

Nepal’s High financial literacy rate (65.9%) with large proportion of economically active population (57%) (Social Statistics 2018 )

But low level of literacy among rural people compared to urban people, especially in higher level of education.

According to Nepal Rastra Bank, Financial literacy refers to “Knowledge and understanding of financial concepts
and risks, and the skills as well as motivation and confidence to apply such knowledge and understanding in order to make effective decisions across a range of financial contexts, to improve the financial well-being of individuals and society, and to enable participation in economic life” (OECD, 2015, p. 9). It is a combination of awareness, knowledge, skill, attitude and behavior necessary to
make sound financial decisions and ultimately achieve individual financial wellbeing.

Nepal Stylized Facts on Financial Literacy and Inclusion

  1. Adults having access to formal financial services: 61% (40% formally banked and 21% using other formal products)

2. 19.9% of Nepalese adults are financially excluded: have no account because financial institutions are too far away. (The World Bank, 2017)

3. Only 6.3% of people use banks and financial institutions for gathering funds to go abroad. (Nepal Rastra Bank, 2016) 52.8% of the households receiving remittance take credit of which 37.3% have taken it from BFIs (Nepal Rastra Bank, 2016).

4. 60.9% of Nepalese hold at least one savings account in a commercial bank, a development bank or a finance company (A, B and C class of financial institutions in Nepal). (Nepal Rastra Bank, 2019).

5. Presence of banks in local level of Nepal: 743 out of 753 as of mid-December 2019 (Nepal Rastra Bank, 2019)

6. Presence of banks in local level of Nepal: 743 out of 753 as of mid-December 2019 (Nepal Rastra Bank, 2019)

7. Branch network of BFIs are at 9,297 as of mid-December 2019 (Nepal Rastra
Bank, 2019)

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