F inancial l iteracy as the K ey to F inancial i nclusion Ashoka M. L.,* Aswathy P.** Abstract Financial inclusion is one of the most important tools for the sustainable growth of an economy. The pace of fnancial inclusion will be determined by how the marginalised, without knowledge of banking, are taught the basics of dealing with money. Financial literacy is now becoming a new trend in developed and developing countries, to spread awareness on budgeting, money management, saving and investment, credit, insurance, and so on. Globally, only one in three adults show an understanding of basic fnancial concepts (Klapper et al., 2015). Many schemes are undertaken by the government to ensure an inclusive growth. There are many factors that act as barriers in attaining fnancial inclusion, with the lack of fnancial literacy at the top (Atkinson & Messy, 2013). There is no upper limit for fnancial literacy, as the developments and new instruments in the fnancial markets are growing. Therefore, the fnancial regulators are bringing initiatives to increase the fnancial literacy of the people so that they become wiser investors and assist in the wealth creation of the economy. The present paper is descriptive in nature and analyses the conceptual aspects of fnancial literacy and fnancial inclusion, with the help of secondary sources of information such as earlier literatures, news bulletins, books, and so on. Keywords Financial Inclusion, Financial Literacy, NSFE, NCFE INTRODUCTION A nation is said to be developed when all sections of the community enjoy the benefts of economic growth. Inclusive growth is the economic growth that is distributed fairly across society and creates opportunities for all. Skill development, fnancial inclusion, technological advancement, social advancement, and so on, are some of the key elements of inclusive growth. Reducing poverty, improving quality of life, and ensuring that all sections of the society enjoy the benefts of development are at the crux of inclusive growth. People would feel more motivated and involved if the benefts of economic growth is allowed to fow to all people, irrespective of their fnancial status. Financial inclusion is necessary for inclusive growth, as it leads to a culture of saving, which initiates a virtuous cycle of economic development. India, a fast-growing economy, is looking to establish a more stable fnancial system by gradually eliminating the barriers of limited or no access to fnancial services for a vast majority of the population which is poor in fnancial literacy. A growing number of studies and evidence suggests that fnancial literacy is one of the most important determinants of fnancial well- being. Financial literacy and education are the fundamental elements of fnancial inclusion and empowerment of people, especially with regards to changing the pace of innovative advancement and the progression of computerised fnancial services. Financial inclusion refers to efforts to make fnancial products and services accessible and affordable to all individuals and businesses, regardless of their personal net worth or company size. Financial inclusion can be seen as a catalyst to inclusive growth and sustainable development of the country. Whatever the inclusion measures adopted, fnancial literacy plays a key role in the adoption of fnancial inclusion. Therefore, we can say that fnancial literacy is the frst step towards fnancial inclusion. Financial inclusion will enable the poor of our country to open a bank account to save and invest, to borrow and to repay, and to take part in the credit. This will enable them to break the chain of poverty. Financial inclusion means people have access to and can use a range of fnancial products and services. The pace of fnancial inclusion will be determined by how the unbanked population can be taught the basics of fnance. The frst move in this regard was made with the Pradhan Mantri Jan Dhan Yojana with which 80% of the population has a bank account. Now the challenge lies in activating these accounts, as most of these accounts have remained passive since inception. Mere opening of an account will not help in attaining inclusion, because if account holders do not know how to optimise the fnancial options available to them, policies, schemes, and fnancial instruments are of little use. The only way to make people become actively involved in transactions is to educate them. Hence, fnancial literacy and education can be identifed as pre-requisites for fnancial inclusion. * Professor, Department of Commerce, University of Mysore, Mysuru, Karnataka, India. Email: ashokml.uom@gmail.com ** Research Scholar, Department of Commerce, University of Mysore, Mysuru, Karnataka, India. Email: aswathy.p@live.com (Corresponding Author) International Journal of Business Ethics in Developing Economies 10 (2) 2021, 01-06 http://publishingindia.com/ijbede/