Financial Education – Returns Rewards For Business
Financial inclusion was the main theme of the World Bank’s 2014 Global Financial Development Report (World Bank 2013). To no one’s surprise, the report noted that small and medium-sized enterprises (SMEs), and particularly informal businesses or SMEs in emerging markets, face significant financing constraints that undermine their contribution to employment, productivity growth and innovation. In South Africa, being financially literate has become as important as learning to read and write.
Financial education is one of the greatest bargains in life, as it is inexpensive, risks nothing and returns significant rewards for businesses.
In a 2013 global report conducted by the Associated Certified Chartered Accountants (ACCA) it was found that entrepreneurs with unlimited liability could, in theory, argue that their businesses are theirs to make or break, and may be putting the livelihoods of employees, family members, suppliers and customers at risk through their financial decisions; under many bankruptcy regimes they could do so without internalising most of the social cost. Hence the case for financial education is, if anything, stronger when it comes to entrepreneurs.
Further, local government forces have identified that the SME sector is a sustainable and forceful approach for attaining general goals such as employment and poverty alleviation. However, SMEs in emerging markets, including South Africa, face substantial financing constraints that undermine their contribution to employment, development and productivity.
In principle, financial literacy is the essential skill that you must develop if your goal is to build wealth and enjoy financial security. In the past, industry researchers have repeatedly stressed that financial capability is not a substitute for appropriate financial regulation, or professionally run and innovative financial institutions. Even so, it can complement all the above to produce better outcomes. As long as interventions are evidence-based, well-designed and well-resourced, the financial education agenda is as valid and as relevant to entrepreneurs as ever.
Ultimately, financial literacy provides greater control of an organisation’s financial future and reduces vulnerability to fraudulent schemes whilst allowing businesses to grow in strength.