– Patna reports lowest literacy levels with only 22% of borrowers aware of their CIBIL score, followed by Kolkata (25%) and Mumbai (25%), reveals research conducted to understand financial literacy levels
– 76% of borrowers do not know the amount of their interest on the loan, according to a study
– 50% of respondents know about mutual funds; Kolkata leads the research with 66% of people aware of mutual funds, followed by Delhi at 61% and Mumbai at 53%
– 74% of respondents are willing to take financial literacy courses to better manage their finances
The ongoing pandemic has had a drastic impact on the economy and people in all walks of life. With new reforms, policies announced regularly, a large part of the population remains unclear and confused about their various financial aspects. Financial inclusion is essential to the success of every nation and financial literacy is an important step towards an inclusive nation.
Home Credit India, a local branch of the international consumer credit provider with operations in Europe and Asia, conducted research in 7 cities, to understand financial literacy levels among borrowers. Almost 1,000 respondents were interviewed for the survey.
Research has found that 52% of borrowers understand what a CIBIL score is and its importance. The CIBIL score is a parameter that helps to understand the eligibility of borrowers for loans. It is interesting to note that this group has already taken out a loan and still does not know CIBIL. Despite this, 68% of respondents did not know their CIBIL score. The numbers were below the country average in Patna with only 22% of borrowers aware of their CIBIL score, followed by Kolkata (25%) and Mumbai (25%).
Research also found that 76% of borrowers did not know the amount of interest on their loans. They are only interested in the amount of EMI to budget monthly, but it was found that they did not know the amount of interest separately. Only 17% of borrowers in Delhi, 19% in Jaipur and 24% in Mumbai knew the amount of interest on their loans, upon request.
When inquiring about interest calculations, a majority close to 43% in the 7 cities said they had only partial knowledge of how their loan interest was calculated. The respondents were worried and kept track of their EMI amount while knowledge of the interest rate charged and the amount of interest was low.
Speaking about the research, Mr. Marko Carevic, Director of Marketing and Customer Experience, said: “Financial literacy is imperative for the economic progress of any country. This financial literacy research aims to better understand our clients’ financial management skills. Research has found that a majority want to better understand their finances and want to take financial literacy classes. It helps us build a meaningful financial literacy program that will help our employees understand the basics of personal finance like budgeting, good debt vs. bad debt, when to borrow, etc. As a responsible lender, we regularly engage with our clients and the community at large to educate them on the important aspects of financial management and borrowing. Our Paise ke Pathshala financial education program creates an ecosystem where people can make informed, thoughtful, and beneficial financial choices at every stage of their lives. The program aims to encourage people, to set life and financial goals, and to provide them with the fundamentals of money management to increase see their financial awareness and their success. We want to expand financial inclusion in India. “
The research also found that 50% of those surveyed were familiar with mutual funds. 66% of Kolkata people know about mutual funds, followed by 61% in Delhi, 53% in Mumbai, 50% in Patna, 43% in Bhopal, 41% in Hyderabad and only 37% in Jaipur.
A whopping 95% of borrowers said they fully understand their passbook and its elements. Bhopal leads this trend with 98%, followed by Jaipur (97%) and Delhi (96%).
Given the low awareness rate, it was heartening to learn that 74% of respondents would like to receive financial literacy classes to be able to better manage their finances. Interestingly, only 44% of respondents understand the difference between credit and debit cards. Considering frequent visits to the bank branch, 87% of passbook users know the meaning of savings account and 80% understand the meaning of checking account. Women interviewed for the research were found to have a lower understanding of finances compared to men.
Home Credit serves 11.3 million customers with a plethora of hassle-free financing options that can be used from a strong network of approximately 31,500 points of sale (PoS) in 350 cities. The company is committed to fostering credit penetration and expanding financial inclusion through responsible lending in the country.