Financial Literacy Training Not For Small Business Loans


By Luther Scat Lamang

My previous article put into perspective the relationship between SME lending and financial literacy. He specified the essence of the latter, as not being a guarantee of access to loans to SMEs.

Rather, it is a single requirement that must be met as part of the criteria defined by the banks as custodians of the K 180 million direct government intervention in the SME sector.

In exposing this topic, I have gathered a striking resemblance to another misconception surrounding the topic.

There has been a major public delusion as to the importance of training and its purposes.

This article continues to provide information on this error in judgment and possibly induce a change in perception on the part of readers.

Financial literacy training was started by Westpac Bank at the peak. It was later adopted and popularized by the Human Development Institute through its Personal Sustainability Program, the Port Moresby-based Ginigoada Foundation and the Central Bank’s Center of Excellence for Financial Inclusion.
All these institutions had a common mission: to ensure the financial inclusion of all Papua New Guinea.

The program aimed to ensure that individuals were aware of basic money management practices in the areas of spending, saving, budgeting and investing for the future, leading to achieving the overall goal of poverty reduction, debt free, wealth creation, minimizing the gap between the banked and the unbanked and general financial empowerment for all Papua New Guinea – whether in the formal or informal business sector, in the working class or not.

The vision to achieve these overarching nation-building goals gave rise to the need for financial literacy. Participants in these programs were motivated by a desire to acquire the financial knowledge and skills necessary to better manage their daily interaction with money and make informed financial decisions.

However, the dawn of the SME lending era over the past year has created an unintended influence of public perception on the importance of financial literacy.

The essence of this important training has dissipated from its primary focus of personal financial empowerment to one that is now pursued as a reward for SME loan eligibility.

A survey conducted by Lamang Business Consultants of its interns over the past 10 months revealed some fascinating statistics.

About 90 percent of those who completed the program applied for eligibility for SME loans, while the rest had a variety of other reasons.

Only a minority who had existing informal businesses said they needed to upgrade their skills in business finance and management. None attributed their intentions to the overarching goal of achieving personal financial success. These data assume that key messages about the importance of financial literacy training took a detour, confirming the trend notion that financial literacy training was aimed at SME loans.

It should be understood that business success has a direct root in the management of personal finances.

It is only when one understands the principles of good personal money management practices that one can be optimistic about the success of a business enterprise; highlighting why personal financial literacy is important to business success. The belief that financial literacy is a direct empowerment for SME lending is a sham.

This misinterpreted ideology was unwittingly introduced by banks as a measure to offer loans only to those who were financially sound in their business management practices on the basis of a prudent personal financial rating.

These business practices include saving, budgeting, cash flow, profit and loss plan, sales and income plan, balance sheet, accounting, taxes, insurance, banking, investments, debt service, accounting and other areas relevant to the business.

This misconception has been observed to be amplified by financial literacy advocates, who misinterpreted the core of the matter, thereby defeating the original goal for which personal financial empowerment was the primary outcome.

The term financial literacy refers to a variety of important financial knowledge, skills and concepts needed to make financially responsible decisions – choices that are an integral part of everyday life.

It is the confluence of these various financial components and the appreciation of best money management practices that one can avoid unnecessary debt and move on in life.

Although there are different levels of financial literacy training, depending on education and business background, basic personal finance in saving, budgeting and cash flow is most appropriate for Papua New Guinea. Guinea means to start their financial journey.

A solid foundation of financial literacy has a big impact on individuals as they seek to achieve financial goals such as children’s school fees, customary obligations, starting a business, retirement, vacations and travel. , and to be able to deal with unexpected emergencies such as deaths, medications, and class opportunities that come once.

On the other hand, being financially illiterate can lead to a number of disadvantages, such as being more likely to accumulate an unsustainable debt burden, either due to poor spending decisions or a lack of long-term preparation. . This in turn leads to poverty and other financial crimes. Financial education is the foundation of the relationship with money and should be seen as a lifelong learning journey. The earlier you start, the better the individual will be, as this is the key to success when it comes to money.

It is essential that individuals let go of their perception of mistaken beliefs that financial literacy training is only intended to access loans to SMEs. Advocates are advised to align their training results with the core objectives of the topic rather than using SME loans as a marketing advantage, which heightens this perplexity in the process. Financial literacy should be seen as an important driver of personal financial success in the future. It does not matter whether or not SME loans are available after completing this training.

It is above all essential that individuals be better equipped to properly manage their personal finances and progress in life.

Once personal finances are in order, then there would be optimism for business success – which then puts SME lending in perspective.

The author is the director of Lamang Business Consultants and can be contacted at 79918016 | 78528835 or [email protected]


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