James Shapiro of the Bombay Stock Exchange discusses the need for financial education in India, and explains some of the initiatives underway to try to fill the knowledge gap.
Date: Mar 2011
However, a key problem, he explained, is that outside of a few big cities, most people aren’t exposed to the markets.
As a result, there is a large need for advice and education generally. The Bombay Stock Exchange, for example, believes that education is required to grow and deepen the market, and to include more people within the financial system, said Shapiro.
The Exchange has its own training institute, for instance, to give people the opportunity to learn about the markets, and to train and become participants within it.
How to better educate people
According to Shapiro, the Exchange is trying to penetrate smaller cities and towns through its investor protection fund – which is where the regulator has told the Exchange to take a small portion of its fee revenue to be used towards educating investors.
Such programmes are quite basic in terms of individual asset classes and the dos and don’ts of investing, he explained. They also focus on the principles of regular savings plans.
When it comes to education focused on the benefits of investing in mutual funds, Shapiro said the industry is still relatively small in terms of mutual fund assets, especially in the equities space.
As a result, there are opportunities in terms of educating individuals on the benefits of diversification through mutual funds and exchange-traded funds, rather than through individual securities.
To be able to overcome the infrastructure challenge, however, Shapiro said it is critical to use web-based platforms and mobile devices more and more to be able to educate individuals.