Importance of focusing on personal finance in volatile economy

From left: Certified Expert in Financial Inclusion Policy/Lions Club Colombo Host 306A1 (2021-22) President Asitha Pinnaduwa, HNB Executive Director/COO Dilshan Rodrigo, CB Deputy Governor Yvette Fernando, Ceylon Chamber of Commerce Chief Economist Shiran Fernando, and ADB Financial Sector Specialist Manohari Gunawardhena 

Lions Club Colombo Host District 306A1 recently concluded the second session of the Money Matters webinar series – ‘Money Matters 1.1 – Does Personal finances still work in our changing economy’. The webinar series is part of the Lions Club’s efforts to optimise financial literacy and inclusion around the country. 

The highly insightful session was facilitated by a distinguished panel of speakers including Central Bank (CB) Deputy Governor Yvette Fernando, Asian Development Bank (ADB) Financial Sector Specialist Manohari Gunawardhena, Hatton National Bank Chief Operating Officer/Executive Director Dilshan Rodrigo, Ceylon Chamber of Commerce Chief Economist Shiran Fernando and moderated by Certified Expert in Financial Inclusion Policy/Lions Club Colombo Host 306A1 (2021-22) President Asitha Pinnaduwa, who enlightened the audience to a wealth of knowledge on personal finance, alternative investment options, role of regulators etc. 

Pinnaduwa gave a fitting introduction to the session with insights on Sri Lanka’s economic background since the COVID-19 outbreak, before moving on to discuss in detail with the speakers. He went on to discuss about the importance of personal finance, managing income and how economy affects personal finance. He suggested that becoming financially literate can help an individual to manage income, make well-informed financial decisions, and distinguish good financial advice and more.

Answering a question on what personal finance is and why it is important to citizens, Rodrigo explained that personal finance in a nutshell is about having financial independence, having enough money to live, save for retirement and invest to gain higher profits. When it comes to investing, many Sri Lankans are used to deposit in banks. Instead, he suggested to look for alternative investment options such as the stock market, unit trusts, lands, etc., where the investor gains a higher return, even though it takes a longer duration to yield profits.

He also emphasised on the need for individuals to focus on their retirement plans early rather than waiting till 55 or 60 years and the role of financial institutions in encouraging customers to look for retirement plans. As suggestions, he pointed out that investing in diversified financial institutions without sticking to a single financial institution will be beneficial for customers.

Fernando, in his turn, interpreted economy as an interaction between different players, including the general public who are consumers and service providers who provide goods and services. He pointed out that the country’s economy is undergoing a challenging period and how it affects the decision making of individuals. 

On the subject of interest rates, he spoke about the initiatives taken by the CB to support the economic recovery by lowering interest rates, which provides an ideal opportunity for customers to invest. He shared valuable insights on how customers can decide their investment plans based on the country’s current economic situation and their personal requirements. 

Gunawardhena, answering a question posed on why people are reluctant to invest in the stock market, said that trust, confidence and transparency play a key role in the decision to go for alternative investment options. She emphasised that the attitude towards investments and financial literacy are two things that matter in this regard. In terms of financial literacy, she was of the view that Sri Lanka has some way to go despite the continuous efforts taken by the CB to enhance the country’s financial literacy. 

She touched up on the regional best practices in personal finance, drawing examples from countries such as India. As for the best practices, she stressed on the fact that education on financial inclusion needs to be a part of the school curriculum and suggested that financial inclusion should be approached from the young ages, so that everyone can be responsible of their money and how they invest it. She also encouraged the practice of saving among the youth. 

Yvette Fernando went on to emphasise the importance of financial literacy and the continuous measures taken by the CB to enhance financial literacy in Sri Lanka. She touched upon the role of regulators in the personal finance segment. The regulators have introduced several prudential requirements, including a minimum capital, governance process including documentation, monitoring and reporting processes etc., to safeguard personal finance segment. 

With regards to the responsibility of the general public before dealing with a financial institution, she insisted on the fact that customers should only deal with authorised financial institutions merely for their safety. She also emphasised on doing background research about the financial institutions before dealing with them and gain sound knowledge about financial instruments, diversification and ‘high risk, high reward’ principles etc. She also talked about the customer protection initiatives taken by the CB in ensuring transparency in the financial institutions’ operations etc.

The webinar also featured a Q&A session towards the end, which resolved few of the common concerns faced in personal finance. The next webinar session themed ‘Money Matters 1.2 – Personal Credit – The good, bad and ugly’ will be held on 11 September.