Whether they have in mind first, second or third sector businesses, governments or charities, for-profits or not-for-profits, serious commentators are increasingly pointing to the need for financial literacy
on the part of all economic agents if they are to be able to operate effectively in today’s circumstances.
There is an urgent need to find ways that connect today’s excess liquidity to human
destinies so as to fund the initiative and creativity of human beings, young people especially. In this way, money can become generally available for wherever human beings have initiatives to undertake that are meaningful for themselves, their communities
and socio-economic life generally.
In such a context, whether those invested in are on the right or the left politically becomes an irrelevance. The borrowed capital appears as a liability on their
balance sheets; the asset is the ‘cash’ with which they are able to give expression to their intentions. More importantly, as befits an entrepreneur, the income an individual derives from his activity is treated as a reduction or withdrawal of
capital, not as a wage or salary.
A key consideration, therefore, is the financial literacy of the borrower, especially the young entrepreneur. Lenders' collateral needs to become an awakening to financial
literacy on the part of the borrowers of funds who, in effect, learn to act as their own financiers and auditors.
Financial literacy can be of a narrow, unquestioning kind that merely reiterates
existing assumptions and practices, many of which are becoming out-dated by events. Or it can be thorough-going, based on an awareness of the wider history of monetary and financial affairs and, in particular, the role of accounting as an instrument for goal
achievement and effective organisational management.
Financial literacy can also be top-down, theoretical and remote, or grounded in the up-to-date accounts, financial planning and cash-flow realities
of an existing business. Best of all is a business that one either owns or in some other way has a direct connection with, so that one can effect change by doing, especially by doing with regard to one’s own activities.
Financial literacy in this wider sense is also a powerful learning path, teaching one to be the author rather than victim of one’s circumstances. Indeed, it is often the lack of financial literacy and its corollaries, long-term profitability
and effective cash-flow management, that prevent goal achievement.