Financial Capabilities and Poverty Alleviation: The Role of Responsible Financial Decisions

The recent financial crisis has shown a very low level or even lack of financial capabilities in most countries, but especially among low educated, low income and rural regions populations. Developing financial capabilities, which may lead to responsible financial decisions, is a part of growing responsibility of financial sector as well as financial supervision authorities. The topic, which is hotly debated by the World Bank, G20, European Commission, OECD, has also become a vital point of national strategies (i.e. Canada, UK, US, Australia, New Zealand) in the context of poverty alleviation and decreasing income distribution. Moreover, The importance of financial capabilities development is even more important in the face of overwhelming financialization, which led to an enormous increase of complexity of financial products, and showed that financial inclusion may not be the best solution to fight against social exclusion and poverty The article is a part of the discussion focused on CR, especially the so-called CSR 2.0 (see: Visser, The age of responsibility. CSR 2.0 and the new DNA of business, Chichester, Wiley, 2011), with moral philosophy and business ethics as a part of development economics research (compare with, Nussbaum and Sen, The quality of life, Clarendon Press, 1993; Sen, On ethics and economics, Blackwell, 1987, Inequality reexamined, Russell Sage and Harvard University Press, 1992; Development as freedom, Knopf, 1999a; Commodities and capabilities. Oxford India Paperbacks, Oxford University Press, 1999b; Nussbaum, Creating capabilities. The human development approach, The Belknap Press of Harvard University Press, 2011), as well as Ecological Rationality in developing effective decision heuristics (Gigerenzer and Todd, Simple heuristics that make us smart, Oxford University Press, 2000; Gigerenzer et al. Heuristics: The foundations of adaptive behavior, Oxford University Press, 2011; Todd and Gigerenzer, Ecological rationality, Oxford University Press, 2012). In this paper I explore financial capabilities concept, position that in the discussion about responsible financial decisions, explain its important role in poverty alleviation, and present possible institutional approach to financial capabilities building. This approach is based on three key processes’: economic socialization, financial education and financial instruments which are extensively discussed in the chapter. The central point in discussed Institutional approach is heuristics (decision’s rules). Heuristics which are a vital point of ecological rationality approach to effective financial decision building. The analysis carried out by the Author focuses mainly on Poland, however the conclusions may be also of great significance for societies which have recently experienced radical socio-economic transformation.