Introduction

Chapter 1 suggested that financial inclusion tries to encourage individual participation in the financial system. If people are to take part in the financial system, then they need both access to the financial system and the capacity and motivation to make financial decisions. This chapter considers financial capability. Financial capability refers broadly to the knowledge, skills and confidence of people to make financial decisions.

Financial capability has been a particular area of policy concern since the global financial crisis of 2007–08 (Commission for Financial Capability, 2015; National Strategy for Financial Literacy, 2015; Financial Investor Education Foundation, 2019). One of the main reasons for this is the view that shortfalls in financial capability are thought to have contributed directly to the financial crisis. O’Donnell and Keeney (2010: 362) comment that the global financial crisis ‘only serves to highlight the importance of financial capability. It can be argued that the sub-prime crisis in the US which had such global ramifications was a manifestation of poor levels of financial capability there.’ For example, people and households were thought to have made poor decisions and housing investments that created the conditions for the financial crisis.

Governments have sought to address these shortfalls in financial capability through policies such as financial education. Critics see the stress on financial education as part of an effort to create investorsubjects. As Santos (2017: 414) writes:

The attention paid to financial capability might be part of a wider concern with a focus on individual behaviour within welfare policy. This suggests that this is part of a shift in responsibility from the state to individuals. Donoghue and Edmiston (2020: 9) refer to the attention paid to active citizenship as being part of the ‘continued reorientation of social citizenship towards neoliberal, productivist ends’.