How vibrant financial system uplifts society?

The Liberty Discussion Series on financial system in society commenced on April 30th at Gaia Restaurant and Coffee Shop, Thamel. The members of the group sat down in an informal setting to discuss about how finance benefits society and secures political and economic freedom. The discussion was based on Mark A. Calabria’s article ‘Society, Finance and Freedom.’ The discussion began with the attendees floating the issues they wished to discuss. The following were the agenda of the discussion:

  • Financial inclusion in Nepal—issues and challenges
  • The logic behind the correlation between financial freedom with that of democracy and personal freedom.
  • Finance as a means to something but it is an end in itself
  • How finance helps us connect with future self
  • The financial crisis—wrongdoing by financial institutions or wrong policies of the government
  • Finance as a means to certainty

Some of the takeaways from the discussion were:

  • There is a big challenge of financial inclusion in Nepal. The government regulation requires banks to open branches in remote areas and also requires directed lending. But whether this has been beneficial to the people in those areas hasn’t been measured yet. This could crowd out local market solutions. Furthermore, there is big challenge with managing collateral for the common people while borrowing money. One way to solve this problem is through proper delegation of property rights.
  • There have been instances where financial innovation has turned those against reform into advocates of reform. For example, as mentioned in the article, people with financial asset holdings in the UK supported parliamentary supremacy over monarchist control.
  • There is an interrelated relationship between financial freedom and political freedom. In some cases, financial freedom leads to political freedom and vice-versa. According to Adam Smith, the best freedom is to be yourself. As finance helps us be ourselves it promotes political freedom.
  • Finance helps us connect with our futures selves through different financial products and access to credit. For example, students can reach their academic potential through student loan. Similarly, an entrepreneur can start a business by borrowing from a bank. Finance also helps us to improve our lifestyles.
  • The financial crisis happened not just because of the wrongdoing of the financial institutions but because of wrong government policies. For instance, creation of Freddie Mac and Fannie May as well as a liquidity glut in the financial system could have created incentives upon which the financial actors merely responded.
  • Finance could be a means to certainty. For instance, financial contracts and insurance minimize risks and promote certainty.