National Strategies Of Financial Education – Way Forward
Financial education is a planned programme of learning opportunities and experiences designed to increase the financial capability of students from every social and cultural background. This is the ability to manage one’s finances and become a confident, questioning and informed consumer of financial services that are available in the market.
Money awareness programme
Financial education is a money awareness programme. The goal is to teach people about money, saving, creating livelihoods, gaining employment and becoming an entrepreneur through practical learning. This is done by giving them an opportunity to open a bank account, to visit a bank for discussion of financial planning, participate in a retirement opportunity at the community level, and connecting them to small and micro enterprise projects of a financial institution.
Financial education helps to take a wise financial decision, make payment of bills on time and manage one’s wealth, which helps potential borrowers to support livelihoods and economic growth, improve the financial system and reduce poverty. It also provides greater control over the people’s financial future, make more effective use of financial products and services, and reduce the vulnerability to overzealous retailers or fraudulent schemes.
Facing a financially educated people, financial regulators are forced to improve the efficiency and quality of financial services. This is because a financially literate population can create competitive pressures on financial institutions to offer more appropriately credible, priced and transparent services, by comparing options, asking the right questions and negotiating more effectively.
Financial service users on their part are able to evaluate and compare financial products, such as bank accounts, saving products, credit and loan options, payment instruments, investments and insurance coverage so as to make optimal decisions.
I have been witnessing the financial education movement since 2012. This is particularly important for the current economic climate. While giving training and workshops, many young people said that they were worried about the future financial plan and financial crunch and their impact on their lives, now and in the future. Many of them expressed concern about start up business, education loans, family dependency and so on.
The financial education movement has helped ease such fears. It has enabled them to develop not only an understanding and awareness of money, but also the skills, critical judgment and resolve to manage money more effectively. It is important in the ever-changing economics of Nepal that we live in that people understand how to make the most of their money, and this works best when national strategies of financial education of the Central Bank of Nepal take the lead.
Financial education in Nepal, measured by the access of the adult population (15 years+) holding an account in a formal financial institution, is around 17 per cent (compared to 44.9 per cent in Europe and Central Asia). According to a survey of Nepal Rastra Bank, a large portion of the population is not aware of specific financial products. The number of account holders in financial institutions is impressive, but loan takers and saving habits of those people from a formal financial institution are very low.
An electronic payment system has been still struggling to spread with the advancement of new technology. There are more than 150 financial institutions across the country. If we wish to navigate through the financial barriers, people should be given financial education to avoid the traditional dependency of the people on the local money lenders.
National strategies of financial education can have a very positive impact on the young generation’s attitudes towards finance and knowledge of financial matters. In particular, workshops conducted for the young generation and community people before and after giving personal finance education lessons showed that policies of financial education can make a significant difference to their attitudes towards saving and borrowing and can make them feel more confident about managing their own money through regulated and guided banking institutions.
Having such strategies is important to ensure that personal finance education becomes embedded within the Banking CSR to give them ownership of planning and to coordinate the delivery of personal finance education lessons to the customer and expected consumers. The main reason behind advocating this is that it can help provide materials, resources and help in planning or delivering personal finance education lessons or activities.
A national strategy is a set of plans and policies that address how people could have access to finance and maintain their personal financial decision and become economically empowered. It helps financial institutions and educational institutions to make long-term informed financial decisions on education. It can give an opportunity to the people about the knowledge, skills and confidence they need to make good financial decisions and improve their financial relationship.
National strategies could be instrumental to provide access to finance to those people who have limited knowledge and understanding of financial products and concepts on a wider scale. This may have super positive consequences not only on the individuals’ and households’ future financial well-being, but also on the long-term stability of financial and economic systems.
During the “Student with Governor” programme that was held during Global Money Week 2016, it was revealed that Nepal Rastra Bank was going to publish its very own national strategies of financial education. Hopefully, the central bank of Nepal will be able to recognise the importance of financial education through legislation. This will invite different stakeholders for cooperation and implementation.
Its main motive should be to develop a roadmap to achieve specific and predetermined objectives within a set period of time that provides guidance to the financial institution to run programmes that can guarantee effective use of financial services.
It’s widely known that increase in financial literacy could help individuals make informed decisions regarding financial services. Given its low impact in Nepal, more advocacy and then investment should be pumped towards financial literacy programmes so as to increase its effectiveness, which can only be measured through its impact on access to financial services. It is almost new for Nepal, so we should begin by launching campaigns to create awareness among the financial institutions, individuals, community, agencies and stakeholders.
A national strategy of financial education is fundamental for financial inclusion. It will help to pull more people from the excluded category and the informal strand towards the formal and semi-formal strands. This will also help increase financial inclusion in the country.
(Writer is Global Youth Financial Education Award Winner 2015)