SUCCESSFUL financial inclusion strategies do not only give consumers access to financial services and products, but the wherewithal to understand what is on the menu and how and when to use the products.
Much of the global debate on financial exclusion has focused on lack of access, but there is growing acceptance that even where financial products are made widely available, they are of no use if the people don’t know how to properly apply them to improve their lives.
Thus, because we are living in a world where the majority of people the world over have inadequate knowledge about concepts related to personal finance and basic economics, financial education becomes an imperative in the fight against financial exclusion.
Due to the fact that concepts of Banking; Savings and Budgeting; Taxes; Investing; Pensions & Insurance are intimidating and foreign to the majority of us, strategies must be in place to make such concepts part of our daily personal, household or national vocabulary.
Indeed we must even go beyond just understanding the language of money, but how to practically use the knowledge of financial concepts to enrich our daily lives, communities and the nation at large.
Financial literacy complements financial capability.
Financial literacy broadly refers to people’s ability to understand money issues and thereby allowing them to make informed and effective decisions through their understanding of finances. It encompasses participation by people in economic life that maximises life opportunities and enables them to lead fulfilling lives from a financial perspective.
Financial capability on the other hand embodies the people’s knowledge and skills to understand their own financial circumstances, along with the motivation to take appropriate action. Financially capable consumers plan ahead, find and use information, know where and when to seek advice and can understand and act on this advice, leading to greater participation in the financial services market.
Financial capability is therefore a broader concept than financial literacy.
However, in order to attain financial literacy and capability, one must go through an education process that is not only theoretical, but largely practical in financial matters.
Therefore a sound financial education process is one by which financial consumers/investors will improve their understanding of financial service providers, their products, concepts and risks and, through a deliberate process of information, instruction and/or objective advice, to develop the skills and confidence and to become aware of financial risks and opportunities and therefore to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being.
What are the key elements of a financial education programme?
The Bankers’ Association of Zimbabwe is of the view that financial education must be a lifelong and continuous process that starts at an early age and continues throughout a person’s life.
An successful financial education strategy should recognise that as a person grows from childhood through adolescence to adulthood, they should be exposed to various aspects of personal financial management in a manner that meets their needs at each lifecycle stage.
The very first and most important element of a financial education programme is an outline or definition of its objectives.
Objectives are driven by a careful needs analysis of the various stakeholders, be they consumers, government and regulators, providers of services to mention but a few.
Being able to define the key objectives of a financial education programme will ensure its sustainability and success. Addressing real needs means that the programme will be supported at all levels by all the concerned stakeholders.
An example of good goals and objectives for a financial education programme could be:
- “To increase the informed and adequate usage of financial services by Zimbabweans in order to promote economic development through financial inclusion.”
The objectives that could arise out of such a goal statement could be:
- “To increase knowledge, awareness and usage of financial services and products and provider institutions;
- “To increased awareness by consumers of their rights, responsibilities and recourse mechanisms in the course of their interactions with the financial space;
- “To increase the trust and confidence in financial institutions” and so on.
- The Financial Education Programme must also specify upfront its various stakeholder groups that essentially make up its target audiences.
These could be:
- Youths in colleges, high schools, primary school pupils;
- Self-employed people and Micro, Small and Medium Enterprise (MSME) owners and emerging entrepreneurs;
- Employed people and professionals such uniformed forces employees, teachers and so on;
- Staff of financial service providers (banks, non-bank financial institutions, financial NGOs and microfinance institutions;
- Socially and economically vulnerable people (e.g. rural people, women and pensioners and low income earners)
These audiences will each require different channels of communication and formatting of messages. For the school going ages, financial education should be embedded in their day to day school curriculum. The theoretical components of the financial education programmes should form part of mainstream learning whilst extra curricula activities such as clubs and drama and competitions can be used to add the practical dimension of financial education.
lClive Mphambela is a Banker. He writes in his capacity as Advocacy Officer for the Bankers’ Association of Zimbabwe. BAZ expressly invites stakeholders to give their valuable comments and feedback related to this article to him on firstname.lastname@example.org or on numbers 04-744686, 0772206913