Enhancing financial literacy through inclusion and education

Financial literacy is defined as the ability to recognise and effectively use diversified financial skills, tools and services, especially with reference to personal banking management, investment strategies and budgeting. Developing nationwide financial inclusion remains a central theme in the vision portrayed under the banner of Digital Bangladesh—the concept refers to the integration of tacit and tangible opportunities for the mass public, to acquiesce, synthesise and benefit from financial services in their day to day lives. Equivalently, what is also certain is this: sustainable state investments with the aim of empowering regular citizens to take ownership of their finances, is an indispensable prerequisite in working towards financial inclusion across the board, both on paper and in practice.   

A working paper (MAB Khalily, 2016) published by the Asian Development Bank Institute stated that around 40 percent of the adult population and 75 percent of households have access to financial services in Bangladesh. A 2019 survey carried out by Bangladesh Bank indicated similar trends—45 percent of adults have zero access to formal financial services. What is even more staggering with regards to the 55 percent of citizens with access to financial services is this—a mere 16 percent of those designated as having access are able to benefit from the all-inclusive portfolio of existing financial services (savings, insurance and forms of credit), with 39 percent having only basic access (such as a savings account). 

At the outset, the statistic of 75 percent Bangladeshi households having access to financial services is misleading—especially when considering that the gender gap in financial services was at 29 percent in 2017, compared to a mere nine percent in 2014. According to The Global Findex Database, 65 percent of Bangladeshi men have bank accounts compared to 36 percent of women. This results in the country having one of the largest financial gender gaps in the world amidst fast-paced GDP growth trends, demonstrating the stark differences in numbers discussed above. In summary, Bangladesh faces systematic and cultural challenges in enhancing the scope for women to have greater access to financial services—the same can be said for low-income groups and other marginalised populations. This is a fundamental issue which needs to be addressed, especially with relation to increasing the financial independence and inclusion of middle-class citizens.

The challenge is to streamline those in the informal market and rural populations leveraging microfinance services, towards the formal financial system—particularly with respect to everyday banking services. On one hand, a primary responsibility of enhancing access remains in the vicinity of regulatory reform—but in conjunction with tools and institutional changes in banking guidelines, there is a dire need for citizens to be educated and made aware about their financial rights and responsibilities. And this will come through the development of state-mandated financial literacy programmes and the consequent knowledge diffusion. From a macroeconomic sense, the banking sector needs top-to-bottom reform—the persistent existence of loan defaulters across state-owned banks has fundamentally reduced public confidence in the financial system. However, from a personal banking perspective, the instillation of trust and confidence of everyday banking (non-business) customers in the banking structure, has to be mobilised through the accentuation of financial knowledge, attitudes and behaviour.

As a Toronto-based banking professional, I have witnessed an impressive shift in the way finance and its available tools are promoted and used in the city where I live—the key idea being financial empowerment through literacy and self-directed platforms, leading to citizens taking ownership of their finances. The role of banking advisers is increasingly shifting towards consulting informed citizens, rather than making financial decisions on their behalf. I believe this is the future of sustainable banking—where fiscal decisions are directed by informed citizens, rather than sales-goal driven banking advisers. In the summer of 2020, the Government of Ontario mandated financial literacy programmes across education institutions, starting from elementary classes. With a key focus in developing understanding of personal finances, corporate citizenship, economic knowledge and consumer awareness, financial literacy classes have been made an integral component of the Ontarian school syllabi.

At work, I have observed with pleasure, the increasing interest amongst students in their early teens to take ownership of their finances—from opening youth accounts to developing savings patterns from special gifts they get from family, the enhancement of financial literacy programmes across Ontario is indeed empowering young citizens to develop budgeting and savings skills. I believe Bangladesh, with its use of ICT as a means to boost the scope of sustainable education, can follow suit—developing weekly e-learning lectures on financial health, responsible spending trajectories and monetary tools will provide key takeaway points for students, in particular, to develop viable life skills.

There is little to no doubt that Bangladesh is moving away from being an underbanked society, primarily due to the prominence of digital banking services—yet to ensure inclusion above and beyond mere numbers, innovation in policy and strategies is a must. The National Financial Inclusion Strategy (NFIS–B) is currently being formulated by Bangladesh Bank, and aims to provide a clear roadmap to implement and coordinate financial inclusion initiatives in the country. I sincerely hope that e-learning modules and sustainable financial education for students is given focus, prior to publishing the final strategy. Furthermore, the government should consider legislating a foundational Access to Basic Banking Services (ABBS) Regulation via Parliament. The prevalence of legislative agendas such as the ABBS in countries like Canada are used as legal architectures to guarantee that each citizen, irrespective of race, gender, income level, religion or age, has the constitutional right to open a low-cost retail banking account—ensuring the internalisation of cash money into the banking system, whilst allowing marginalised groups, homemakers and low-income individuals to have a consolidated financial structure for their everyday banking needs.

The message is simple—with respect to financial education, we need to start young. We must allow the younger generation to take ownership of their finances by building good savings habits, which can be achieved by creating e-content through the ICT and education ministries. From a legislative angle, we need to institute the concept of inclusion through legal mandates, especially with respect to citizens being provided the right to have access to all forms of basic banking services—not only will this reduce and regulate dirty money in the economy; it will provide the government with an opportunity to streamline social support and pension schemes directly to personalised bank accounts.

Mir Aftabuddin Ahmed is a Toronto-based banking professional. Email: aftab.ahmed@mail.utoronto.ca