Our youth needs financial literacy to combat banking scams

In an era where financial scandals have become alarmingly commonplace, the importance of financial literacy for our youth cannot be overstated. A Centre for Policy Dialogue (CPD) report published on August 12 paints a grim picture of our banking sector, revealing that a staggering Tk 92,261 crore was embezzled in 24 major banking scams between 2008 and 2023—more specifically, during the 15-year rule of the Awami League. This amount, equivalent to 12 percent of Bangladesh's national budget for FY2023-24 or two percent of the GDP for FY2022-23, highlights the dire state of our financial institutions. The banking sector, meant to be one of the pillars of our economy, has instead become a house of cards, teetering on the brink of collapse.

Consider the case of BASIC Bank, once a top-rated institution. After Sheikh Abdul Hye Bacchu was appointed board chairman in 2009, the bank's reputation plummeted. From a mere 4.81 percent of soured loans in December 2009, the bank's defaulted loans skyrocketed to 55 percent of total outstanding loans by March 2023. Despite the Anti-Corruption Commission (ACC) filing 60 cases related to this scam, Bacchu himself was not named in any lawsuit, highlighting the culture of impunity that plagues our system.

The Hallmark group scandal involving Sonali Bank is another glaring example. Between 2010 and 2012, the bank's Ruposhi Bangla Hotel branch lent an astounding Tk 3,547 crore to Hallmark and five other firms based on fake documents. Both the board and management of Sonali Bank were implicated, yet the bank has recovered little of the swindled funds.

The saga of PK Halder further illustrates the depth of the problem. The former managing director of NRB Global Bank and Reliance Finance Limited fled Bangladesh in 2019 after allegedly syphoning off about Tk 10,200 crore from four non-banking financial institutions. Being a fugitive for two years, he was arrested in India in May 2022, only proving the challenges we face in bringing such criminals to justice.

These high-profile cases are not isolated incidents but symptoms of a systemic rot. The fact that many of the perpetrators remain unpunished only serves to embolden future wrongdoers.

Beyond these high-profile cases, another threat has been looming on the horizon lately: digital financial crimes. Cybercriminals are increasingly targeting our youth through social media platforms and mobile financial services (MFS). Their tactics range from convincing victims to reveal their NID to organising elaborate engagement programmes in luxurious hotels. These scams not only result in financial losses but also inflict severe psychological trauma on victims, with some cases even leading to suicide.

In this landscape of financial peril, financial literacy emerges as a crucial safeguard. It's not just about understanding banking terms or investment strategies; it's about developing critical thinking skills to detect scams, make informed financial decisions, and manage money responsibly.

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Why scams thrive in Bangladesh

In 2022, the Bangladesh Bank took a step in the right direction by issuing financial literacy guidelines to banks and financial institutions. However, if we look at the recent banking scams and the rise of loan defaulters, it is evident that the central bank's guidelines could do little to no help, and it has repeatedly failed to take any action against the financial crimes.

To add to that, statistics present a far more bitter truth. As of December 2023, the financial literacy rate in Bangladesh is only 28 percent, according to the Financial Inclusion Insights (2018) Programme by Intermedia Research. Therefore, unarguably, we need a more comprehensive, nationwide approach to financial education and must do our part as aware, responsible citizens.

First and foremost, financial literacy, covering digital banking as well, should be integrated into our national curriculum. Our youth need to be equipped with the knowledge to navigate the complex world of finance from an early age. This education should not be limited to traditional classroom settings but should also leverage technology to reach a wider audience.

We also need a collaborative effort involving financial institutions, NGOs, universities, and community organisations to offer financial literacy programmes. These initiatives should be inclusive, ensuring that women, people with different educational needs, individuals with disabilities, and those in remote rural areas have access to this crucial knowledge.

Our law enforcement agencies need specialised training to understand and combat digital financial crimes. The government should also establish research bodies dedicated to identifying new scam trends and developing innovative awareness strategies.

The banking scams and digital financial crimes plaguing our country are not just economic issues; they're a threat to our social fabric and our aspirations for a reformed Bangladesh. By prioritising financial literacy, we can arm our youth with the knowledge and skills they need to protect themselves and contribute to a more stable financial future for our nation. Financial literacy is not a luxury; it's a necessity. It's time we treated it as such.

Mahiya Tabassum is a journalist at The Daily Star.

Views expressed in this article are the author's own.

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