On 18 & 19 March, AFI’s Eastern Europe & Central Asia Policy Initiative (ECAPI) held a virtual meeting. Over 40 participants discussed results from a behavioural experiment conducted by the Central Bank of Armenia (CBA), and shared approaches to understanding and solving overindebtedness.

CBA revealed that requiring customers to handwrite ‘I have read and gave my consent to the terms and conditions of this agreement’ decreases impulsiveness while taking loans, microcredits, and other financial products, and may also serve to combat financial fraud.

Similarly, CBA’s ‘handholding’ experiment, where customers are given special assistance when opening accounts, provided with individual financial literacy sessions, and assigned financial mentors, has boosted financial literacy and spurred the usage of mobile banking.

The session on overindebtedness featured expert speakers from Agensi Kaunseling & Pengurusan Kredit (Malaysia), Banque de France, the London School of Economics and Political Science, and Krakow University of Economics.

“Speakers agreed that the reasons for overindebtedness include low financial literacy, poor financial behavior, and also economic and social factors,” said Dilbar Abduganieva from Central Bank of Uzbekistan, Vice-Chair of ECAPI’s Expert Group on Financial Inclusion Policy. “Solving the problem will require agile solutions to empower and educate customers, making use of technology in order to intervene early.”

Professors Agnieszka Walega & Grzegorz Walega from Krakow University of Economics discussed objective and subjective indicators to estimate over-indebtedness, and the need for a holistic approach.

Participants concurred that customer empowerment, cooperation between stakeholders, leveraging targeted programs and innovative approaches (e.g. early intervention), and flexibility will be required to build sound policy solutions for over-indebtedness.