COVID-19 fast-tracking financial literacy for resilience building

COVID-19 has accelerated the need to promote financial literacy as an essential tool for individuals to manage their financial affairs and build greater resilience, speakers highlighted at virtual member training on national financial education strategies (NFES) on 23-25 November.

Co-hosted by Banco de Portugal (BdP), the three-day capacity building event championed AFI’s peer learning model and enabled participants to gain knowledge on the design, implementation and monitoring of NSFE with a special focus on digital financial literacy.

BdP Vice Governor Luís Máximo dos Santos commended the timeliness of the training, citing the global pandemic and a resulting shift in consumer patterns towards the greater use of digital channels, such as mobile apps and online platforms, to conduct transactions and obtain credit.

“Many like us have long considered financial literacy as an essential tool for individuals to manage their financial affairs wisely and to be prepared for the unexpected,” dos Santos said. “But following the outbreak of COVID-19, financial literacy became a survival skill which everyone needs to build greater resilience and to navigate a sea of uncertainty.”

While the shape of the post-COVID world remains unclear, he stated that the new digital economy was here to stay before reminding his peers that investment in digital financial literacy was needed to protect vulnerable groups against cybercrime, such as online fraud and scams.

“Bank customers who were already using digital channels typically increased their use, while those less familiar with new technologies were compelled to enter the digital age, often ill-prepared to do so,” he said. “Not surprisingly, cybercrime rose to record highs in 2020, hand-in-hand with the sharp increase in the number of bank customers going online.”

AFI Executive Director Dr. Alfred Hannig added that women, youth and other disadvantaged groups were also more likely to be left behind by a digital divide and that efforts to promote digital financial literacy must consider barriers faced by those groups when designing suitable content and messages.

“Digital drive is indeed the way forward to reach out to those financially excluded and ensure that no one is left behind,” he said. “As economies strive to build back better, financial education and financial literacy need to occupy the center stage of recovery efforts.”

He noted that while foundation topics such as basic financial principles, interest, personal finance and budgeting should be covered in schools, continued and structured financial education at all levels of education helps build societies where people can better plan for future events. This, in turn, supports financial stability and contributes to sustainable and economic development.

NFES, he explained, must therefore aim to build nationwide financial education infrastructure that provides equal opportunities for all. They must also pay special attention to the financially excluded, illiterate or innumerate segments so that populations can make more informed choices about financial products and services or better understand government financial assistance programs.

Providing a focal point for policy initiatives and knowledge products that are elavating the importance of NFES in member countries is AFI’s Consumer Empowerment and Market Conduct Working Group. Among the working group’s landmark publications is a financial capability barometer that guides regulators in setting effective policy priorities, strategies and benchmarks for the development of financial education programs, and monitoring the implementation of NFES and ensuring public accountability.

Over 110 participants from 40 AFI member institutions took part in the event to learn about the key phases of an NFES, important delivery channels for financial education, effective institutional structures and the importance of integrating digital financial literacy and design initiatives to serve specific groups, such as women and youth.

Owing to their popularity among members, NFES and digital financial literacy often feature heavily in capacity building events, with both topics explored during member training earlier this year with members of AFI’s Eastern Europe & Central Asia Initiative.

BdP shared its journey into developing its strategy, policies and initiatives on financial education so that participants understand key considerations behind an NSFE and gain insight from the perspective of Portugal’s central bank. The central bank also provided perspectives into the effective establishment of institutional structures and digital financial literacy as a key pillar of an NFES.

Participants highlighted that every country requires a comprehensive NSFE and this training clearly brought out the importance of having a one, especially during challenging times such is COVID-19 crisis. Some of the institutions have committed to launching financial education program for women and received knowledge on what should be strategic pillars and delivery channels. This training helped member institutions recap their next actions and come up with new ways of collaborating with stakeholders to reach our target groups and to measure effectiveness.

Banco de Portugal and AFI held three capacity building events since 2017, when two institutions partnered by signing a Memorandum of Understanding (MoU) to collaborate on implementing capacity building programs to promote financial inclusion and financial education in Portuguese-speaking countries.

Last year, BdP and AFI conducted similar training in Lisbon as part of an agreement to promote financial inclusion and education in Lusophone countries through the exchange of information, studies, research, activities and materials.

Capacity building cooperation between BdP and AFI is organized as part of the network’s developing-developed countries dialogue (3D) platform, which provides a unique opportunity to directly share and learn from practical experience, best practices and expert opinions between AFI members and their peers from the developed countries.