Importance of financial literacy
The landscape of financial markets in Pakistan has changed drastically over a short span. Until a few years back, there were very few people who participated in buying and selling of stocks, or invested vigorously in financial products. This has changed with the appearance of an increasing number of individual investors in financial markets. Now people also have less difficulty in understanding various financial products. The reason is the growth of financial knowledge that investors now have in making financial decisions. With growth in financial literacy, people now understand stock market behaviour and treat it differently than a card game.
But, despite this change in the financial dynamics of the country, there is still a lot more room for the importance of financial literacy to penetrate. In an earlier interview to Enterprise, Nazish Lutfi, CEO, Institute of Securities Management and Research, lamented: “People do not follow the trend; they follow the crowd in this quite erratic market. There is no understanding of how to create business. In Pakistan, we do not have more than 60 to seventy thousand customers, while in Bangladesh and India these figures are in millions. To create new customers, we need to focus on the untapped market of educated brokers.”
She further elaborated, “It is the job of the brokers to educate traders and investors but for that brokers need to be educated first. A broker also educates the investor and gives him reasons about why he is buying, presents the reports and profits, shares the future prospects and the international market scenario. This is the standard abroad where the investor relies on the broker and the reports of companies. But here what happens is that buying and selling takes place on the names of people. Therefore people complain that this market is monopolized, but I tell them that beat this monopoly through your money management.”
Money management is about financial dignity. Experts point out that it was not the lack of justice that some communities were worst hit by the economic crisis, but the lack of financial tools. To address this issue, there have been initiatives like the State Bank of Pakistan’s Nationwide Financial Literacy Program (NFLP) with an endowment from the Asian Development Bank with a focus on imparting knowledge and understanding of basic financial concepts and products and services for low-income Pakistanis in order to enable them to take better economic decisions.
NFLP focuses on seven themes: budgeting, savings, investments, debt management, consumer rights and responsibilities, financial products and services and branchless banking. Its key advisors include local and international experts from the fields of financial education, microfinance, training, curriculum development and the financial industry.
Also, Visa, one of the leading payment solutions providers, has rolled out its financial literacy programme for media in Pakistan by organizing educational workshops on financial literacy. Working with members of the Karachi Press Club and the Karachi Union of Journalists (KUJ), the workshop is aimed at helping create a better understanding of money management skills among the people of Pakistan.
Commenting on Visa’s financial literacy program, Lama Kabbani, Visa Corporate Communications Manager in the Middle East, said, “Visa believes the most important financial tool is not a product — it is knowledge. That is why, for more than a decade, Visa has been developing financial literacy programs that teach individuals how to spend, save and budget responsibly. Possessing the skills to make the right money management decisions gives people greater control over their finances, the ability to deal with unexpected costs, and the skills to budget and save responsibly.”
As part of its Financial Literacy programme, Visa also has plans to launch a localized version of its dedicated financial literacy website, www.mymoneyskills.com to help people from all segments strengthen their knowledge of personal finance. Providing fundamental personal finance information in both Urdu and English on topics such as learning how to plan a budget, preparing for the future, using a credit card wisely and spending responsibly, the website will provide an engaging platform for all audiences, including young people, families and schools to improve their financial literacy skills.
Moreover, among other initiatives, the South Asian Federation of Exchanges (SAFE) and Friedrich-Naumann-Stiftung fur die Freiheit (FNF) have also been arranging seminars on financial literacy in collaboration with Securities and Exchange Commission of Pakistan and Lahore Stock Exchange. At one such seminar, it was urged that, “In the aftermath of the financial crisis, financial literacy and education issues have acquired a momentum. Policymakers worldwide now increasingly acknowledge the importance of financial literacy both as a life skill and as a key component of financial and economic stability and development. Acknowledging the importance of better financial education and literacy for improving the ability of people to use financial services, a comprehensive and high-level project on financial literacy should be developed.”
In today’s world, reliable financial information is more important than ever as people continue to experience hardships and are forced to make difficult economic decisions under the strain of the recession.