Alfred Hannig: Financial Education in the Arab World: Strategies, Implementation and Impact

Financial education in the Arab World: Strategies, Implementation and Impact

Amphitrite Hotel in Skhirat, Rabat, Morocco

20 October, 2016

Keynote Speech by Alfred Hannig, AFI

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Honorable Minister of Handicraft and social and solidarity-based Economy, Mrs. Fatima Marouane,

Honorable Minister of National Education and Professional Training, Mr. Rachid Benmokhtar,

Hororable Governor of Bank Al-Maghrib and President of FMEF, Mr. Abdellatif Jouahri,

Honorable Director General Chairman of the Board, AMF, Mr. Abdulrahman A. Al Hamidy

Distinguished Guests,

Ladies and Gentlemen,

Thank you for a very warm reception. It is a great pleasure for me to be here with you in this beautiful city of Rabat and to present this keynote address.

Permit me to briefly express my gratitude to the Arab Monetary Fund and Bank Al Maghrib inviting the Alliance for Financial Inclusion (AFI) to this important conference under the theme – Financial Education in the Arab World: Strategies, Implementation and Impact.

Ladies and Gentlemen,

The theme could not be more appropriate as financial education has received a lot of attention in the wake of the Global Financial Crisis and is even more important in today’s environment. I understand that the initiative to hold this conference with the specific focus on financial education originated from Governor Jouahri, and this reflects the growing relevance of this topic in the AFI network. As a matter of fact, there has been unprecedented policy attention on financial education and financial inclusion with growing recognition amongst policy makers and leaders that financial education is an important life skill.

Ladies and Gentlemen,

Before I elaborate further on the subject, let me share with you more on the Alliance for Financial Inclusion (AFI). AFI was founded on the idea that a global knowledge exchange platform was key to expanding and improving financial inclusion policy. Our network has truly come a long way since its humble beginning as a project funded by the Bill & Melinda Gates Foundation to a fully-independent, member-owned organization, registered under the International Organizations Act of the Laws of Malaysia as of January 27th, 2016.

The network includes members from more than 90 countries working together to advance its mission of accelerating the adoption of proven and innovative financial inclusion policy solutions with the ultimate aim of making financial services more accessible to the world’s 2 billion unbanked people. AFI is the embodiment of an ongoing paradigm shift toward a new form of peer-to-peer dialogue. Our network is the model prompting the international community to reexamine its entire approach to achieving inclusive and sustainable development—not only in regard to financial inclusion. 

Smart financial inclusion policies promoted and implemented by AFI members are reducing inequality and contributing to overall sustainable economic development and stability. We have embraced over 170 policy initiatives aimed at increasing financial inclusion since the network’s inception. Providing an unparalleled reservoir of smart policies for financial inclusion.

AFI’s members are actively engaged in advancing financial inclusion policy at national, regional and international levels through partnerships and cooperative arrangements with other regulators, as well as with international organizations and private sector leaders. The network uses the depth of unique knowledge and experience to produce regulatory guidance, provide insights on innovative policy developments and highlight proven solutions in the field.

Ladies and Gentlemen,

Why is financial education important? When we started AFI I sometimes got tough questions from funders why members are pursuing financial education initiatives. I was asked to show one case where financial education has led to the opening of one additional bank account in the world. And at this very early stage we could not answer this question. Today we know more. And although we still face the challenge to produce solid evidence on the concrete impact of financial education programs, we have become so much clearer about the relevance of the topic.

The increasing complexity of financial products and growing need for consumers to act responsibly requires a financially literate society and more especially among the low-income households. Financial Education empowers consumers to make informed financial decisions which can have a dramatic impact on their financial welfare and wellbeing of the society.

Financial education is therefore an essential life skill for a consumer to achieve social and economic well-being. For a nation, the strength and development of its economy depends on the level of its citizens’ education and knowledge. Empowering consumers with financial knowledge and skills leads to improved livelihoods and positive impact on the household.

Financial education is therefore not only the driver of financial inclusion but also the potential conveyor of prosperity for the underprivileged consumers.

Policymakers, NGOs, donors and private sectors have heavily invested in financial education and literacy initiatives for its important role in improving lives and creating societies that are financially savvy. Some AFI Members have mandated and prioritized financial education and literacy for their citizens with national strategies implemented despite a lack of evidence that substantiates the positive impact of financial education and literacy initiatives.

While researchers grapple with the issue whether financial education and literacy initiatives lead to long-term improvements in financial behavior and well-being, it is imperative that financial education must continue to be provided.

Ladies and Gentlemen,

Financial education is also necessary for ensuring financial stability:

• Educated consumers are likely to develop matured credit behavior, recognize the risk of over indebtedness and able to better cope with emerging risks thereby helping financial institutions to improve their debt management and mitigate bad loan portfolio.
• Educated consumers demand for transparency and disclosure, better governance, better services, good management, and consumer rights; and thus provide the influence to strengthen market discipline and contribute to bolster the financial stability.
• Financial education is likely to uplift the well-being of poor people. It creates opportunities for financial institutions to offer banking services to the poor people. It leads to an expanded and diversified customer base as large segments of population are brought to formal financial system.

Low income and unbanked populations may have very little experience and awareness of financial services, and may have a low level of literacy. This combination poses risks for financial stability and integrity since clients may be susceptible to inappropriate or predatory practices and unaware of their rights and responsibilities. 

Ladies and Gentlemen,

In 2011, AFI members signed up to the Maya Declaration with the aim to unlocking the economic and social potential of the 2.5 billion unbanked population. Since then, more than 60 Maya Declaration Commitments have been made, representing 51 percent of AFI’s growing membership, currently comprising of more than 100 financial regulatory and policymaking institutions from over 90 developing and emerging countries.

Of the many commitments made, 78 target commitments were on financial education and literacy. Member commitments included the adoption and implementation of financial education strategies, increasing number of school banking accounts of students, undertaking capacity building and training, collaborating with Government and stakeholders to drive financial education and literacy initiatives, conducting financial competency surveys and integrating financial education into school curriculums. Within the MENA region of AFI, members of the network from Morocco, Palestine, Egypt and Jordan have made commitments specific to promoting financial education and literacy initiatives.

The case of Morocco could be very informative for the Arab World. In September 2013, Bank Al-Maghrib committed to;

• Consolidate initiatives for promoting financial literacy and to establish a National Financial Education Foundation charged with implementing the national financial education strategy;
• Launch a study to assess the financial capacity of the population

At the end of the year 2015, all these targets were reached with positive results. The presence of the Minister of National Education and Professional Training in this Conference is a tangible indication of the successful outcomes of the fruitful collaboration between the Central Bank of Morocco and the other Governmental Departments.

To date, of the 78 targets, 27 have been successfully achieved by members (Armenia, Bangladesh, Brazil, Chile, Ethiopia, Fiji, Guatemala, Indonesia, Malawi, Malaysia, Morocco, Mozambique, Namibia, Peru, Philippines, Rwanda, Solomon Islands, Tanzania, Timor Leste, Trinidad & Tobago and Zambia).

It is also interesting to note that of the more than 170 policy reforms reported by AFI members, 30% are in the area of financial education and literacy. This indicates a high interest in the members and to AFI that it is a topic that we allocate resources to further enhance capacity and technical expertise.

Lessons learnt from the development and implementation of these commitments and reforms are shared with members within the network either through the thematic policy working groups, capacity building programs, AFI events such as regional initiatives or the Global Policy Forum or other AFI services such as JLPs or Peer Advisory. This is the beauty of the network in that members learn from each other practical policy solutions which have been tested and applied, learning from the mistakes and challenges and improving and tailor making to suit the country or jurisdiction requirements.

Ladies and Gentlemen,

Financial education is key to improving the welfare of an economy. It will help consumers to better understand the risks involved in managing their finances and will facilitate better financial decision making. Higher rates of household savings are invested in businesses, infrastructure and education. It creates job opportunities, income for the households and leads to participation in the national economy. It raises the economic welfare of individuals, expanding the investor base, providing qualified human resources for the financial sector, and ensures growth and more efficient functioning of financial markets.

I therefore see your role as of critical importance and I encourage you to discuss freely today’s topics with the other participants, and to find innovative solutions to progress financial education and literacy for all citizens of the Arab states.

Before I end let me also inform all of you that next year’s Global Policy Forum of AFI which is our flagship event will for the very first time take place in the Arab region. Central Bank of Egypt and AFI will hold the event in the first week of September 2017, and preparations for this important gathering where we will definitely discuss pertinent financial education issues are already underway.

Once again my thanks to the Arab Monetary Fund and Bank Al-Maghrib for the invitation and best wishes for the success of this conference.

Thank you!