Digital financial literacy training targets South Asia’s vulnerable

Digital financial literacy plays a crucial role in building key life skills, encouraging the use of financial services and empowering populations, speakers said during member training co-hosted by Maldives Monetary Authority (MMA) and AFI on 17-18 March, the first regional focused capacity building event held exclusively for network members in South Asia.

Recognizing the need for a multi-pronged approach that targets different segments with customized content and delivery channels, the training was developed in consultation with participating member institutions from South Asia to support specific regional needs and priorities. It was organized following a request from members and targeted at those involved in designing and implementing financial education strategies and initiatives.

With peer learning a key pillar of the AFI network, expertise was provided by network members Bangko Sentral ng Pilipinas (BSP), Bank of Uganda and Nepal Rastra Bank. Reinforcing the need for a holistic approach that involves a variety of stakeholders, external contributors from Centre for Financial Inclusion and Pakistan’s National Financial Literacy Program also delivered valuable presentations. Banque de France also provided insight since digital financial literacy is a point of convergence for financial policymakers in both developing and developed countries.

The virtual training event responded to rapid digital transformation in South Asian countries that has been accelerated by COVID-19, and underscored the need to safeguard access, increase usage and trust in digital financial services and protect consumers as key priorities for regulators.

“Financial literacy, together with consumer protection, has been recognized as a critical enabler of financial inclusion and continues to retain an important position in the policy agenda of many countries,” said MMA Governor Ali Hashim as he opened the two-day event.

Despite these advantages, he noted that most financial literacy and education strategies do not explicitly address digital financial literacy, instead focus on basic financial concepts. He urged his fellow regulators to address this shortcoming at the policy level to fully benefit from new technologies.

Governor Hashim also called on policymakers to define digital financial literacy, design tools to assess it and develop programs to promote digital financial education with special attention to the groups most at-risk of being left behind, such as women, youth, rural populations and elderly persons.

“Digital financial services could be a double-edged sword in that while it promises to be an effective means of reaching the financially excluded, it can also create a new dimension of divide and disparity, especially among the vulnerable groups,” he said, adding that this eventuality was largely dependent on the actions of policymakers.

Policymakers can harness significant opportunities available to them to implement gender-sensitive actions and meet their commitments under the Denarau Action Plan to halve their gender gaps by the end of 2021. While the global gender gap in financial access has remained stuck at nine percent since 2011 in developing and emerging economies, the figure stands at 18 percent in South Asia.

AFI Executive Director Dr. Alfred Hannig added that a focus on digital financial literacy was “critically relevant” for financial regulators due to growing concerns over consumer protection issues that emerged in tandem with the swift spread of digital financial services across markets.

“The fast expansion of innovative technologies for financial inclusion has become a point of convergence for developed and developing countries,” he said.

Dr. Hannig described it as the “right time” to hold the training, given that pandemic-related lockdowns and movement restrictions had triggered an unprecedent rise in the use of digital financial services. While such innovations have heralded game changing benefits for consumers and entrepreneurs, such as faster, more secure and timely transactions, additional risks underscored the need for a strategic approach to digital financial literacy.

An introductory presentation on digital financial literacy by Nepal Rastra Bank set the tone of the event, followed by Bank of Uganda and BSP sharing national experiences on integrating digital financial literacy into national strategies and programs. A representative from the Philippines’ central bank also delivered a presentation on how digital financial literacy can be used to reach vulnerable groups, emphasizing that digital financial literacy must offer practical and tangible value to users, including usefulness, security and ease of onboarding.

Following a plethora of insightful sessions, including on tools and channels for effective delivery of digital financial literacy, MMA Assistant Governor Mariyam Hussain Didi brought the two-day event to a close. She described it as “most remarkable and fruitful”, explaining that lessons learnt from it may be incorporated into the central bank’s upcoming NFIS, including emphasis on establishing partnerships to deliver digital financial literacy programs.

With digital financial literacy becoming increasingly relevant in the Maldives, MMA was well-placed to steer the content and direction of the training sessions. The central bank, which joined the network in January 2010, is currently developing its first national financial inclusion strategy (NFIS). Due to be launched in the first quarter of 2022, it will focus on enhancing access to finance, digital financial services, financial consumer protection and financial literacy.

The country also has one of the highest rates of mobile and internet penetration in South Asia, paving the way for a forthcoming national payment system development project that will help bridge gaps in access to finance.

The two-day virtual training event gathered 30 participants from member institutions in South Asia, including Bangladesh Bank, Bangladesh’s Insurance Development and Regulatory Authority, Nepal Rastra Bank, Royal Monetary Authority of Bhutan and State Bank of Pakistan. They shared in-depth knowledge into the workings of a successful digital financial strategy and how to incorporate them into existing national plans on financial education for financial inclusion. They also learnt about consumer risks linked with various types of digital financial services and how to enhance knowledge related to consumer protection and redress mechanisms.

AFI’s capacity building events support member institutions to gain and translate knowledge on financial inclusion policy, regulation and supervision into concrete actions that meet specific financial inclusion goals. The network organizes around 20 capacity building events each year within four main categories: member training, joint learning program, public-private dialogue and Certified Expert in Financial Inclusion Policy (online course).

This event is funded by UK aid from the UK government