Boosting Financial Literacy in a Post-Pandemic World

The global pandemic caused billions of people to change the way they communicate, work, and manage their finances. With the enormity of these changes, governments around the world are hoping that these experiences can boost financial literacy and allow people to become more sensitive to financial risks and opportunities.

Financial Literacy: What is it and why is it important?

When it comes to financial literacy, spending and saving effectively are essential steps toward achieving financial goals and having a better everyday life. Due to the inevitable ups and downs in life, having the confidence and knowledge to manage our finances adequately is a huge part of being financially literate. However, financial literacy is not simply the ability to spend less than you earn, but also understanding what financial services are available to you, what causes prices to rise and fall, how to avoid financial risks, and how to make money with investments.

Two-thirds of the global population do not have sufficient knowledge to make sound financial decisions. This is a big issue because, if citizens cannot borrow, invest, or save effectively, then families and communities won’t prosper. Poor financial literacy is heavily linked to higher debts, low credit ratings, and missing out on financial opportunities.

Financial Literacy Today

The post-pandemic world is presenting an entirely new dynamic in regards to financial literacy. The impact of COVID on personal finances has been enormous and the health crisis prompted many living in low and middle income countries to use digital technology to manage their finances for the first time. For example, more than 80 million people in India made their first digital payment after the start of the pandemic. With the developing world adapting to a plethora of digital tools, including money transfer apps and mobile wallets, states now have a real opportunity to improve financial knowledge and reach wider audiences.

One thing that hasn’t changed since COVID is that specific groups – namely women, people living in rural communities, and in poorer neighborhoods – have much lower levels of financial literacy. In order to bridge the gap, many states, NGOs, and charities are turning to creative methods to reach these groups.

Reaching New People

Peru

In Peru, 62.4% of the population report not having funds for an unexpected bill, and 4.1% have lost money to scams. Improved access to financial education resources is likely one key piece of the puzzle in helping families avoid financial pitfalls. To that end, nonprofit organization Fundación Capital is taking LISTA Peru, an educational app for adults, out to rural areas to teach primarily women and small business owners how to organize debts and plan their savings. Inclusion in the financial system is often the first step towards financial literacy and, as a direct result of the program and its courses, more than 3,500 people have reported that they now see the benefit of formal savings and plan to open a bank account or a mobile wallet account.

India

In India, the Saksham and Unnati programs, run by local financial institutions and supported by the Asian Development Bank, involve trainers going into deprived neighborhoods to provide tutorials aimed at giving residents the skills and knowledge needed to use digital tools to more efficiently navigate their daily lives and finances. These tutorials are often focused on initial steps, like using mobile money apps, understanding why saving is important, as well as strategies to repay loans and start investing. These programs are very popular in rural communities, where women typically manage the household budget.

As of December 2021, 348,945 women had received financial education through these programs. This represents a huge part of India’s financial literacy strategy, which hopes that women who receive this training will pass the knowledge on to their family members and to future generations. This focus on empowering women also serves to advance the UN’s Sustainable Development Goal for gender equality.

Senegal

A major factor that will influence financial literacy in Senegal in the coming years is the increased number of Senegalese sending remittances home, bringing more people into the financial system. Remittances have grown from 3.9% of GDP in 2000 to 10.5% in 2020 and have become a major source of savings for Senegalese families.

The International Fund for Agricultural Development found that families normally spend 80% of the remittances that they receive on food, medicine, utilities and housing. That means that the remaining 20% can be put towards longer-term financial goals like education, a family business, retirement or saving for unexpected emergencies.

State bodies and charities also recognize the need to reach out to those receiving remittances. Senegal’s community empowerment programs (CEPs), which, among other activities, involve sending community-wide educational text messages on topics like financial literacy, have been shown to increase savings in recipients accounts by as much as 43% when they receive regular reinforcement. The combination of financial opportunity in the form of extra income from remittances, together with financial education tools like the CEPs, present a powerful opportunity for families to work toward their financial goals.

Will these methods make a difference?

Crucial to being “financially literate” is a firm understanding of how to use financial tools and services to achieve greater economic stability. Today, 71% of people in developing nations have bank accounts or mobile wallet accounts, compared to just 42% a decade ago. The expansion of mobile wallets presents an opportunity for people throughout the developing world to learn to efficiently save some of the money received through remittances or government aid.

At Ria, we are constantly expanding our network to include more digital payout options. We currently pay out to 68 different mobile wallets in 36 countries, including the Ria eWallet in Malaysia. With more than $600 billion in remittances to low and middle-income countries moving around the globe each year, the potential impact of improved financial literacy for remittance beneficiaries is enormous.

Of course, a huge part of financial literacy is knowledge. Looking to boost your financial literacy? Check out the Personal Finance section of our blog.

For more info: comms@riamoneytransfer.com