The high cost of financial literacy

Keeping in mind the importance of financial literacy in daily life, the State Bank of Pakistan launched Pakistan’s first-ever National Financial Literacy Program (NFLP) in 2017-2018. The main objectives of the program are to impart knowledge and develop skills to manage financial matters. The program was implemented in collaboration with the Asian Development Bank – to promote financial inclusion by spreading financial education for inclusive economic growth and stability across the country.

In the first year of the program (2017-2018), a total of 4,148 classroom sessions of the NFLP were held in 77 districts of Pakistan against the target of 4,031 sessions. During these sessions, a total of 86,994 male and female participants were trained at a cost of Rs 26.1 million. The total number of branchless banking services and Asan accounts opened was 43,043, with 26,200 men and 16,843 women.

In year two (2018-2019), an integrated media campaign was launched for the NFLP through the media. It was planned to organize street theater sessions throughout the country to raise awareness about financial services. Some 162,720 participants were trained at a cost of Rs 48.81 million.

Based on the overwhelming response from the first two theater programs in 2019, another 300 street theater programs were conducted in different locations in 2019-2020. This time, the female participation rate increased from 42% to 57%. Some 252,000 participants were trained at a cost of Rs 101.6 million.

Given the diverse level of understanding of the target audience, the NFLP has been split into two segments in 2020-21: NFLP and NFLP for Youth.

The State Bank has collaborated with various commercial banks, universities, ministries, institutions and muftis and ulama. Awareness programs for the Islamic bank have been conducted, including 19 workshops with them, 16 two-day capacity building programs for its own officials and 26 awareness programs for the general public.

One-time intensive financial training would be offered to high school teachers, who can teach financial literacy as part of the regular curriculum. This would significantly reduce financial education expenditure i.e. the same number of participants, 865,937, would cost Rs 131 per student, approximately 35% less than the cost per participant of the program. financial education.

During this year, about 362,223 participants were trained at a cost of Rs 144.9 million. Until 2021, this project has cost Rs 321.4 million and provided financial education to 865,937 participants from 158 districts of Pakistan.

Assuming all other costs are zero, the training cost per participant turns out to be around Rs 372 for one session. It is also difficult to understand financial matters in a few sessions. This requires extensive training.

A better understanding could develop if financial education was provided to students during their college years. Introducing a segment on financial literacy at the secondary level would better equip our next generation to handle financial matters. Moreover, it would be profitable. Assuming that two trainers are recruited for each of the 158 districts, it would take a total of 316 trainers to be recruited for a one-year contract. Again, assuming a fixed salary of Rs30,000 per trainer, this would cost Rs113.760 million for the year.

One-time intensive financial training would be offered to high school teachers, who can teach financial literacy as part of the regular curriculum. This would significantly reduce financial education expenditure i.e. the same number of participants, 865,937, would cost Rs 131 per student, approximately 35% less than the cost per participant of the program. financial education.

The NFLP will be concluded this year and has already reached the targeted level of training sessions and trained the higher than expected number of participants. Many of them joined the banking sector after training. The program has been effective overall, but the cost of training is high, which can be reduced if the training arrangement is changed and responsibility for training is given to higher education departments.

Sarah J. Greer