“Money is one form of power, but what is more powerful is financial education. Money comes and goes, but if you have the financial literacy/education about how money works, you gain power over it and can begin building wealth”. (Kiyosaki and Sharon, 1995 as cited by Macha 2009)
While moving ahead towards the second year of the pandemic, this quote often comes to my mind. Nepal Rastra Bank (NRB) had realised the need for financial literacy and reflected that in its strategic plan 2012-2016. I was one among the three consultants who prepared a financial literacy strategy for NRB in 2012. I wonder how far that plan went and how the trainees might have benefitted or not benefitted. I also wonder how these educational strategies taught later in life actually are practical enough for people to manage their finances during catastrophes. Financial literacy, or the ability of managing one's money, is a pressing need of the country at all levels, including macro, meso and micro levels. In today’s situation, where the pandemic has created new challenges and changed the complete working pattern of people, it is very important, especially for the poor and vulnerable people in rural areas of countries like Nepal, to use such skills. This will help people transform not only their household economy but also the national economy. With the help of this strategy, people will be able to make wise decisions regarding financial matters.
Skill However, the skills of managing one’s money are not something that is learned overnight or during a crisis. It is a life-long habit that actually gets transferred from parents to children and develops or changes during ones educational lives. People who never get formal education also develop habits that either helps them in wealth creation or destruction based on socio-cultural, traditional practices together with the influences they encounter as they progress in their lives. Therefore, many a time, the indigenous behaviour of people if guided properly can help them cope with strenuous situations in life even if they may not have formal education. I did a research in Kenya during 2004/5 on gender issues and fraud in the informal financial systems. In a rural part of Kenya, a tribal leader informed me that in their part of the world if someone defaulted on money payments, rather than going to the courts, they would threaten the defaulter that they would seek help of the “witch-doctors and magic” and the very next day the money would be paid. Another person informed that in Kenya when people get married, the groom’s family had to agree to pay a certain number of cattle to the bride’s father. It is called bride price. However these days due to lack of cattle and their high price they also agree on a lump sum payment. But instead of paying it at one go, they paid it in instalments. This gives an indication of the traditional repayment and savings strategy these people had in their culture. In this way, during my interaction with people in rural parts of different countries in Asia and Africa, I learned that people have several traditional and cultural practices related to savings and credit. Saving grains for seeds and food during drought or floods, bartering agricultural products for goods, having informal system of sharing money in rural parts during crisis sustains people with fewer resources during misfortunes. “… There are many times when poor people need sums of money that are bigger than what they have in hand. The need for these ‘usefully large lump sums’ arises from life cycle events such as birth, education, marriage and death, from emergency situations, and from the discovery of opportunities to make investments in assets or businesses. The only reliable and sustainable way they can obtain these sums is to build them, somehow or other, from their savings --Rutherford, Stuart, The Poor and Their Money, Oxford University Press: New Delhi, India. Due to the impacts of the pandemic which have now lasted for more than a year and a half, the savings of people all over the world have become the source of their existence. However, those who have been entrenched in vicious cycles of poverty and were not able to save much before COVID-19 are now facing dire economic conditions which lead towards ill health and ill fate! The lack of money management skills makes people more susceptible to the devastation caused by emergencies (such as sickness), over-indebtedness, or fraudulent schemes. Through skills of money management, households are able to use scarce resources more effectively, choose the financial services and products that best meet their needs and shift from reactive to pro-active decision-making. Informed decisions to budgeting, saving and borrowing appropriately will enhance financial stability, ability to plan for the future and family welfare.
Local knowledge For many households globally, there are now millions of families struggling with the management of their finances, especially at a time when the few resources they have are slowly but surely being depleted. Therefore, one way of helping these families emerge out of the crisis is for the governments all over the world to make sure jobs are available for them. But together with that they need to make sure governments use the local knowledge of savings and credit among people and help them to develop skills in managing their money so they can withstand the financial depression they are currently facing. From the ongoing educational year, Nepal government has included life skills as part of the high school curriculum as an optional course. Actually, this should be made one of the mandatory courses which should also include financial literacy. Financial behaviour and practice actually starts from the growing up days learning from what children see at home and what they are taught at school.
(Namrata Sharma is a senior journalist and women rights advocate. firstname.lastname@example.orgTwitter handle: NamrataSharmaP)