Strategy and Framework for Financial Literacy…Developing Guyana’s Rural Economy through Financial Literacy

Jun 11, 2017 News

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Dr. Terence Smith, Deputy Governor, Bank of Guyana
Lack of financial literacy and financial inclusion in general are the main hurdles in expanding the

coverage of financial services to the rural segments of the Guyanese society. These segments include sugar cane workers, farmers, miners, business owners, housewives and the indigenous populations throughout Guyana. Given the large magnitude of the problem concerted efforts need to be taken.
Notwithstanding the initiatives taken so far, in the January 2016 Budget Speech mention was made of an investment of over $4 billion in support of hinterland development with respect to social integration, economic prosperity, physical infrastructure, green eneregy, sustainable development and protection of Indigenous lands.
The Bureau of Statistics Regional Population Trends indicated that approximately 71 percent of Guyana’s population is clustered in villages, mainly along the coastal belt, while a few others are scattered deep in the hinterland of the country. In the rural areas, males account for 50.8 percent and females 49.2 percent.
Since the challenge is to link numbers of financially excluded people to the formal financial system, the focus at the base level is to create awareness of basic financial products.
The World Bank’s Universal Financial Access by 2020 envisions that adults worldwide – women and men alike – will be able to have access to a transaction account or an electronic instrument to store money, send payments and receive deposits as a basic building block to manage their financial lives. We at the Bank of Guyana look forward to achieving financial access for all Guyanese – urban and rural. I look forward to your support.
Financial Inclusion Strategies for Rural Communities
According to The World Bank, Financial Inclusion Strategies can be defined as roadmaps of actions, agreed and defined at the national or sub-national level, which stakeholders follow to achieve financial inclusion objectives.
Successful strategies coordinate efforts with the main stakeholders; define responsibilities among them, and state clear planning of resources by, for example, prioritizing targets.
Rural communities are highly underserved by financial services. People living in rural areas need access to financial services for a range of productive and protective purposes. In the case of Guyana, the strategy for financial inclusion will be to push for financial literacy programmes to ensure people can make sound decisions as well as to advocate for taking banking to all excluded sections of society, rural and urban. Initially, our approach will centre on the following:
· Introducing transaction accounts and expanding access points: Access to transaction accounts can help people better manage their lives and plan for emergencies. But financial access and the underlying infrastructure taken for granted in rich nations – such as saving accounts, debit cards and credit, as well as the payment systems on which they operate – still aren’t available to many people in the rural areas of Guyana. To its credit, the Bank of Guyana has drafted a consultation paper on Agency Banking. Mobile phones and smart cards are popular platforms for Agency Banking. In addition, GT&T in 2013 rolled out its Mobile Money Guyana (MMG) Application which is being used for paying bills.
· Valid identification documents: Providing rural citizens with a valid ID is essential to access financial services. The process to obtain an ID card and open an account needs to be streamlined. This barrier to financial inclusion needs further research.
· Consumer protection: While payment services including large-volume recurrent payment streams can expand financial access, it’s critical to establish secure and reliable platforms to protect data privacy and funds. To promote confidence, it’s important to treat new customers fairly, adequately disclosure key information, and establish safety and reliability standards to allow customers to make informed choices.
Improving Financial Literacy
Levels of financial literacy are low in rural communities. World Bank studies show that a lack of awareness prevents people in urban and rural areas from using suitable financial products and services. Traditionally, formal financial institutions have avoided or failed to offer sustainable services in rural areas. Our view is that financial literacy efforts like tailored text messages can improve the creation of new accounts and increase savings.
For the purpose, the financial literacy efforts must primarly be directed towards dissemination of simple messages of financial prudence in familiar language through large campaigns across the rural areas combined with vigorous roll out of financial inclusion plans and products by banks, insurance companies and others.
However, challenges to financial literacy and inclusion remain formidable. What is daunting is the sheer magnitude of the task that requires regulating the activities of service providers to thousands of illiterate poor spread across culturally disparate groups.
Financial Inclusion – International Initiatives
The global financial crisis of 2007-2008 has brought the need for financial inclusion into greater focus worldwide as it is believed that widespread incidence of financial exclusion was one of the factors that precipitated the financial crisis.
The World Bank determined that a comprehensive approach to financial inclusion addresses at least three aspects: access to financial services and products; usage of financial products and services; and quality of financial services and products, defined by consumer ability to benefit from new financial services and products.
In June 2010, the G20 Toronto Summit had outlined the “Principles of Innovative Financial Inclusion”, which serves as a guide for policy and regulatory approaches aimed at fostering safe and sound adoption of innovative, adequate, low-cost financial delivery models, helping provide conditions for fair competition and a framework of incentives for the various bank, insurance, and non-bank actors involved in the delivery of a full range of affordable and quality financial services.
Financial regulators from more than 20 countries have made financial inclusion commitments under the “Maya Declaration”, to 1) create an enabling environment that increases access and lowers costs of financial services, including new technology; 2) implement a proportionate regulatory framework that balances financial inclusion, integrity, and stability; 3) integrate consumer protection and empowerment as a pillar of financial inclusion, and 4) use data to inform policies and track results.
Conclusion
Financial literacy and inclusion is a growing challenge as developing counties like Guyana experience an increased need for access to financial services. In various parts of the world mobile phone technology, urbanization, the growth of microfinance, and the prevalence of remittances all ensure that even poor, rural populations can easily access a bank account from a mobile phone or Internet connection.
Finally, several countries now look at financial literacy and inclusion as the means for a more comprehensive growth, wherein, each citizen of the country is able to use his/her earnings as a financial resource that they can put to work to improve their future financial status and simultaneously contribute to the nation’s progress.

Next week we will discuss the benefits of saving for retirement. Thanks for all your comments and support. As usual, please send your comments or questions to [email protected]

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