The State Bank of Pakistan (SBP), in collaboration with the National Institute of Banking and Finance (NIBAF), has so far provided basic financial education to 747,901 Pakistani children and youth, according to the latest update. update of the SBP.
This basic education is offered in three distinct categories, each designed for school children (9-12 years old), adolescents (13-17 years old) and young men and women (18-29 years old).
The central bank and NIBAF achieved this achievement as part of the National Youth Financial Literacy Program or NFLP-Y. Their goal is to reach 1.6 million children and young people by 2023. This financial literacy program for children and young people includes both physical training in the classroom as well as learning sessions in the classroom. line in 45 districts of Pakistan, including Azad Jammu and Kashmir and Gilgit Baltistan.
The three stated objectives of this program are (1) to improve and strengthen knowledge, skills and behavior in money management (2) to inspire young people to set financial goals by saving, budgeting and planning for their future; and (3) educating young people about their rights. and responsibilities as consumers of financial products and services. It is important to educate children and young people about finances. But the most important thing is to inspire them to set financial goals through saving, budgeting, and planning for their future. It is not enough to make it a central goal of the NFLP-Y.
The central bank and the government should work together to ensure that schoolchildren (9-12 years old) and adolescents (13-17 years old) are encouraged to practice the basic financial education they receive as part of the program. NFLP-Y.
Adolescents should be encouraged to open bank accounts using the identity cards of their educational institutions, a possibility offered on a selective basis.
These children and adolescents, for example, should be effectively encouraged to open bank accounts using the ID cards of their educational institutions and the account opening process should be facilitated. Banks say they normally allow students under the age of 18 to open bank accounts using ID cards from their educational institutions. But they do it very selectively. And a large number of Pakistani students under the age of 18 don’t even know that banks offer this possibility.
There is a need to create awareness about this and encourage all NFLP-Y registered teens (13-17 years old) to use their bank accounts not only for certain transactions but also for saving. Banks should design savings plans tailored to them, keeping in mind the growth potential of these plans. They should not view the administration of such plans as a burden just because they initially fail to generate large volumes of funds.
Likewise, young people enrolled in the NFLP-Y (18-29 years old) should be encouraged not only to place their savings in their bank accounts, but also in sovereign debt securities and National Savings Plan (NSS) instruments. . Young men and women in this age group should also be encouraged to invest and launch their own start-ups with small capital and generous funding from local banks.
Banks may consider entering into deals with the stock market to facilitate the trading of stocks by NFLP-Y youth as well as their participation in initial public offerings. They may also enter into agreements with mutual funds and insurance companies with the aim of encouraging these financially educated young people – especially women – to invest in these funds and to purchase insurance policies for the expenses. future education / marriage.
As of December 2020, there were 62 million bank accounts in Pakistan (roughly 28.2% of the total population of 220 million), according to the latest statistics from the SBP. Obviously, it is necessary to increase this number as soon as possible for the documentation of the economy.
Expedited opening of bank accounts for children and youth can help achieve this goal, especially as children and youth (aged 10-24) make up 30% of Pakistan’s total population, according to the report. United Nations Population Fund Report 2020.
Typically, successive governments in Pakistan have focused on empowering youth through concessional student loan programs, often as a tool to broaden political support. The current PTI government has also launched such a program. Providing concessional loans to young people for education or for starting small businesses is, in itself, a good thing to do. But unless children and young people are familiar with the world of finance and encouraged to first acquire basic financial education, open bank accounts, and save and invest, this cannot be expected. that they become financially responsible citizens in the future.
The current National Youth Financial Literacy Program is designed to do just that. However, categorizing children and youth into three groups of 9-12 year old schoolchildren, 13-17 year olds, and 18-29 year olds made the task a bit too complex.
The central bank and NIBAF may have valid reasons for keeping these categories intact. But the SBP should immediately begin publishing a quarterly or semi-annual progress report based on data obtained from banks on savings and investments made by adolescents and young people. These reports which are expected to be published in English and Urdu would hopefully increase awareness of financial literacy programs for children and youth in addition to encouraging them to save and invest. Their savings would eventually improve the overall domestic savings rate, if not in the near future, certainly in five to ten years.
Pakistan’s domestic savings base is weak. According to the SBP’s 2019-2020 annual report, net domestic savings in June 2020 stood at 6.8% of GDP, down one percentage point in four years (compared to 7.8% of GDP in 2016 ). Increasing domestic savings will help finance economic development through a more balanced mix of domestic and foreign sources.
Posted in Dawn, The Business and Finance Weekly, August 23, 2021