Africa Finance Forum Blog
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Poverty. How much of it can be avoided with simple financial skills? If there is anything we have learned over the years, it is that poor financial decision-making by the average economic citizen can be the foundation of financial crises and the root of poverty. The problem is that poor decision-making seems to be inherent in everybody – at least, that is what Economics Nobel Prize winner Daniel Kahneman wrote. This is why the world needs to increase financial education and financial inclusion for individuals, when they are young and are still able to form positive financial habits. After all these youngsters are future leaders, investors, policy makers, and parents.
African Development Bank President Donald Kaberuka stressed at this year’s World Economic Forum that the prevalence of poverty is especially pertinent in African countries with a large youth population. As Africa’s projected youth will represent 75% of the total population by 2015, a large segment of the African population will be entering the labor market in the next few years and will need the education and access required for proper savings and asset building. Contrastingly, in sub-Saharan Africa for example only 16.8% of youth between the ages of 15–25 years hold accounts at formal financial institutions.
Both scholars and policymakers have started to recognize that young people need to learn about managing financial matters at the same time as they are provided with the tools to actually participate in it. The lacking national infrastructures for children and youth to partake in the financial system remains an obstacle. On the one hand, formal savings mechanisms remain unattractive for young people due to heavy document requirements, including identity cards, recommendation letters and wage slip. On the other hand, legal age restrictions and compulsory parent consent can hinder opening an account. Changing the manner in which financial institutions deal with the unbanked, financially vulnerable population of children requires a review of certain social regulations and effective collaboration.
It does appear that this change is on the way. Over 80 countries celebrated Global Money Week last month organized by Child and Youth Finance International. 20% of these were from Africa. The overwhelming success was created by the partnerships formed between national stakeholders and was a testimony to the fact that African countries were ready, willing and able to put financial access and education of youngsters on the map. Zambia set the pace for nationwide initiatives on financial capability for children and youth under the patronage of the Central Bank of Zambia and the Financial Sector Development Program. In Ghana the first local stakeholder meeting on education and access for children was held and HFC Bank opened savings account for more than 200 high school students in Accra. The Central Bank of Nigeria (CBN) and the Financial Literacy and Inclusion Forum (FLIF) jointly organized Global Money Week, creating media campaigns, financial literacy shows and school outreach programs. It was recognized that the average Nigerian child is not introduced to money early enough and is therefore prone to making bad financial decisions. The CBN has now named financial inclusion a national agenda point.
The efforts during Global Money Week are the first step to creating national strategies that will reshape financial landscapes both in Africa and across the world. It is only through collaboration and knowledge-sharing among national stakeholders that the necessary frameworks can be built that will educate and empower entire generations. In Africa, many countries are now creating their strategies for financial education and inclusion of their citizens. We must ensure that children are not forgotten in these efforts.
By reshaping the norms of financial behavior we will be able to empower the next generation and help them become the sound financial decision makers we need them to be.
Akwasi Osei is Child and Youth Finance International's (CYFI) Africa Regional Coordinator. CYFI is leading a global movement to increase financial education and financial inclusion of children and youth. It is working with over 100 partners in over 83 countries worldwide. The CYFI network has a goal of reaching 100 million children in 100 countries by 2015, as a first step to eventually reaching all children and youth across the world. The Movement has the support of the United Nations Secretary General and the G-20.