Experts advocate literacy for booming financial sector

Experts advocate literacy for booming financial sector

They have limited access to demand-oriented savings, loan, investment and insurance products. Poor households, as a result, remain vulnerable to adverse shocks. There are 46 commercial banks and financial institutions in Tanzania today serving hardly half of the potential customers, with industry sources claiming that complicated terms have hindered many people from using banking services.

According to Economic and Social Research Foundation’s (ESRF) Research Officer Donatila Kaino, financial sector, which currently serves about eight per cent of the population, requires urgent review to enable it wins a wider public support. Dr Kaino, who conducted the Fin- Scope survey on the access to formal financial services in Tanzania, says that only eight per cent of the 21 million interviewees in the 2009 survey have access to formal financial services.

The survey further revealed that majority Tanzanians-rural dwellers in particular-were not even aware of financial services. Says Dr Kaino, “We surveyed across the country and the findings are disappointing- it’s a challenge that needs an immediate solution.” However, even the few lucky people with access to financial services do so blindly as financial illiteracy reigns in the country.

Yet, experts concur that improved financial literacy has far reaching socio-economic impacts on the nation. Financial illiteracy has proved to be costly to individuals, financial institutions and the national economy as well. Over-indebtedness that ultimately leads to credit default, for instance, is a product of poor financial knowledge that impacts negatively on individuals, lenders and the national economy.

Financial literate consumers, analysts argue, are more cautious in taking on credit they couldn’t afford, making unwise investments or fall prey to unscrupulous salespersons and buy products that are not in their best interest. Financially savvy consumers, on the other hand, are more likely to save their money, compare financial products and services and borrow sparingly and invest the borrowed money productively.

Although some financial institutions seem to misguidedly embrace financialilliteracy of their customers as beneficial, the truth remains that lenders suffer from such illiteracy and stand to gain from financially literate clientele. According to National Microfinance Bank’s (NMB) Head of Marketing Iman Kajura, NMB believes in well informed customers and has introduced financial literacy programme to educate the public on fiscal matters as a way of nurturing new customers.

“Customers are not born-customers are created,” says Mr Kajura, describing the educative programme as a milestone in creating new and potential future customers of banking services. Savings, planned borrowing, financial plans and business proposals are some of the critical issues to spearhead through the programme, says NMB Marketing Chief.

The bank envisages imparting financial knowledge-saving culture in particular-on school children to motivate them to use financial services. Mr Kajura seems concerned that many people begin utilising banking services on maturity or even at advanced age and sometimes on situation where a bank account becomes a precondition for getting certain services-admission to higher learning institutions, for instance.

Tanzania Women Bank (TWB) Managing Director Margareth Chacha supports the argument for financial education to customers, saying majority Tanzanians underutilise banking services due to ignorance. “Cash deposits, withdraws and loans are the only banking services that many Tanzanians seem to know-but the few financially illiterate people who know how to use bank services have advanced quickly in whatever they do,” says Ms Chacha.

She sympathises with potential bank  customers who need business loans but don’t know how to apply or those lacking in knowledge to properly manage the money they receive in loans, ending up in over-indebtedness. “They all need proper education on finance,” she emphasises.Social Security Regulatory Authority Director General Irene Isaka decries low understanding of financial sectorpension funds in particular-saying ignorance sometimes impedes members’ contributions.

“There is low public awareness on finance and particularly pension funds at virtually all levels-policy makers, workers,employers and the general public. Some people misperceive social security schemes as banking institutions or tax collecting agencies,” laments Ms Isaka. The regulatory body believes that investment in education is inevitable.

No wonder Dar es Salaam-based events firm, Nuebrand Events Company and Centre for Microfinance and Enterprise Development (CEMIDE) have jointly hatched an annual financial literacy campaign-NUEBRAND Financial Services Week for All-whose goal is to educate and persuade uptake of formal financial services.

The company’s Managing Director Aziz Omar says the literacy week that seeks to boost consumers knowledge on financial issues will feature various financial literacy and education programmes delivered through radio, road shows, press kits, drama, workshops and financial services consumer fair at the Mnazi Mmoja Grounds.

“The event envisages bringing financial literacy education directly to the community-to enable financial inclusion - the education programme is friendly and accessible to the target audience,” says Mr Omar.

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