at the Citigroup-INSEAD Women's Financial Education Summit 2004
Speaker: Governor Tan Sri Dato' Sri Dr Zeti Akhtar Aziz
Venue: Hong Kong
Date: 02 November 2004
Language: English
Introduction
Asia represents the fastest growing region in the global economy. Of
significance, is that more than half the population in Asia are women.
The participation of women in the economy would therefore not only
enhance their own economic well being but would also contribute
towards raising further the economic potential of Asia. Women are
already engaged in both the informal and formal sectors and are
increasingly emerging as a more important force in the economy. The
effective participation, however, needs to be an informed
participation. Financial literacy among women becomes an important
part of this process, regardless of the income constituency to which
they belong. There needs to be a better understanding of their
financial rights and responsibilities, and their opportunities for
income generation and the associated risks and costs involved. This
is particularly important for Asia, where rapid economic and financial
transformation is occurring. Financial literacy among women is thus a
vital part of this process, not only to promote greater engagement of
women in the current economic environment, but also to prepare them
for the future.
It is my great honour and pleasure to be here today to speak on the
importance of financial literacy among women in Asia. My remarks
today will first discuss some of the major structural and cultural
transformations in Asia that are changing and impacting the economic
environment faced by women in Asia, and their rapidly changing role in
the economy. I will also touch on aspects of the challenges faced by
women in Asia in their endeavour for greater economic engagement.
This will be followed by a discussion on the important enablers for
enhanced financial literacy and to share with you Malaysia's
experience in driving a more financially literate society in
particular, that enhances the inclusion of women in the economic
mainstream.
Ladies and Gentlemen,
Asia is being transformed. For more than two decades now we have seen
unprecedented structural and cultural changes in Asia that have
resulted in the transformation of the environment faced by women.
Asia has emerged as the fastest growing region in the world with GDP
in Asia now accounting for 23% of the world economy, compared to 17%
in 1980. Per capita income during this period has more than
quadrupled. If these trends continue, by the year 2020 Asia will
account for about 27% of the world economy while the income per capita
would have further tripled. These dynamic changes have made financial
literacy among women even more vital.
Indeed, against these favourable trends, there has been a growing
participation of women in the growth and development process in Asia.
In particular, there has been a strong migration from the informal to
the formal sector, following the modernisation and industrialisation
process. The increase in the relative significance of the financial
sector in most Asian economies can be seen in terms of the momentum in
the financialisation of savings and the increase in the volume of
financial transactions being conducted through the formal financial
sector. These trends are being reinforced by the shift of activities
that is taking place from the traditional sectors to the industrial
and services sectors. On average, the industrial and services sector
now accounts for 74% of the economy in Asia, compared to 60% in 1980.
In contrast, agriculture now accounts for 12%, compared to 26% in
1980. Involved in this transformation, women have demonstrated a high
degree of mobility, participating in all segments of economic
activity. Most discernable is the increasing participation of women in
the services sector. Here in Hong Kong, the percentage of women in
the services sector relative to the total population increased from
43% in 1980 to 87% in 1999. Similarly in Indonesia, the rise was from
32% to 42%, and in Malaysia, it was from 33% to 57% and in Thailand,
from 18% to 34%.
In Asia, the demographic structure also reinforces the economic
potential of Asia. The population in Asia continues to grow at a
relatively high and stable rate to account for more than half the
world's population. Of significance is the relatively young
demographic structure in Asia. More than 50% of women fall in the age
group 15 to 49 years, similar to that for men. This demographic
structure thus not only contributes to enhance the potential of the
economy but combined with rising incomes and improved standards of
living, has resulted in increases in consumption spending. This
resultant increase in purchasing power has strengthened domestic
demand, making it an important driver of growth in the Asian
economies. Indeed, these trends have strengthened the sustainability
of consumption-based growth. As part of this process, women have
become an important consumer target group with enhanced purchasing
power. In fact, in several of the Asian economies, women are emerging
as a key target market. This greater capacity for earning, spending,
saving and investing requires ability for financial management, and
hence the urgency for greater financial literacy
While financial literacy is important, regardless of economic status,
it becomes even more important for those that are less privileged.
For those that have less to manage, it becomes more vital to manage
the finances even more effectively. It is also those that have been
under-served by the financial system that need to be more aware of the
financial services that they should be able to access, and the
benefits that can be drawn from the various options available. They
too have the same need for maximising the benefits from their limited
resources, and to achieving financial and economic security.
Strengthening their financial position becomes even more important for
this target group. There needs to be awareness of the alternative
assets that can be accumulated not only to generate an income stream
but also towards building wealth. Of equal importance is to draw
those operating in the informal sector into the formal sector, where
their financial requirements, whether households or businesses can be
better served.
A further phenomenon taking place in Asia is the increased regional
economic and financial integration that is taking place. This has
manifested itself in increased intra-regional trade, investment flows
and the increased intra-regional presence of corporations and
financial institutions. A more recent phenomenon is the increased
mobility of labour in the region. Of significance is the number of
women who have ventured beyond their own borders in search of new
employment opportunities. While data on this is not available, the
statistics on remittances of income show this is a growing trend.
Overseas employment is particularly evident in the manufacturing and
services sectors. Financial literacy under these circumstances
becomes even more vital. In venturing to new areas where different
systems, languages and cultures prevail, it becomes important to have
knowledge of the basic financial matters so as to maximise the
benefits the new employment is expected to yield.
As the formal economies of Asia prosper and grow, there is a greater
need to integrate the informal sectors of the economy with the formal
sector. There are millions of women in Asia involved in a wide range
of economic activities from the home, making handicraft, assembling
parts for international brand names and working in the fields. They
work for a small income, and generally in difficult circumstances.
Deliberate actions to integrate the informal economy into the formal
economy will give this segment of society increased opportunities. In
many countries, the success of various national and international
socio-economic reform programs have resulted in women becoming an
increasing part of the formal economy. Through the concerted efforts
of women's rights movements, economic policy intervention and gradual
shifts in cultural norms, women today have more opportunities for
education, careers and political representation. However, in many
instances the increase in participation in the formal economy has not
come with a commensurate level of sophistication in financial
literacy. As a result, women continue to face special challenges in
their endeavour to be active participants in the economic system.
Challenges women in Asia face in financial literacy
Let me now turn to discuss some of the challenges faced by women in
Asia in their endeavour to become more financially literate and
financially independent.
1) Firstly, with the socio-economic environment in Asia
changing rapidly, there is greater uncertainty and volatility which
represents a challenge even for financial experts. The financial
system has also become more complex, with new risks emerging. This
increased sophistication thus makes it increasingly difficult for
those who are less financially literate to make sound decisions.
2) Secondly, the advances in technology has led to a
proliferation of financial products and services. There needs to be a
greater understanding of the basic concepts and practices of banking,
insurance and equity so as to know how to make choices from the wide
range of financial products available, and to assess the respective
risks, costs and returns. Also important is the basic principles of
debt management, wealth management and personal budgeting to be able
to understand the importance of long-term savings in funding future
requirements.
Financial literacy involves being able to identify and understand the
opportunities for income generation, access to funding, and learning
how to make the most of the range of financial products available. It
also involves learning how to manage financial risks in an environment
where the financial infrastructure may be under developed. This may
relate to the laws and procedures in the country. Also important is
the need to be able to recognize illegal schemes and other
exploitative practices such as predatory lending.
3) Thirdly, while women in Asia are being less stereotyped and
given greater opportunities for entering into the economic mainstream,
nonetheless the working conditions for women in many countries have
tended to be less favourable. The exploitation of labour in the
informal sector in some instances are particularly bad, not only for
women, but also for children and minority groups. Women who are
disadvantaged in this manner have found it difficult to escape from
the trap of indebtedness.
Frequently, the disadvantaged and those who are not able to access the
formal financial system have resorted to the informal financial
systems. Recourse to these financial sources have also been due to
the lack of awareness. These may be in the form of deposit schemes
that entail high risk, access to financing from sources that are
highly costly, and almost inevitably against high collateral. Very
often, the practices are unfair and deceptive. Examples in predatory
lending are found to be unscrupulous and highly disadvantageous to the
borrower.
4) Fourthly, in some Asian societies, traditions continue to
create cultural pressures that restrict a woman's choices and
liberties. Though there is increased freedom for women to pursue
education and careers, in some societies, cultural pressures still
make it more difficult for a woman to get the exposure on financial
matters. In addition, the increased incidence of divorces and single
parenthood mean that more women are left to fend for themselves and
their children. In certain Asian societies, single women may face
unusual difficulties in arranging their finances. In some cases, a
woman may even have difficulty claiming her legal rights in a
contract, even though the law does not dispute such a right. Deeply
entrenched human behaviour is not able to change as rapidly as the
financial system is evolving.
5) Fifthly, statistics on life expectancy confirm that women
tend to live longer. In segments of society where women earn less than
men, combined with the fact that they may live longer, it is crucial
to have financial acumen in order to increase the financial
independence of women. This trend also magnifies the need to plan for
retirement especially in an era of rising medical costs.
Ladies and Gentlemen,
Enabling Environment for Financial Literacy
The promotion of greater awareness and understanding in financial
issues in a dynamic and constantly changing environment has to be a
continuous process. The effort needs to focus not only on providing
education programmes but also on putting in place the supporting
infrastructure to enhance the access to financial services, to ensure
an environment of financial transparency and disclosure as well as
adequate consumer protection. Enhanced financial literacy is about
bringing people into the financial mainstream so that they are able to
make well informed decisions regarding their earnings, spending,
savings and investments. The effort thus has to encompass a
comprehensive set of strategies including the education process
reinforced by the supporting infrastructure.
The goal of any financial education programme is to increase awareness
of the value of effective financial management, to show how it can
contribute to financial security and improvement in the economic
well-being. The most effective of programmes have been those that are
targeted to specific groups. Fundamental education for greater
financial literacy that will have most sustainable impact are those
through the school system. Such educational programmes would provide
the education to women from an early age. Essentially, it would not
result in the marginalisation of anyone target group, in particular
women. Such programmes would therefore best serve its purpose as part
of the core curriculum. Indeed, the national education system can play
a pivotal role in financial literacy within a country.
The responsibility of promoting economic and financial literacy needs
to be a collaborative effort amongst the authorities, the financial
service providers and the community to connect to the different target
groups including all social groups. These would include the lower
income groups, workers and businesses. Important are programmes
directed to families where women have an important role and to engage
those we have not been able to participate fully to benefit from the
favourable economic environment prevailing in the region.
Among the successful financial education programmes are those with
specific objectives that are tailored to meet particular needs. This
includes programmes to promote savings for specific objectives; for
education; or for retirement. The education programmes can also be
linked to other objectives such as good health, house ownership and so
on. Financial products can be tailored for such purposes to not only
to promote interest but to also meet these objectives.
All distribution channels need to be relied on to maximise the
effectiveness of financial education programmes. Formal training
programmes can be reinforced by web based content via the Internet.
The World Wide Web offers dramatic economies of scale in terms of
distribution of content at low cost. Connectivity to the Internet can
serve to bring information from all over the world to the local
education system. Iterative programmes can be useful to encourage
participation. Web based programmes while requiring computer literacy,
has a wider outreach and allows for flexibility of time that is of
particular importance to women.
A further means by which financial advice is provided is through
financial advisors. Financial advisors are able to address the issues
for the more sophisticated investors. Similarly, infrastructure for
advisory services for small businesses is key. This can in particular
be provided by financial institutions. Systems need to be in place
where consumers and businesses are explained their rights and
responsibilities. Micro credit institutions have also been highly
successful in many countries in providing access to financial services
to microenterprises. This will contribute towards greater reliance on
the formal financial infrastructure and less on the informal
structures.
Higher level of consumer education and financial literacy must be
complemented with effective disclosure regime, fair and transparent
market practices, simplification of financial products and enhanced
communications in the marketplace to minimise information asymmetry.
While efforts may be taken to enhance transparency and disclosure by
service providers, and while programmes for enhanced literacy can
produce positive results, consumer protection is still needed. Given
the asymmetry of information, consumers often do not have enough
information to be completely protected. Building the confidence of
consumers also requires that there be adequate avenues for consumers
to seek redress to enable consumers to resolve conflicts through an
equitable process. Also important are the requirements for complaints
to be handled promptly by financial institutions.
Ladies and Gentlemen,
The Malaysian Experience
Let me briefly take a moment to share with you the experience of
Malaysia in developing an enabling environment to promote financial
literacy.
For several decades, Malaysia has made significant economic progress.
The economy grew by an average of 7% per year, while the per capita
income has increased from USD300 in 1970 to USD4,236 in 2004. From a
commodity-based economy, Malaysia now has a highly diversified
economy, with significant contribution from the manufacturing and
services sectors. Women account for about half of Malaysian
population, and have played an important role in this economic
transformation process. Women account for about 45% of the labour
force, with increasing representation at the professional, managerial
and technical levels. Such progress is achieved following increased
educational opportunities that have been made available to women.
Female primary and secondary students account for half of total
enrolment, while at public universities, female students account for
55% of total enrolment. While women continue to play a major role in
household financial planning, a new generation of women who are
financially independent and sophisticated is emerging.
The financial sector in Malaysia has also experienced significant
progress, with greater diversity of players, products as well as
delivery channels with extensive distribution nationwide. The
widespread distribution of financial institutions has been a conscious
and deliberate policy to ensure the widest reach of financial services
to both the urban and rural areas. With the improved access of
consumers and businesses to financial products and services, consumer
education on financial matters is an important priority for the
Central Bank.
Consistent with the belief of the importance of instilling financial
awareness at an early age, Bank Negara Malaysia introduced a pocket
money book to inculcate smart financial management habits among
students in 1996. The programme also included Household Account Books
to assist families in the management of household income, savings and
investments. This was distributed to cover a wider group, including
women, teachers and workers.
Following this, in 1997 together with the Education Ministry, the
Central Bank embarked on a School Adoption Programme. Through this
programme, more than 7000 schools have been adopted by banking
institutions to play a leading role in educating school children on
basic financial knowledge. In October this year, an online interactive
version of the Pocket Money Book to be used in the School Adoption
Programme was launched.
The Central Bank of Malaysia has also laid out a blueprint known as
the Financial Sector Master Plan that charts the development of the
Malaysian financial system over a ten year period commencing in 2001.
A key component of that plan is the 10-year Consumer Education
Programme for the banking and insurance sectors. This programme is
known as BankingInfo and InsuranceInfo, and was launched in 2003. To
reach a wide spectrum of the population, various channels are being
employed to disseminate information, including through media, road
shows, information brochures and a dedicated web site. There is also a
dedicated outreach programme aimed at specific target groups, which
includes women in rural areas, low income earners and disadvantaged
women such as single mothers. To date, the BankingInfo website has
received an overwhelming response - about 14 million hits and more
than 2.5 million booklets were taken up by the public. In the
insurance sector, over 1.4 million hits have been received on the
InsuranceInfo website, and more than 1.3 million insurance
info-booklets have been disseminated by the insurers to the public.
Ladies and Gentlemen,
Similar to many other Asian economies, microenterprises in Malaysia
are a substantial contributor to employment. Women are extensively
involved in microenterprises, often operated as family run businesses.
To support the growth of microenterprises, dedicated agencies and
funding mechanisms have been established. In order to equip the
microenterprises with proper knowledge, education materials were
developed on the fundamentals of starting a business, specifically
addressing issues of getting access to appropriate financing within
the constraints faced by microenterprises. Dedicated agencies,
including specialist development financial institutions, were
identified to provide training and advisory services to complement
these initiatives.
In addition to the consumer education programmes, the Central Bank has
put in place a consumer protection framework. In collaboration with
the financial industry the Central Bank has established a Financial
Mediation Bureau. The Financial Mediation Bureau aims to serve as a
one-stop center for the resolution of retail consumer complaints
against financial institutions regulated by the Central Bank. The
Central Bank is also establishing a one-stop service centre in the
Bank that will function as a Public Information Centre for the
promotion of financial literacy among the Malaysian public. The
service centre will provide advisory services on financial matters to
small and medium enterprises.
Ladies and Gentlemen,
Concluding Remarks
Financial literacy among women is all about having sufficient
awareness of financial matters to enable women to protect and prosper
for themselves and their families in a world that is becoming
increasingly more complex and uncertain. To be an effective
participant in this modern economy, we cannot take financial literacy
for granted. It is a knowledge and skill that must be deliberately
pursued. From a national and institutional perspective, promoting
financial literacy must be an integral part of the overall agenda for
financial and economic reform and development.
Let me conclude with the words of Jawaharlal Nehru, "We talk of
revolutions, political and economic. And yet the greatest revolution
in a country is the one that affects the status and living conditions
of its women. It is in so far as our revolution has affected our
women that it is basic."
Thank you.
Copyright Bank Negara Malaysia, 2004. All rights reserved.
No comments:
Post a Comment