Since the end of the civil war in 2006, Nepal has changed dramatically. Overall poverty rates have declined, almost all children now attend primary school, and women make up 30 percent of the representatives in parliament. Yet, despite these impressive achievements, almost one third of the population still lives below the national poverty line.
UNCDF has been working towards making financial services available for the poor in Nepal for decades, by supporting providers that offer a range of financial products at a reasonable cost, including savings, credit and insurance. But access to financial services is only a first step towards enabling people to build better futures. In order to empower poor families and small businesses to make informed choices, financial education is key.
Living on around one dollar per day requires tremendous financial skill. In Nepal as elsewhere, poor people rely mostly on family and informal networks to manage their finances. Although their incomes are small and paid at unpredictable intervals, they devise strategies to save, invest and borrow by entrusting money to a neighbor for safekeeping or visiting a moneylender in times of need. Unfortunately, these strategies can at times be unnecessarily risky and costly.
In January, UNCDF launched a new initiative in Nepal that aims to empower poor people by teaching them the basics of personal finance. Working with financial service providers and the Central Bank, UNCDF conducted a training course on how to deliver financial education for specific target groups. As a result, these organizations are now equipped to broaden their clients’ knowledge of financial options and promote effective money management. The course covered all aspects of financial literacy from identifying the needs and demands for financial education to monitoring and outcome evaluation.
Just as there is a renewed emphasis on financial education in the developed world in the aftermath of the economic crisis of 2009, financial literacy is gaining traction across the developing world. Financial education is especially important in the context of rapidly expanding microfinance institutions in Nepal and elsewhere. Combining access to financial products and services with financial education will allow poor people to realize the benefits from financial inclusion and manage their incomes in ways that maximize wellbeing and ultimately contributes to pro-poor growth.
In Nepal, UNCDF also seeks to support efforts by financial institutions and regulators to deepen, broaden and scale up the outreach of financial services. The initiative is taking the lead in assisting the Government of Nepal in formulating a National Strategy for Financial Literacy. Lessons from the initiative will also feed into the process of developing a regulatory framework for the microfinance sector in Nepal. These efforts will also contribute to the formulation of the Microfinance Act, which will likely be passed in the course of 2012.
UNCDF is also promoting financial education in other countries as part of the Pacific Financial Inclusion Programme (PFIP), which is being implemented jointly with UNDP, financed by AusAID and the European Union. The PFIP aims to find new ways to provide financial services to hard-to-reach populations and is active in Fiji, Papua New Guinea, Samoa, the Solomon Islands and Vanuatu.