Education for life

Education reform has been discussed by parliamentarians over the last couple of weeks with suggestions to include law into the curriculum, while experts have called for economic modules to promote entrepreneurship and financial literacy. 

As per Standard & Poor’s 2014 global financial literacy survey, Sri Lanka has a higher financial literacy rate than its South Asian peers. This is not a surprising factor since Sri Lanka has one of the highest adult print literacy rates in the region, and as a country with an ageing population there is greater need for competent use of the financial system to find solutions to social needs.

However, what it is noteworthy is the gap between print literacy and financial literacy. Sri Lanka has the highest gap between print literacy and financial literacy in the region. As per the survey, on average 65% of adults in the major advanced economies are financially literate. South Asia records the lowest percentage of financial literacy, with Sri Lanka coming in at about 35%. Bhutan has the highest parity between its print literacy and financial literacy, recording 65% and 55% respectively. 

This indicates that there is more scope to promote financial literacy among Sri Lankans, and this may well be one of the main reasons behind the relatively high level of indebtedness, where despite the country’s well-developed financial system, many pockets still struggle to use it effectively. 

Financial literacy is massively important because even though about 83% of Sri Lankan adults have bank accounts, their usage of banking services is severely limited. The number of individuals who reported no deposit and no withdrawal in the past year was 31%, and only 17% of women have been successful in borrowing from the formal sector, whereas over 80% of borrowers in the informal microfinance sector are women. This shows that there is a strong gender bias towards financial inclusion and literacy as well.

Inability to access formal lending sources is also one of the reasons why women are disproportionately affected by indebtedness and struggle to repay loans they have taken or end up having to pay much more than market rates due to unfair practices. Being able to understand economic trends is also important in starting, running and expanding a business, which is often extremely challenging. 

Both legal knowledge and practical financial knowledge would empower Sri Lankans. Expanded education reform in this direction would also have the long term benefit of pushing politicians to make decisions that are positive for the public. For example politicians routinely burn through reserves to defend the currency when an election is near because of the widespread belief that a depreciating rupee is a sign that the entire economy is collapsing. Politicians also feed into this hysteria for political gain usually pushing the country into a balance of payments crisis in the end. 

Another example is how loss-making State Owned Enterprises (SOEs) create burdens for the people with disproportionate impact on the poor because about 83% of Sri Lanka’s taxes are collected indirectly. Understanding of global value chains, steps to improve exports and investment, how the criminal justice system works, what State sector reforms are essential to improve productivity and many others can be understood by the public. Empowered masses can then demand better decisions from their representatives. This can only be a plus for Sri Lanka.