United Nations: Financial Literacy is Essential in Social and Economic Development
The financial literacy industry is calling for a heightened focus on financial education in both developed and developing countries on the heels of the release by the United Nations Development Programme (UNDP) of its 2014 Human Development Report, which highlights alarming realities, including that nearly 1.5 billion people in 91 developing countries live in poverty, with another 800 million people currently at risk of falling back into poverty if financial or other setbacks occur.
Financial literacy proponents are moving ahead aggressively in an effort help prevent financial setbacks for the hundreds of millions of individuals and families who comprise vulnerable populations that are exposed to greater financial stress by virtue of their lack of financial education. The United Nations report comes at a critical time, not only as the tenuous global economy continues to hamper employment, housing and overall personal financial growth, but it also comes just days after the release of results of the first-ever global financial literacy study conducted by the OECD Programme for International Student Assessment (PISA), which tested 15-year-olds internationally regarding their understanding of critical personal financial concepts. With results of the PISA study highlighting the lack of financial literacy on a global basis, combined with the troubling statistics unveiled by the UNDP’s Human Development Report, key financial education stakeholders such as governments, corporations, NGOs, economists, research institutions and others are going to great lengths to raise financial literacy even higher on national political, economic and social agendas throughout the world.
UNDP & UNCDF Funded Initiatives
The United Nations has a long history of supporting financial education and promulgating the virtues of financial literacy. Helen Clark, Administrator of the United Nations Development Programme, has been very focused on incorporating financial education into initiatives designed to improve the quality of life, particularly for women. In one of the latest examples of Clark’s concentration on financial literacy, she spoke extensively about this topic during a three day tour of Papua New Guinea (PNG), where she accentuated that financial education is a critical skill necessary for individuals and families in all socioeconomic categories, but even more vital, in Clark’s view, for women residing in rural regions.
UNDP and UNCDF partner with public and private institutions to fund, develop and implement financial literacy programs that disproportionately target vulnerable populations. Papua New Guinea represents a good example, as UNDP and UNCDF funded an initiative by Nationwide Microbank for the delivery of mobile wallet products and financial literacy training for women to better understand and become more empowered to make important money management decisions for themselves and their families. On one hand, the mobile wallet deployment through Nationwide Microbank’s MiCash initiative was intended to address the high levels of unbanked individuals in Papua New Guinea. But financial literacy advocates are quick to note that it was the financial education component of this program that truly drove its success since customers learned how to manage their money, budget, save, and plan for emergencies, which is of utmost importance in the regions in which the project was carried out.
Given the astounding statistics on poverty and personal finance vulnerability exposed in UNDP’s 2014 Human Development Report, the importance of incentivized financial discipline that sets individuals on the path to financial prosperity, such as through UNDP and UNCDF funded initiatives like the one implemented in Papua New Guinea, is clear.
UN Millennium Development Goals
The Millennium Development Goals of the United Nations were developed as the foundation for a roadmap and strategy agreed upon by all nations and the world’s leading development institutions. The goals have stimulated extraordinary efforts to bring together governments, NGOs, corporations, foundations, academia and other important players to develop and proceed with a bold post-2015 development agenda.
Financial education is a theme that runs throughout many of the UN Millennium Development Goals. For example, with respect to the goal of eradicating extreme poverty and hunger, the United Nations is advocating for the adoption of policies and strategies designed to simplify and expedite the expansion of micro credit and microfinance institutions in an effort to service the substantial demand among poor people for financial products and services. In so doing, another key objective is to promote financial literacy on the basis that greater access to financial services will only be useful and beneficial to individuals if they understand those products and services and have the knowledge to use them effectively. Such policies relating to financial education are being supported widely not only within the UN system, but also among other UN affiliates and vital stakeholders.
Similarly, in connection with the UN Millennium Development Goal of achieving universal primary education, many contend that education should include a financial component so that youth can become better equipped to understand money concepts, which are important for a sustainable, successful life as it relates to understanding money, budgeting, gainful employment, credit, debt and overall personal finance empowerment.
Those who have served in the role of United Nations Secretary-General have been fostering financial education as a means to address many crises identified as priorities within the UN system. Following the establishment of the UN Secretary General’s Five Year Action Plan on Youth, the UN Inter-Agency Network on Youth and Development commenced a global survey of young people to help inform the planning and action necessary to meet the objectives of the Plan on Youth. Given the results of the survey of young people, which highlighted the low levels of financial literacy that exists broadly, the United Nations plan was shaped to best address this issue in order to better financially educate young people in communities throughout the world.
The UN Secretary General also created the position of Special Advocate for Inclusive Finance for Development, which has advanced financial literacy to a material degree. Since her designation in 2009 by UN Secretary-General Ban Ki-moon as his Special Advocate for Inclusive Finance for Development, Her Majesty Queen Maxima has worked with a broad range of stakeholders to promote policies and best practices for the incorporation of financial literacy and consumer protection into a wide spectrum of economic, social and political endeavors across the globe. Coordinating with many governments and financial regulators, Queen Maxima is focused on developing and implementing action plans that leverage financial education to solve major international problems as deep rooted as economic instability and poverty.
Leveraging United Nations Partnerships to Drive Success
The global financial literacy community has long viewed the United Nations, as well as its affiliated and non-affiliated partners that comprise the larger UN system, as key leverage points for growth, awareness and the attainment of success. Among the entities within the UN system that have been more active in advancing financial literacy interests are the following:
• United Nations Development Programme
• UN Department of Economic and Social Affairs
• United Nations Children's Fund (UNICEF)
• UN Human Settlements Programme
• UN Conference on Trade and Development
• UN Development Group
• UN Industrial Development Organization
• The World Bank
• International Monetary Fund
• International Labour Organization
• International Trade Centre
• World Trade Organization
Through a commitment among both developed and developing nations, these entities bring countries together in their common goal of enhancing the financial education and financial capability of their citizenry, thereby improving financial literacy to a highly significant extent on a worldwide basis.
Given the findings revealed in the recent release of the 2014 United Nations Human Development Report, the importance of enhancing financial literacy throughout the world has never been more apparent. The UN’s efforts in continuing to support financial education across a wide variety of programs and initiatives should bode very well for the financial literacy movement in the months and years ahead.