Financial Literacy and Inclusion: The Key to Unlocking a Brighter Future
By Shervone J. Alexander
Key Messages
- Financial literacy and inclusion empower individuals to make informed financial decisions and enhance their economic well-being.
- The inaugural Financial Literacy and Financial Inclusion (FLFI) survey shows a regional financial literacy score of 12.2 out of 20 and reveals that over 90,000 residents do not have an account with a financial institution.
- A multifaceted approach with “all hands on deck” is needed to improve literacy and access to financial services.
Introduction
Imagine a grandmother who uses a traditional "Sou-Sou" system to save money and keeps cash in a paper bag under her mattress. This grandmother is not part of the formal banking system and she may not understand that the value of her money changes over time. Although she may make a budget, she does not consider savings accounts and other banking products, due to a lack of financial education and access to financial services. This situation not only affects the elderly, but also poor and vulnerable people of all age groups.
Financial literacy involves understanding inflation, interest rates, budgeting, borrowing, investing and managing money, along with the ability to assess financial risks and opportunities (OECD, 2022). Financial inclusion ensures that all, especially the underserved, can access affordable and useful financial products such as bank accounts, credit, investments and insurance. It supports opportunities for individuals to manage, grow and protect their money (World Bank, 2023).
Financial literacy is the gateway to accessing quality financial products. Financial literacy and inclusion are, therefore, necessary to propel our society into one that is thriving and more equitable. The Eastern Caribbean Central Bank (ECCB), recognizing this truth, has been creating and supporting initiatives to improve financial literacy and inclusion in the Eastern Caribbean Currency Union (ECCU).
In 2002, the ECCU saw the introduction of two important initiatives: Financial Information Month (FIM), an educational campaign aimed at improving financial literacy; and the Regional Government Securities Market (RGSM), which allows residents to purchase treasury bills and bonds. Later, the Payment Systems Act (2007) came into play to facilitate easier clearing and settlement of financial transactions. Ongoing efforts to bolster financial inclusion include:
- DCash, the digital version of the EC dollar that is a safer alternative to physical cash
- A Credit Bureau to improve credit access
- A loan guarantee programme by the Eastern Caribbean Partial Credit Guarantee Corporation (ECPCGC), to help micro-entrepreneurs grow their small businesses
- Basic Bank Accounts to ease access to the formal financial sector;
- An Office of Financial Conduct and Inclusion to protect consumers of financial services; and
- A Financial Inclusion Strategy to be more deliberate in enhancing financial education and removing financial access barriers.
The Status of Financial Literacy and Inclusion in the ECCU
Despite ongoing efforts to improve financial literacy and promote inclusion, the inaugural ECCU Financial Literacy and Financial Inclusion (FLFI) Survey showed a low level of financial literacy across the sub-region, with an overall financial literacy score of 12.2 out of 20.
Financial Literacy: Attitude and Behaviour Matter Too
A key aspect of financial literacy is financial knowledge, which involves understanding basic financial concepts and having numeracy skills for effective financial management. Participants of the FLFI survey scored an average of 62.6 per cent on financial knowledge, demonstrating an understanding of concepts like the time value of money, interest, risk and inflation. However, financial knowledge alone is not enough; attitudes and behaviours matter too.
Financial attitude speaks to the approach towards using money and planning finances, while financial behaviour is about actions taken which can impact an individual’s financial well-being (OECD, 2022). In both cases, higher scores represent a more responsible outcome. The ECCU financial attitude score was below 50.0 per cent, showing that the population focuses more on short-term planning and prioritises spending over saving. Notwithstanding the low financial attitude outcome, the financial behaviour score (66.7 per cent) indicated that people in the ECCU generally actively manage their finances.
These results highlight the need to empower individuals to take control of their financial futures. In addition to imparting knowledge, changing the culture, dispelling financial myths and promoting good financial habits must be encouraged.
Financial Inclusion: Breaking Down Barriers
The potential of financial literacy is undermined by a lack of awareness and limited access to affordable financial products and services. While about nine out of 10 people (88.3 per cent) in the ECCU know about at least five of the 17 available financial products, access to these remains a concern. One key indicator of financial access is the percentage of the population with a bank account as it shows whether they can participate in the formal financial system.
Did you know that an estimated 90,000 adult residents in the ECCU did not have a bank account in 2023? When asked why, 41.6 per cent cited insufficient funds to justify an account, 18.8 per cent mentioned documentation barriers and 13.5 per cent reported trust issues—all common financial access barriers.
At the country level, financial inclusion indicators raise concerns and reiterate the need for urgent action. One country registered a “no-account” rate of 24.9 per cent. This country also registered the highest percentage of unemployed respondents, and 96.9 per cent of its population relying on cash for regular payments. The country that recorded the lowest “no-account” rate (7.6 per cent) also had a low level of unemployed respondents and 77.6 per cent of respondents using cash for regular expenses.
These findings highlight the need for a multifaceted and targeted approach to lowering access barriers—one where society works together to invest in education to improve job prospects, reduce poverty, ensure strong regulatory frameworks, and lower transaction and account fees.
Financial Goals: Preparation for a Stable Future
With an average life expectancy of 73 years (United Nations, 2024), financial education becomes a crucial investment and the time to start investing is now. Across the sub-region, financial goals vary by sex and age. The desire to invest in a home tops the list, particularly among youths. More men than women aspire to start or grow their own businesses, while those aged 50 and over tend to focus on becoming debt-free. These diverse aspirations shape our communities.
Are we really taking the right actions to support our goals? The FLFI survey shows that effective strategies used by residents for achieving personal goals include saving and investing, reducing spending and creating a detailed action plan. Unfortunately, we cannot boast that this is true across all ECCU societies. Why? Likely because of low financial literacy and the existence of access barriers.
Future-Proofing Financial Access
Without financial knowledge, accessing financial services can feel impossible. That is why a robust financial education system is crucial for opening doors to future opportunities. By integrating financial education into school curricula, we can create a brighter future for everyone. For those who are not currently in school, community workshops and seminars provide valuable opportunities to learn. Additionally, embracing technology and the principle of “each one teach one” can ensure we are all in a position to adapt to emerging trends, including mobile banking apps, digital wallets and online investment platforms.
In our small, diverse and traditional society, it is important to tailor our efforts to meet the unique needs of our people, especially the underserved. This includes groups like the elderly, who may have specific financial needs, beliefs and practices that mainstream financial services do not address.
Creating a financially resilient currency union means promoting savings, investments and diverse income streams for all, regardless of status, age, gender and geography. Encouraging the creation of emergency funds, no matter how modest and providing resources and training for aspiring entrepreneurs are key strategies for financial stability, resilience and prosperity.
A Call to Action
The key to financial security lies in education, access to services and positive financial habits. The future of a financially inclusive society is our collective responsibility. We can foster economic empowerment and stability through a multifaceted approach, thereby enabling sustainable development and unlocking a brighter future for all.
Efforts are ongoing. Are you ready to join the journey?
About the Eastern Caribbean Central Bank
The Eastern Caribbean Central Bank (ECCB) was established in October 1983. The ECCB is the Monetary Authority for Anguilla, Antigua and Barbuda, the Commonwealth of Dominica, Grenada, Montserrat, Saint Christopher (St Kitts) and Nevis, Saint Lucia and Saint Vincent and the Grenadines.
Disclaimer
The ECCB strongly supports academic freedom and encourages such activity among its employees. Notwithstanding, the views and opinions expressed are solely those of the authors. The ECCB may not necessarily endorse the writers’ position or guarantee technical accuracy. Readers are free to submit their comments or questions on the information presented in this publication.
References:
ECCB. (2023). The ECCU’s Financial Literacy and Financial Inclusion. https://www.eccb-centralbank.org/viewPDF/documents/2024-08-21-13-02-50-ECCU-Financial-Literacy-and-Financial-Inclusion-Survey-Report-Volume-II---2023.pdf
OECD. (2022). OECD/INFE Toolkit for Measuring Financial Literacy and Financial Inclusion 2022. www.oecd.org/financial/education/2022-INFE-Toolkit-Measuring-Finlit-Financial-Inclusion.pdf
United Nations, Department of Economic Affairs. (2024). World Population Prospects 2024. United Nations, New York. https://population.un.org/wpp/assets/Files/WPP2024_Summary-of-Results.pdf
World Bank. (2023). Financial Inclusion Lessons from World Bank Group Experience, Fiscal Years 2014–22. Independent Evaluation Group. Washington, DC: World Bank.
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