Financial literacy to curb inequality from coronavirus

The coronavirus crisis is taking a bigger toll on those in vulnerable situations compared to people enjoying good financial health. And these inequalities, now so evident, are the result of situations that have been brewing for a long time. "In previous years, a large part of the population has not adopted, or been able to adopt - due to structural elements of the labor market itself - financial measures to protect itself."  These measures, as Roa explains, include: building up a financial buffer to face unexpected situations, refrain from overborrowing, laying out a financial plan and enrolling in a private health insurance plan. "Therefore, this health crisis is triggering, just as it is in other countries, a household financial crisis, and therefore an economic crisis."

Financial education to strengthen finances

In Latin America, financial education has become an essential tool for people to “learn to how to develop resilient personal finances’, proofed against crises such as the currently unfolding one. However, effectively disseminating knowledge is a challenging task. “Many people in Latin America save very little money, if any at all, can’t plan for retirement, overborrow and spend too much, can’t buy or use insurance and work in the informal economy," explains Roa. "The lack of financial education is an a barrier that underlies this situation."

In this context, it is becoming increasingly necessary to launch adapted programs. “The needs, situations and contexts of every population group are different. And financial education programs’ contents and objectives should be adapted to each one of these contexts.” To achieve this, "we must focus on understanding both the target audience for the programs and their needs."  In recent years, several public and private initiatives have been carried out in the region to promote financial education, including, as the CEMLA researcher points out, “the inclusion of financial education in school curriculum.”

Progress in Mexico

Mexico’s recently launched National Policy for Financial Inclusion represents a pivotal step in the right direction. María José Roa was involved in the development of this policy. "It is a cross-cutting strategy ultimately aimed at strengthening the financial health of the population," says this expert. "Financial inclusion, therefore, is no longer understood as an ultimate goal, but rather as a lever that allows achieving greater financial health and/or well-being.”

The strategy, a pioneer in the region, "pays special attention to vulnerable population groups and targets them with specific measures and actions."  Roa defines it as a “comprehensive strategy”, especially in terms of “effective mechanisms to ensure financial consumer protection and access to transparent information, the development of financial capacities and a focus on vulnerable groups, all of which have proven effective in promoting healthy financial behaviors."

The role of banks

Banks play a fundamental role in the promotion of financial inclusion,  "Firstly, developing financial products and services that fit the needs of the population and the different groups, especially the most vulnerable," explains María José Roa. "Secondly, because, following the codes of conduct and operation contained in prudential regulations and financial consumer protection, contributes to building trust in the financial sector, as increases the effectiveness of their role as financial intermediaries." Roa values ​​financial institution’s efforts to deliver technological solutions to make users’ lives easier, "developing platforms that promote financial capabilities, including robo advisors, reminders and apps.”

This is the case of BBVA which, during the current confinement stages, is promoting the use of its digital banking channels across its footprint, which offer access to a broad range of tools to control their expenses and personal finances comfortably and safely from their homes, saving them the need to step outside to visit a physical branch.  “Thanks to the comprehensive range of features of our mobile app – BBVA Spain’s banking app was named world’s best by Forrester Research for third consecutive year a few months ago - we continue to deliver our services normally,” said Lidia del Pozo, BBVA’s Head of Community Outreach Programs, during a webinar, organized by UNEP FI.

In this way, customers can carry on with their financial lives and access the information they need about our products and services remotely, without having to go visit a branch and compromising their or their loved ones’ health.