A Key to success: financial Inclusion, literacy, capability or investor education?

TEHRAN, Dec. 16 (MNA) – These days, many people and entities are talking about or doing something about enhancing "financial literacy", but few are seen touching upon, as much as they do on financial literacy, other pertinent and perfectly-correlated concepts, i.e, financial inclusion, financial capabilities, and investor education (current and potential).

These topics, which some people mistakenly consider the same, should be allocated an equal amount of attention and time. Holding events and delivering speeches is not the only way to "enhance financial literacy". The focal areas some international associations such as IOSCO and IFIE have mentioned in their reports are as paramount. These areas include investment knowledge and understanding, financial skills and competence, program design, delivery, and measurement. We should adopt a normally-distributed approach to all these areas should we seek to reach an acceptable level of financial literacy, inclusion, and capabilities.

The level of financial literacy is usually measured by questionnaires, the questions of which ask about numeracy and capacity to do calculations related to interest rates, such as compound interest, understanding inflation, and understanding risk diversification.

The benefits of investor education and financial literacy, among others, encompass helping improve financial outcomes for retail investors, more informed saving and investment decision-making, better financial and retirement planning, greater confidence and higher participation in the securities markets, increased awareness of investor rights and responsibilities, addressing any misalignment of investor and industry interests, particularly with respect to information asymmetry, reducing both the propensity for investors to miss-buy investment products and services, and for intermediaries to mis-sell products and services, fewer investor complaints, helping investors better assess the appropriateness and suitability of investment advice, investment products, and services, detect and avoid suspected fraudulent activity, and distinguish between regulated and non-regulated activity, reduce investor losses.

Generally, the entities in charge of investor education and financial literacy enhancement stick to a set of programs and try to bring the targeted audience together through different channels, some of which include incorporating financial topics in school curricula, organizing events (conferences, seminars, forums, exhibitions, workshops…), publications (books, brochures, booklets…), competitions, gamification, animations and infographics, and humors.

Financial literacy enhancement programs in Iran mainly carried out by SIDSCo, an affiliate to the SEO of Iran, have been tailor-made based on the standards set by IOSCO and IFIE. These programs include:

Organizing competitions such as the League of Stock Exchange Stars and Algorithmic Trading,

Publishing capital market books for different ages,

IREVEX: a virtual mock exchange where investors can log in and start trading before entering the real market.

Press Festival,

Benchmarking and Membership in International Associations such as IOSCO, IFIE, and the Financial Literacy Task Force in COMCEC,

FINEX: as the biggest annual financial market exhibition,

Gamification: including financial questions in some already-launched games and game shows including Quiz of Kings and Barandebash game show,

Based on a report named “Financial Literacy Around The World” released by The Standard & Poor’s Ratings Services in 2017, the level of financial literacy in Iran is around 20% which places Iran around rank 130 in the world.

With the recent steps in the capital market and also the data from Central Securities Depository of Iran (CSDI) that the number of trading accounts has dramatically increased and above all the upward trend in the capital market index, it seems a tangible improvement has been made in financial literacy and inclusion. Furthermore, the number of trading accounts in Iran is around 12 million which is approximately equal to the number in India, based on the data released by the SEBI, the supervisory and regulatory authority to the Indian capital market.

Education plays a pivotal role in enhancing the level of financial inclusion, literacy, and capability. If investors and financial services consumers are not targeted and educated well, no tangible outcome will be accomplished and as a result, there will be just a series of erratic and haphazard events. Therefore, more needs to be done in Iran so that the market enjoys better-aware and informed investors. For instance, the Ministry of Education, Central Bank of Iran, Securities and Exchange Organization of Iran should hammer out a short, medium, and long-term program incorporated with detailed instruments and resources to achieve a more literate and capable investment society and ultimately a better and more thrived financial market in Iran. 

*Farhad Morsali Pavarsi, head of Securities and Exchange Organization of Iran’s international relations department


News Code 153414


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