Financial literacy stands at 58 pc, poor inclusion in insurance

Kathmandu, Dec. 22

About 58 people in a hundred are financially literate in Nepal, concludes a survey of the Nepal Rastra Bank (NRB) published on Thursday.

The 'Baseline Survey on Financial Literacy in Nepal' found that country's overall national financial literacy is 57.9 per cent, but only 27.5 per cent of adult population (18-80 years of age) passed the minimu target score in all financial literacy components – financial knowledge, behaviour and aptitude.

Only 36.5 per cent adults passed the minimum target score in financial knowledge and 56.6 in financial behaviour but financial aptitude of Nepali people seems good with 95.4 per cent score. Financial aptitude includes people's response towards savings, prioritization of short-term wants over long-term security and inclination towards risk for future wellbeing.

Financial literacy for the study encompasses aspects of knowledge, aptitude and behaviour covering the issues like money management, planning for short- and long-term financial goals and awareness and choice of financial products.

According to the study, while financial behaviour and financial aptitude scores are found almost similar across provinces, there is a vast difference in financial knowledge.

Bagmati Province has the highest financial literacy score, whereas Madhes Province scored the lowest. Bagmati has 64.5 per cent financial literacy and Madhes 52 per cent. Gandaki's score is 62.4 per cent, Karnali 59.7 per cent, Sudurpaschim 57.5 per cent, Province 1 57 per cent and Lumbini 55.6 per cent.

Men more literate

Men are more financial literate than women. Financial literacy score in male is higher than female by 7.5 percentage point – male score is 61.8 per cent and female score is 54.3 per cent. But financial knowledge score of males is higher than female by 17.9 per cent. Such a difference in financial knowledge between genders is found in all provinces.

Financial knowledge includes the understanding of key financial concepts and the ability to apply numerical skills in financial situations. Likewise, financial behaviour encompasses day-to-day money management, financial planning, spending, savings, investment, reliance on credit to meet daily requirement and building a safety net for future well-being.

Likewise, younger generation (18-30 years), have better financial knowledge compared to other age groups. The financial literacy score of people of age 18-30 years is 63.2 per cent compared to 27.9 per cent of people of age 60 years and above. Similar is the case with formal education, reflecting that the fact that higher level of formal education has positive correlation with financial literacy score, concludes the survey.

 

Insurance has least inclusion

The survey of the central bank also found that insurance is the area having the least inclusion.

About 73.78 per cent of adult population is using the payment products, 86.64 per cent uses saving, investment or retirement products, and 46.34 per cent uses credit products while only 30.2 per cent uses insurance products.

Only about 8.5 per cent adults use non-life insurance products, while 26.8 per cent use the life insurance products. About two-thirds of adults are aware of at least five different financial products. Still 71.83 per cent of them rely on family and friends for saving or borrowing to meet their financial need.

 

92% in cities use payment service

Likewise, the usage of payment services is highest in metropolitan cities standing at 91.9 per cent of adult population. Workers in agricultural, construction and other sectors have a low usage of payment product. "Still significant numbers of population are using collective saving loan and 24 per cent hold stocks. Young generation have a higher usage of saving, investment or retirement products. Still, people in agricultural and construction sector have a low usage of saving product compared to other sectors," concludes the study.

According to the NRB, the baseline financial literacy survey was conducted to explore the status of financial literacy and financial inclusion in Nepal up to district and provincial level.

The survey included 9361 Nepali people of age above 18 years from 77 districts with at least one local level from a district. Individuals were selected from the voters’ list of the selected wards for the study. 

 Published in The Rising Nepal daily on 23 December 2022.