KINGSTOWN, St. Vincent, CMC – A Financial Literacy and Financial Inclusion Survey conducted by the St. Kitts-based Eastern Caribbean Central Bank (ECCB) has found that financial literacy in the Eastern Caribbean Currency Union (ECCU) is generally low, but lowest in St. Vincent and the Grenadines.
“In a region which boasts high levels of adult literacy (high 90s), financial literacy is lamentably low and lugubrious,” said ECCB Governor Timothy N.J. Antoine at the launch of the survey results.
“How do we explain the following? Persons engaging in hire purchases are ignorant or indifferent to effective interest rates, with some as high as 35 percent. The proliferation of payday loans essentially means attempting to ride up on a down escalator — a veritable debt trap,” Antoine said.
He asked why highly credentialed persons are clueless about managing their finances. He also noted that only one in 25 persons (four percent) in the ECCU are invested in the regional and international capital markets. Still, several people are now pursuing investments in high-risk cryptos.
Antoine said people spend their limited income on wants while begging family, friends, and the government for their basic needs.
The financial literacy score was obtained by adding the scores of financial knowledge (range from 0 to 7), economic behavior (range from 0 to 9), and financial attitude (range from 0 to 4).
The derived financial literacy score ranges from a minimum value of 0 to a maximum of 20, with a score of 20 suggesting that an individual has acquired a basic level of understanding and use of finance.
The ECCU members are Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Vincent and the Grenadines, St. Kitts and Nevis and St. Lucia. The ECCB serves as a central bank for these.
The Financial Literacy and Inclusion Survey found that the overall financial literacy score across the currency union was 12.2 out of a maximum of 20 or 61 percent.
In the ECCU, the financial literacy score ranged from 11.7 to 13.1, with Anguilla achieving the highest and lowest scores in St. Vincent and the Grenadines. The other six countries scored between 11.8 (St. Lucia) and 12.7 (Antigua and Barbuda).
There is a need for improvement in financial knowledge, behavior, and attitude in the ECCU,” the report said.
The ECCU financial behavior score was 4.4 out of 7, representing 62.2 percent of the maximum possible score. Three in five adults met the minimum target score of six out of nine for financial behavior.
The ECCU financial knowledge score was six out of nine, representing 66.5 percent of the maximum score possible. Half of all adults met the minimum target score of five out of seven for financial knowledge.
The ECCU financial attitude score was 1.9 out of four, representing 47.6 percent of the maximum score possible.
Only one in five adults met the minimum target score of three out of four for financial attitude.
The survey also found that financial product awareness was relatively high while use was relatively low across the ECCU.
“Financial Inclusion provides insights into the extent to which respondents are active financial consumers. In this exercise, financial inclusion is measured by respondents’ awareness, holding/choice, and use of financial products,” the report said.
Product awareness was relatively high across all countries; however, using these products was relatively low.
The survey results show that 88.3 percent of respondents were aware of at least five of 18 financial products, while 54.5 percent chose at least one of these products in the two years preceding the survey.
Product awareness was highest in Montserrat and lowest in St. Vincent and the Grenadines. Meanwhile, Anguilla had the most significant number of persons who recently bought a financial product.
Antoine said the ECCB commissioned the survey because financial inclusion is a strategic priority. Financial inclusion refers to access to various financial services, including banking, credit, and insurance.
He noted that Investopedia defines financial literacy as the ability to understand specific economic issues and use financial skills for personal financial management, such as budgeting and investing.
“This latter behavior calls to mind a remarkable observation by the late Martin Luther King Jr., who in the 1960s observed that many black people were spending money on their wants and then begging for their needs,” Antoine said.
“Against this backdrop, this survey is no ordinary and cannot be an academic exercise. Indeed, urgent action is needed to address financial literacy and inclusion in the ECCU,” he said.
Despite low financial literacy scores across all ECCU countries, some financial literacy components saw better results than others.
For instance, three in five individuals, or 61.6 percent of respondents, achieved the minimum target score for financial behavior.
Results deteriorated across the other two financial literacy components as one in two individuals, or 50.5 percent of respondents, achieved the minimum target score on financial knowledge.
One in five individuals, or 18.8 percent of respondents, achieved the minimum target score on financial attitude. Across all three components, 8.6 percent of individuals earned the minimum target score.
At the country level, the proportion of respondents passing the minimum target financial behavior score ranged from 56.6 percent in St. Lucia to 71.9 percent in Anguilla.
Similar results were seen for financial knowledge, where the proportion of respondents passing the minimum target was lowest in St. Lucia (41.8 percent) and highest in Anguilla (62.3 percent).
Contrary to the pattern seen for financial behavior and knowledge, 14.5 percent of respondents in St. Vincent and the Grenadines passed the minimum target financial attitude score. At the same time, Montserrat had the highest proportion of persons (24.4 percent) passing the minimum target financial attitude score.
Antoine said that over the past 21 years, the ECCB has sought to raise financial literacy through its saving and investment courses, annual Financial Information Month, and weekly podcast, ECCB Connects, which began airing seven years ago.
He said it was time for a strategy to scale up.
“We live in a shock-prone world. As a region vulnerable to external shocks, we must be engaged in a lifelong pursuit of building resilience, including financial resilience. This is imperative for member countries, companies, and individuals. The survey reveals that one in two persons in the ECCU are not financially resilient.”
Antoine spoke of financial resilience as the capacity to absorb and bounce forward from a shock such as a health event, a job loss, an economic downturn, a natural disaster, or even a pandemic.
“Let’s face it, there are persons in the ECCU who have experienced all these shocks during the past five years,” he said, adding, “When it comes to our finances, we must hope for the best but plan for the worst. Never forget, hope is not a strategy.”
He said that every citizen should aspire to be financially literate and resilient.
“Armed with the results of this survey and seized with a sense of urgency, I issue a clarion call for a coalition of partners and champions (institutionally and individually) to join the ECCB as we craft and implement a strategy to scale up financial literacy and inclusion in the ECCU.”
He said the mission of the ECCB is “to advance the good of the people of the currency union,” where they do not merely strive but thrive.
“Could you imagine what our Currency Union would be if every citizen were financially literate? We would be thriving. Could you imagine if every high school graduate in the ECCU was economically literate? To achieve this, we need our Ministries of Education and the Caribbean Examinations Council to prioritize this outcome.
“Could you imagine improving mental health, financial resilience, and well-being if more of our people can manage their finances?
“Could you imagine if every workplace, starting with governments (the largest employers), offered financial wellness programs? That would be a new day and a giant stride in our big push for financial resilience and wealth creation.”
Antoine said this is a cause worth pursuing with huge potential dividends.
“As a region, we cannot change our history or geography, but collectively, we can elevate our development trajectory through innovation and collective action. Let us seize the moment, and may God crown our efforts with resounding success,” he said.
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