Using a strategic approach to increase the economic prosperity of Timor-Leste, the South-East Asian nation’s government called upon Massey University for assistance in developing a national financial literacy strategy.
The financial literacy of a country’s citizens has a direct impact on economic development. An ability to manage one’s personal finances by minimising debt, increasing savings and protecting one’s assets has long-term benefits for individuals, families, businesses and the wider financial system.
In an effort to cultivate a culture of financial good health, the government of Timor-Leste made the financial education of its “under-served” people a priority. Following wide consultation and garnering the support of its financial sector, the government then commissioned the expertise of Massey University’s Dr Pushpa Wood to work with the Central Bank of Timor-Leste to develop a national strategic plan for financial literacy.
Dr Wood is the Director of the Financial Education and Research Centre at Massey University’s School of Economics and Finance, and has a long history of adult and financial literacy advocacy. She has worked across the school, tertiary and industry sectors to improve adult literacy and financial literacy, and is a member of the New Zealand Qualifications Authority’s project advisory group reviewing financial literacy unit standards.
Timor-Leste is largely a cash society. “Approximately half of the population don’t have bank accounts, don’t understand the products and services that banks offer, and if they’re saving at all, they are doing so via accessible systems like community cooperatives,” Dr Wood says. “Their outlook tends to be focused on what’s happening in their lives at the moment, rather than planning for the future. As a result, the concept of accumulating savings over a period of years doesn’t resonate naturally.”
A comprehensive five-year plan for improving financial literacy is currently under way, following a year-by-year strategic roadmap. While prescriptive—detailing how to grow the capacity and capability of the financial services sector, establish a network of advocates and how to reach the target audience—the plan is also agile, allowing for learning to influence changes.
“To affect successful and sustainable changes in society you need to take people from all walks of life with you,” Dr Wood says. “People need to believe that it is going to be beneficial to them personally. Ideology alone is not a compelling incentive.”
Through a national awareness campaign, the benefits of saving are being realised by hundreds of young people. In November 2014, Timor-Leste held its first National Savings Day, during which the government distributed 750 locally made clay money-pots to children and encouraged them to save as much as they could over the coming year. To make their efforts worthwhile, Dr Wood worked with the Central Bank to gather incentives.
“At the 2015 National Savings Day the Central Bank was able to match the children’s savings dollar for dollar up to a hundred dollars.”
At the end of August 2015, a new savings product called Hau Nia Futures was launched, supported by four commercial banks. By the end of February 2016 this new product had attracted a total of 959 individual accounts, holding savings of more than $340,000. “In a country where the average annual income is US$250, this is an incredible feat,” Dr Wood says.
“Kids can’t take out the funds until they’re 17 so it seems that their families are really supporting them in saving for future goals like their education and training,” she adds.
Despite such a positive start and a hope that the “save now for a better future” concept will catch on, the government is well aware that simply educating its people about financial matters won’t necessarily spark a behavioural change.
In a small country like Timor-Leste it can be comparatively easy to gain political consensus to drive the development agenda.
DR PUSHPA WOOD
The government and its network of advocates are in it for the long haul. They include providers of financial services, who are committed to updating their offerings and making their products and services more accessible by employing clear language, and training staff to support customers new to banking and insurance.
Dr Wood spent some time in early 2016 educating 15 teachers who, in a first for the education sector, will be delivering a financial literacy programme in elementary schools. Beyond schools, business owners, civil servants, farmers, pensioners and niche groups are all being supported to make better financial decisions for their future.
In terms of learning for organisations or nations seeking to make similar cultural changes, Dr Wood says, “You need to have champions to drive any new initiative. In Timor-Leste’s case, the Governor of the Central Bank and his team were very committed from the beginning, but they also recognised the fact that they needed to engage people with expertise in the field and then leave them to drive the process.
“In a small country like Timor-Leste it can be comparatively easy to gain political consensus to drive the development agenda. The challenge is how to sustain it when you are still building the capability of the nation.”
Funders Central Bank of Timor-Leste
Dates Ongoing since 2014