The State Bank of Pakistan (SBP), in collaboration with the National Institute of Banking and Finance (NIBAF), has so far imparted basic financial education to 747,901 Pakistani kids and youth, according to the SBP’s latest update.

This basic education is offered in three separate categories each one designed for school children (nine-12 years), adolescents (13-17 years) and young men and women (18-29 years).

The central bank and NIBAF made this achievement under National Financial Literacy Programme for Youth or NFLP-Y. Their target is to reach out to 1.6 million kids and youth by 2023. This kids’ and youth financial literacy programme comprises both physical classroom training as well as e-learning sessions in 45 districts across Pakistan including Azad Jammu and Kashmir and Gilgit Baltistan.

The three stated objectives of this programme are (1) improving and strengthening money management knowledge, skills and behaviours (2) inspiring the youth to set financial goals through saving, budgeting and planning for their future and (3) educating the youth about their rights and responsibilities as consumers of financial services and products. Making kids and youth financially literate is important. But more important is inspiring them to set financial goals through savings, budgeting and planning for their future. Just making it a core objective of NFLP-Y is not enough.

The central bank and the government must join hands to ensure that school children (9-12 years) and adolescents (13-17 years) are encouraged to practice the basic financial education they receive under NFLP-Y.

Adolescents should be encouraged to open bank accounts using the identification cards of their educational institutions, a facility that is offered selectively

These kids and adolescents, for example, should be effectively encouraged to open bank accounts using the identification cards of their educational institutions and the account opening process should be made easier. Banks claim that they normally allow students below 18 years to open bank accounts using ID cards of their educational institutions. But they do it very selectively. And a large number of Pakistani students below 18 years of age don’t even know banks offer this facility.

There is a need to create awareness about it and encourage all NFLP-Y enrolled adolescents (13-17 years) to use their bank accounts not just for making some transactions but also for savings. Banks should design tailor-made saving schemes for them, keeping in view the growth potential of such schemes. They should not consider the administration of such schemes a burden just because they initially fail to generate large volumes of funds.

Similarly, NFLP-Y enrolled youth (18-29 years) should be encouraged not only to park savings in their bank accounts but also in sovereign debt securities and instruments of National Saving Schemes (NSS). Young men and women in this age group should also be facilitated for investing and launch their own start-ups with a small equity and generous funding from local banks.

Banks may consider making arrangements with the stock market to facilitate NFLP-Y youth in trading of stocks as well as in participating in initial public offerings. They can also make some arrangements with mutual funds and insurance companies with an aim to encouraging these financially literate youth — particularly females — to invest in these funds and buy insurance policies for future education/marriage expenses.

In December 2020, there were 62m bank accounts in Pakistan (equal to about 28.2pc of the total population of 220m), according to the latest SBP stats. Clearly, there is a need to increase this number in the shortest possible time for documentation of the economy.

Accelerated bank accounts opening for kids and youth can help achieve this objective, more so because kids and youth (aged between 10 and 24 years) constitute 30pc of Pakistan’s total population, according to the 2020 report of the United Nations Fund for Population.

Generally, successive governments in Pakistan have focused on empowering youth through concessional loaning schemes for students, often as a tool to expand political support. The current PTI government has also launched one such scheme. Offering concessional loans to youth for education or for initiating small businesses is, in itself, a good thing to do. But unless kids and youth are made familiar with the world of finance and are encouraged first to get basic financial education, open bank accounts and save and invest, they cannot be expected to become financially responsible citizens in the future.

The ongoing National Financial Literacy Programme for Youth is designed to do just that. However, categorising the kids and youth in three groups of school children of 9-12 years, adolescents aged 13-17 and youth aged 18-29 has made it a bit too complex.

The central bank and NIBAF may have valid reasons to keep these categories intact. But the SBP should immediately start publishing a quarterly or half-yearly progress report based on the data obtained from banks on savings and investment made by adolescents and youth. These reports that should be published in English and Urdu would hopefully increase awareness about kids-and-youth financial literacy programmes besides encouraging them to save and invest. Their savings would eventually improve the overall domestic savings ratio — if not in the near future, certainly in five to 10 years from now.

Pakistan’s domestic savings base is shallow. According to the SBP’s 2019-20 annual report net domestic savings in June 2020, stood at 6.8 per cent of GDP, down one full percentage point within four years (from 7.8pc of GDP back in 2016). Increasing domestic savings will help finance economic development through a more balanced mix of domestic and foreign sources. \

Published in Dawn, The Business and Finance Weekly, August 23rd, 2021