BUSINESS FOCUS WITH BALEWA ZYUULU

PRIORITIZE FINANCIAL LITERACY IN SCHOOLS

To commemorate the 10^th anniversary of Insurance Week, Mrs. Namakau Ntini, the Acting Registrar of the Pensions and Insurance Authority (PIA), delivered a compelling speech at the National Institute of Public Administration on 25^th September, 2023. The address highlighted the critical role of financial literacy, especially in schools, in shaping the financial health and future of Zambia.

The speech emphasized the remarkable strides the insurance industry has taken in enhancing financial literacy within Zambia. By collaborating with various stakeholders and utilizing Insurance Week as a platform, the industry has successfully disseminated invaluable information regarding insurance, reaching a broader audience.

“Significantly, the statistics presented shed light on the evolving trends in the insurance sector. Traditionally, motor insurance dominated the general insurance gross written premium. However, in 2022, a noteworthy shift occurred, with fire insurance covering property now accounting for a substantial 39.70 percent, surpassing motor insurance at 33.60 percent. This change was attributed to the flourishing construction industry in the country, reflecting the dynamism and adaptability of the insurance market,” she said.

Mrs. Ntini underscored the importance of imparting financial education to students, emphasizing that the lack of it in the past has left many households struggling financially. The modern financial landscape demands a strong foundation in financial education to equip children with essential skills to navigate their economic future effectively.

Research has shown that financial habits are formed at a young age, influencing lifelong financial decisions. Hence, integrating financial education into school curricula is a pivotal step towards building a financially literate society. The Curriculum Development Centre is actively working on developing educational materials to enhance financial literacy in schools.

Moreover, Mrs. Ntini stressed the need for financial education to be included in the training of teachers and other professionals. This holistic approach ensures that educators are well-equipped to instil financial knowledge effectively.

In an increasingly competitive job market, diversifying career choices is vital. The insurance industry has showcased consistent growth, offering a myriad of opportunities. With the implementation of the new Insurance Act, the industry is expected to expand, creating more job opportunities and career paths for the youth.

The Pensions and Insurance Authority called on industry players to intensify efforts to engage with the public, especially in underserved communities. Additionally, the industry was urged to develop tailor-made products to meet the unique needs of various demographics.

The speech serves as a reminder that the future prosperity of Zambia hinges on empowering its citizens, especially the youth, with the knowledge and skills to make informed financial decisions. By prioritizing financial literacy in schools, Zambia paves the way for a financially-healthy and resilient nation.

Financial literacy is crucial in schools, particularly in rural parts of Zambia, for several compelling reasons:

Empowerment and economic inclusion:

Financial literacy equips individuals, including students in rural areas like Chipata in the east or Chimata in the Southern province, with the knowledge and skills needed to make informed financial decisions. This empowerment promotes economic inclusion and enables active participation in the financial system.

Poverty reduction

Rural areas often face high levels of poverty. Financial literacy can provide individuals with the tools to manage finances effectively, save, invest, and start small businesses. These skills can contribute to poverty reduction by generating additional income and fostering economic growth within the community.

The link between poverty and lack of financial education in Zambia, as in many other countries, is a complex and multifaceted relationship.

Understanding this link involves considering various factors that contribute to the cycle of poverty and how a lack of financial education can perpetuate or exacerbate this cycle.

Limited financial literacy

Many individuals and families in places like Sinda in the Eastern Province may lack basic financial literacy skills, including budgeting, saving, investing, and understanding financial products. This lack of knowledge can lead to poor financial decision-making, making it difficult to break the cycle of poverty.

Inadequate financial education can result in a lack of understanding about available financial services and products. People in poverty may not fully comprehend how to access and effectively utilize financial services like loans, savings accounts, or insurance, which can further hinder their economic progress. Without adequate financial education, individuals may fall into debt traps, often taking high-interest loans or falling prey to exploitative financial practices. These situations can lead to a cycle of debt that exacerbates poverty.

Lack of financial education can also result in ineffective management of resources, leading to poor spending choices and an inability to save or invest in income-generating activities. Effective resource management is critical for breaking the cycle of poverty.

Therefore, financial education plays a crucial role in fostering entrepreneurship and small business development. Without the knowledge and skills required to start and manage a business, individuals in poverty may struggle to create sustainable income-generating opportunities.

A lack of financial education can perpetuate poverty across generations. Parents who lack financial knowledge may struggle to provide their children with adequate guidance on managing finances, setting them on a similar path of financial struggles.

Limited access to education

Poverty often leads to limited access to quality education. Without education, individuals are less likely to acquire the necessary skills and knowledge, including financial literacy, to escape poverty.

Policy and systemic factors.

The Government policies and the overall economic system can also play a role. Inadequate policies related to financial education and poverty alleviation may exacerbate the link between poverty and lack of financial knowledge.

So, we agree with PIA that to address the link between poverty and lack of financial education in Zambia, efforts should be made to improve financial literacy through education, community programs, and policy changes. Equipping individuals with financial knowledge and skills can empower them to make informed decisions, break the cycle of poverty, and contribute to the economic development of the country.

Debt management and financial security

Teaching financial literacy helps students understand the implications of debt and the importance of responsible borrowing. It encourages sound financial practices that enhance financial security and prevent individuals from falling into debt traps.

Savings and investment culture

Instilling a savings and investment culture from a young age encourages individuals to set aside money for the future. It promotes long-term financial planning, which is essential for achieving personal and community financial goals.

Financial resilience

In rural areas, economic stability can be fragile. Financial literacy imparts skills to navigate economic uncertainties, manage financial shocks, and maintain resilience during challenging times.

Improved decision-making

Understanding financial concepts enables students to make informed decisions regarding spending, investment, and financial priorities. This can lead to better financial outcomes, both individually and collectively for the community.

Asset building and wealth generation:

Financial literacy encourages individuals to accumulate assets and build wealth over time. It promotes wise investment choices and understanding the potential returns on investments, fostering a culture of wealth creation.

Financial inclusion and digital literacy

Financial literacy often encompasses digital literacy, enabling individuals to access and use digital financial services. This is increasingly important as digital platforms play a significant role in modern financial transactions and services.

It is worth stating that an educated populace in insurance can contribute to economic stability by minimizing the financial impact of unforeseen events. Families and businesses that are adequately insured are more likely to recover quickly from losses, promoting overall economic development.

Insurance education can foster a culture of community support and resilience. Understanding insurance principles can lead to communities working together to ensure mutual protection and support during challenging times.

Incorporating insurance education into the school curriculum in Zambia can have far-reaching positive effects, not only for individuals and families but also for the broader economy and society. It promotes financial literacy, economic stability, and social well-being.

In summary, integrating financial literacy into the education system, especially in rural parts of Zambia, is pivotal for equipping students with the knowledge and skills necessary to navigate the complexities of the financial world, enhance economic well-being, and contribute to community development and prosperity.

The author is an Economist and a multiple award winning and certified financial journalist.