The debt situation among a majority of the population in Sri Lanka is yet in a bad condition due to poor financial literacy and inclusion in the country echoed many speakers at the launch of key financial literacy initiatives by the Central Bank with UNDP, JAICA and the University of Kelaniya last week.
Resident Representative, United Nations Development Programme (UNDP) Azusa Kubota said debt sustainability among Sri Lanka’s households remain a pressing issue hindering the path to prosperity.
Studies reveal that despite Sri Lanka making economic progress close to 31 percent still live in poverty exacerbated by the economic crisis in 2022.
“A large segment of Sri Lanka’s population depend on informal sector for borrowing putting them at great risk due to inadequate income generation and financial literacy,” said Chief Representative, Japan International Cooperation Agency (JICA) Kenji Kuronuma.
It was also stressed that financial literacy alone in not sufficient to raise people out of poverty and put them on the road to prosperity. Knowing how to manage finances, avert scams, risk management and making money to work for one than working for money is important to be wealthy.
Chinese entrepreneur Jack Ma said, “If you put a banana and money in front of a monkey, the monkey will choose the banana because it doesn’t understand that money can buy many bananas.”
“A higher rate of literacy will take a person to prosperity only if he/she knows how to manage money and manage risks,” said Assistant Governor, Central Bank W. A. Dilrukshini.
The Central Bank has notified the public of many financial scams and has launched many initiatives to expand financial literacy which is key for financial empowerment of people.
However, the Central Bank acknowledges that while the financial knowledge among Sri Lankans is satisfactory compared to other countries, there exists a significant gap in financial behaviour.
This gap arises from various factors including attitudes towards finance, behavioral biases, lack of practical experience, socioeconomic barriers, and emotional influences. Poor financial behavior not only leaves individuals vulnerable to economic shocks but also contributes to macroeconomic instability and increases inequality.
“Past surveys show financial behavioral gaps such as an insufficient saving culture, susceptibility to financial scams and impulsive spending persisting in the country,” Central Bank Governor Dr. Nandala Weerasinghe said.
Financial management of micro-small and medium enterprises, digital financial literacy, tax literacy, economic and finical literacy are some of the modules of the financial literacy curriculum launched last week.
The Central Bank launched last year a five-year Financial Literacy Roadmap in collaboration with numerous to improve financial behavior by implementing targeted interventions, standardising financial literacy materials, enhancing financial education in schools, and using resources effectively.
However, challenges remain in aligning with national policies, adapting to evolving financial landscapes, and ensuring accessibility and inclusivity of financial literacy interventions.
In response to the Central Bank’s findings, Sri Lanka’s financial knowledge is deemed satisfactory but there’s a notable deficiency in financial behavior, posing challenges for individuals and the economy at large.
