NATIONAL BANK OF SERBIA FINANCIAL EDUCATION STRATEGY

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1 NATIONAL BANK OF SERBIA FINANCIAL EDUCATION STRATEGY March 2012

2 INTRODUCTION The importance of financial education has increased in recent years as a result of both financial market developments and demographic and economic changes. Financial markets are becoming more sophisticated with the appearance of a wide range of new and complex products carrying various types of risks. Along with financial market development the need emerges for financial consumers to use the instruments and products on offer. To do so, consumers must have the necessary knowledge and information to understand the concept and nature of financial products and services. In this regard, the education of school children and youth as prospective financial services users should be continuous and start at an early age. FINANCIAL EDUCATION WORLDWIDE According to the definition of the OECD (Organisation for Economic Cooperation and Development), financial education is the process by which financial consumers/investors improve their understanding of financial products and concepts and, through information, instruction and/or objective advice, develop the skills and confidence to become aware of (financial) risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being and protection. Financial education cannot replace classic education, but aims to offer timely, adequate and complete information on financial products. In the OECD recommendations, the target audience of financial education are individuals who, being non-professional investors, do not have a basic economic background and find it harder to obtain necessary information. The OECD Directorate for Financial and Enterprise Affairs issued four recommendations 1 which have been translated into the Serbian language and published on the National Bank of Serbia s website: 1. Recommendation on Principles and Good Practices for Financial Education and Awareness (2005) 2. Recommendation on Good Practices for Enhanced Risk Awareness and Education on Insurance Issues (2008) 3. Recommendation on Good Practices for Financial Education Relating to Private Pensions (2008) and 4. Recommendation on Good Practices on Financial Education and Awareness Relating to Credit. The recommendations aim to encourage financial education of people in all social spheres, beginning from primary school, in both non-member and member OECD countries. 1 Recommendations are available on OECD s website: and NBS s website: 2

3 seminar. 3 It has become evident from the activities implemented so far that a public opinion Financial education programmes should focus on important aspects in life saving, insurance, pension and debt. The recommendations also promote the national campaign of financial education, web pages dedicated to this area, and citizens right to receive clear, intelligible and full information before deciding on taking out a loan or investing money. A significant role in the financial education process is played by financial institutions which should be prompted to clarify the terms of financial products and ensure that clients understand them. FINANCIAL EDUCATION IN THE REPUBLIC OF SERBIA Financial education programmes were initiated across the globe at the start of the third millennium. In step with the rest of the world and recognising the need and importance of financial education, the National Bank of Serbia (NBS) launched in 2005 the campaign of educating the youngest members of society primary school students, mainly about the central bank s role in the country s financial and monetary system, history of money, electronic banking, insurance, payment cards, etc. Through modern didactic materials, interactive workshops, quizzes and games, the process later spread to secondary school students. With its savings caravans and olympics across Serbia, the NBS presented to children and young people the role and importance of saving. 2 In 2010, the NBS held the seminar Dinar Our Money tailored for primary and secondary school teachers. The seminar was accredited by the Institute for the Improvement of Education and Upbringing and is obligatory for teachers who are the main mediators in the financial education process and are responsible to disseminate knowledge about the key economic concepts. The NBS s didactic material and handouts were presented to teachers at this research should be conducted before an adequate financial education plan can be defined. Financial market research In 2006, the NBS commissioned a research on citizens trust in the Serbian banking sector. 4 According to the research results, 24% of respondents did not have a bank account, 48% of credit consumers did not understand a currency clause though as many as 81% of household loans contained such clause. Further, 58% of citizens did not understand the consequences of taking foreign currency clause-indexed loans (EUR, CHF, USD etc). Moreover, the analysis of 2 The NBS s Communications Department organised educational activities for young people. 3 Educational materials are available on NBS s subdomain: 4 The research was carried out by TNS Мedium Gallup. 3

4 complaints received by the Centre for Financial Consumer Protection and Education 5 shows that around 50% of complaints are ungrounded as citizens do not understand the provisions of contracts with financial institutions. In an effort to help citizens understand the nature of financial products and services, the NBS published and distributed educational materials containing clarifications regarding the terms of financial products and services, including the underlying risks. However, subsequent research showed that many consumers did not even know what interest rate was applied. The public opinion research relating to banking products and services on offer in our market, carried out by end , showed the following: 31% of those using current account overdraft do not know at which interest rate, 28% of debit card users do not use ATMs, 48% of payment card users do not use the cashless facility, 24% of credit card users do not know what interest rate is applied to their credit card debt, 24% of credit card users are not aware that a commission is charged for cash withdrawals from ATMs, 56% of credit card users settle their debt by making minimum monthly payments. A mystery shopping qualitative research was carried out as well (involving individuals trained to measure any customer service process by acting as potential customers). The results showed that citizens (64%) are generally satisfied with their banks services. However, in regard to credit terms, 43% of respondents expressed their dissatisfaction, primarily because of interest rate changes, i.e. increases in monthly instalment levels. Forty percent of credit consumers subject to variable interest rate did not know what determines such variability. As regards the way in which users overcome problems relating to banking products and services, around 55% of citizens contacted their banks, while 42% knew that the NBS could also be contacted (the Centre for Financial Consumer Protection and Education). NBS activities aimed at financial services consumers The activity plan of the NBS in the field of citizen financial education in the Republic of Serbia is based on the results of conducted research and the consumer complaints received. In 2007, 6 brochures and 19 prospectuses on different financial products and services were issued and distributed. In 2008, the website: was launched, tailored for financial services consumers and all citizens interested in using particular financial services. The nature 5 For a more detailed analysis of complaints against operations of financial institutions, please see the reports of the Centre for Financial Consumer Protection and Education. 6 TNS Мedium Gallup conducted a research on the terms of opening, administration and holding of current accounts. 4

5 and terms of financial products and services in all these publications of the NBS are clarified in a very simple way. Financial literacy is important for the entire population, particularly for those making important decisions such as buying a home or a car, or expecting a baby or retiring. In 2008, the NBS published 7 prospectuses on life-turning events (starting university studies, leaving your parents home, starting a new job, starting a family, having a baby, getting the car you want, preparing yourself for pension). In January 2009, the NBS opened a financial education office in each of its branches in order to provide citizens on the spot with comprehensive information on financial products and services. In November 2010, as part of its public education campaign, the NSB began organising presentations first in towns where its branches are located, and then in other places across Serbia (2011). Educational presentations are targeted at the household and corporate sectors (farmers, entrepreneurs, small- and medium-sized enterprises). The NBS shall continue to invest further effort in this field, aiming to involve other relevant institutions as well. NBS S STRATEGIC OBJECTIVE OF FINANCIAL EDUCATION The NBS s overriding objective in the field of financial education is to increase financial literacy levels of the public at large. To this end, it provides in-depth and comprehensive information on the concept of money, the financial market and financial products, prepares new and modern multimedia and interactive educational materials, constantly improves online content dedicated to financial education, and holds educational workshops and presentations throughout Serbia. Financial education of the youngest members of the society, through the introduction of financial education curricula in schools, is an important aspect of NBS s strategy. Awareness raising of the young in regard to financial products and services is becoming increasingly important as young people should be empowered to become competent participants in the financial market. Within the scope of its mandate, the NBS shall continue to pursue its goal of making financial education available to private individuals and businesses in the Republic of Serbia in order to ensure a more comprehensive understanding of products and services offered in the financial market. 5