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Financial Literacy in the Arab Region: A Prerequisite for Financial Inclusion (22/11/2017)
Union of Arab Banks - Research Department

Executive Summary 
Financial inclusion and financial literacy are inexorably linked; understanding the different kinds of products and services a bank offers is a prerequisite to effectively making use of those services; likewise, having a bank account acts as a catalyst to a better understanding of financial concepts and principles (Payne, 2017). Low levels of financial inclusion are usually associated with lower levels of financial literacy, hence financial education is necessary to facilitate access to and encourage use of relevant financial products and services. Section I of this study examines the state of financial inclusion in the Arab region which still has one of the lowest levels of financial inclusion in the world as account penetration stands at 29%, in other words around 70% of adults (168 million) report no account ownership, and if one excludes the GCC countries, the outreach of formal financial services in the region is only 21% of the population – the lowest level worldwide (AMF and CGAP, 2017). 
Arab governments are trying to increase financial inclusion by boosting access to bank accounts and other formal financial services but, unless people are equipped with the necessary financial skills, these opportunities can easily lead to high debt, mortgage defaults, or insolvency as financial ignorance carries significant costs while the potential benefits of financial literacy are manifold. Section II of this study presents the definition and importance of financial literacy and financial education, and Section III provides the most recent financial literacy statistics both globally and regionally. 
The Arab region has made progress over the past decade in terms of financial literacy levels, financial education initiatives, and financial inclusion, due to the combined efforts of banks, central banks, governments, and various non-profit organizations. However, the Arab world still lags behind other regions as there remains a great potential to raise financial literacy rates and deepen financial inclusion. The average financial literacy rate among studied Arab countries is below the world average at 30.7%. Tunisia (45%), Kuwait (44%) and Lebanon (44%) have the highest percentage of financially literate adults, while countries such as Yemen and Somalia have one of the lowest financial literacy rates both regionally and globally at 13% and 15%, respectively. One striking feature of the empirical data on financial literacy is the large and persistent gender difference as women have lower financial literacy rates than men in almost all studied Arab countries, with an average financial literacy of 33.5% for men and 27.7% for women.
National strategies for financial education are gaining increasing importance on the agendas of governments on both global and Arab fronts. Section IV provides an overview of major public and private sector financial literacy and financial education strategies, initiatives and programs in a number of Arab countries. While several Arab countries have launched initiatives and programs to raise financial literacy, Morocco and Jordan are forerunners in the design and implementation of national financial education strategies in the Arab region, and several other Arab countries are in the process of drafting their own strategy including Saudi Arabia, Lebanon, Palestine, Tunisia, and Egypt. 
Finally, financial education is a perquisite as well as a byproduct of financial inclusion. Financial education is intended for all citizens of a country, regardless of their socio-professional background, business area, age, gender, residence or level of education. Faced with the specific context of each group in society, it is important to segment the population into target groups (households, companies, young people, women, the illiterate, etc.), with the aim of providing appropriately adapted financial education programs (AMF, 2017). Section V discusses proposed recommendations and delivery methods to raise the existing low levels of financial literacy in the Arab region and to promote financial inclusion.
Table of Contents 
I. Financial Inclusion in the Arab Region 5
a. Financial Literacy: The First Step towards Achieving Financial Inclusion 5
b. Financial Inclusion: Definition and Objectives 5
c. Global Overview 6
d. Current Status of Financial Inclusion in the Arab Region: Persistent Gender and Income Gaps 7
II. Financial Literacy and Financial Education 15
a. Definition 15
b. Importance 16
III. Financial Literacy: Global and Arab Trends 17
a. Financial Literacy around the World 17
b. Financial Literacy in the Arab World 18
IV. Recent Regional and National Financial Literacy Strategies and Initiatives in Arab Countries 21
a. Morocco: A Pioneer in Promoting Financial Education 21
b. Lebanon: Public and Private Efforts to Promote Financial Literacy 23
c. Tunisia: Observatory for Financial Inclusion 24
d. Jordan: A Successful National Financial Education Program 24
e. United Arab Emirates: Banks’ Initiatives to Promote Financial Literacy 25
f. Egypt: Shaping the Future 26
g. Injaz Al Arab: A Prominent Regional Initiative on Financial Education. 27
V. Conclusion: Recommendations and Delivery Methods to Promote Financial Inclusion and Raise Financial Literacy in the Arab Region 29
a. Promoting Financial Inclusion in Arab Countries 29
b. Raising Financial Literacy and Incorporating Financial Education in Arab Countries 30
VI. References 32

List of Figures
Figure 1: Financial Services for Individuals 6
Figure 2: Regional Comparison – Account Ownership at a Formal Financial Institution, 2014 (% ages 15+) 7
Figure 3: Regional Comparison – Loans from a Formal Financial Institution, 2014 (% ages 15+) 12
Figure 4: Delimitation of Financial Education 15
Figure 5: Financial Literacy – Main Global Findings 17
Figure 6: Proposed Targets of Financial Education Programs 31

List of Tables
Table 1: Total, Male and Female Account Ownership* (% ages 15+) 9
Table 2: Account Ownership: Ages 15+ v. Ages 25+, 2014 (%) 10
Table 3: Account Ownership: Poorest 40% vs. Richest 60% (% ages 15+) .10
Table 4: Percentage of Adults who Borrowed Money from a Financial Institution during the Past Year, 2014 12
Table 5: Borrowing by Source, 2014 13
Table 6: Financial Literacy in Arab Countries (%) 19
Table 7: Financial Literacy in Arab Countries: Richest 60% vs. Poorest 40% of Households (%) 20
Table 8: Financial Literacy in Arab Countries by Age Groups (%) 20
Table 9: Injaz Al-Arab Network in the Arab Region 28
I. Financial Inclusion in the Arab Region

a. Financial Literacy: The First Step towards Achieving Financial Inclusion
“Financial inclusion is an international policy priority and demand-side initiatives including financial education have an important role to play in helping individuals access and use appropriate, formal financial products,” (Atkinson and Messy, 2013). Financial inclusion and financial literacy are inexorably linked; understanding the different kinds of products and services a bank offers is a prerequisite to effectively making use of those services; likewise, having a bank account acts as a catalyst to a better understanding of financial concepts and principles (Payne, 2017). Low levels of financial inclusion are usually associated with lower levels of financial literacy, hence financial education is necessary to facilitate access to and encourage use of relevant financial products and services for the benefit of all segments of society. The following section studies the state of financial inclusion in the Arab region based on the World Bank’s 2014 Global Findex database. 

b. Financial Inclusion: Definition and Objectives
Financial inclusion means ensuring that all individuals and enterprises that need financial services have access to and control over a holistic range of adequate and affordable regulated financial products, delivered effectively and responsibly by financial institutions, and that they are equipped with the appropriate knowledge and skills to use these products. As a concept, financial inclusion entails appropriate access to financial services (such as credit, bank accounts, deposits, payments services, remittance facilities, insurance, and pension plans), financial consumer protection, and financial capability. It should be noted that financial inclusion is not an end in itself, but rather a means to an end, as it has a critical developmental role in improving social welfare, boosting prosperity, equalizing opportunities, reducing poverty and income inequality, and hence achieving inclusive economic growth. Moreover, participation in the formal financial system boosts productive investment and consumption, empowers women, and enables individuals to start and expand businesses. 
Figure 1: Financial Services for Individuals 

c. Global Overview
On the global front, great progress has been made in expanding financial inclusion. The number of people worldwide having an account grew by 700 million between 2011 and 2014. Currently, 62% of the world’s adult population has an account, up from 51% in 2011. Wide regional disparities exist as 94% of adults in OECD countries had an account in 2014 compared to 54% in developing economies, with vast discrepancies among developing regions. To this day, around 2 billion people or 38% of adults in the world still do not use formal financial services or are unbanked due to costs, travel distances and the often-burdensome requirements involved in opening a financial account. Moreover, a wide gender gap in account ownership exists at 7% globally and 9% in developing countries. Notably, women constitute 55% of the world’s unbanked adults and adults in the poorest 40% of households within economies make up half. (Source: World Bank Global Findex Database 2014). 

d. Current Status of Financial Inclusion in the Arab Region: Persistent Gender and Income Gaps 
The Arab region still has the one of the lowest levels of financial inclusion in the world (see Figure 2). According to the 2014 Global Findex Database, account penetration in the Arab world stands at 29%, in other words around 70% of adults (168 million people) lack access to a basic account, and if one excludes the GCC countries, the outreach of formal financial services in the region is only 21% of the population – the lowest level worldwide (AMF and CGAP, 2017). Account ownership is even lower for women in the region as the Global Findex Database shows that the weighted average of the account penetration stands at 24.5% – exposing an important gender gap. Furthermore, among the poorest 40% of households, only 7% of adults had an account compared to 19% among the richest 60% of households, which shows the high level of inequality in financial inclusion (Attia and Engelhardt, 2016).

Figure 2: Regional Comparison – Account Ownership at a Formal Financial Institution, 2014 (% ages 15+)

However, on a country basis, a remarkable increase in total, male and female account ownership can be noted between 2011 and 2014 in almost all Arab countries, yet large discrepancies still exist among countries. In 2014, account ownership was notably high in the UAE, Bahrain, and Kuwait at around 83%, 82%, and 73%, respectively while financial inclusion remained low in Yemen, Iraq, and Egypt at 6%, 11% and 14%, respectively. 
Nevertheless, recent studies indicate significant improvements in financial inclusion in some Arab countries. According to a new study mandated by the Central Bank of Jordan (CBJ), in cooperation with the Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ), the share of bank account possession reached 33% in Jordan in 2017, compared to 24.6% in 2014, and 27% of women have access to financial services, compared to 15.5% in 2014, while 38% of adults remain completely excluded from the formal financial system. Overall access to finance in Jordan has improved in recent years, yet inequalities remain, particularly for women and youth. The gender gap is still persistent as women (27.2%) are much less likely than men (37.6%) to have an account with a financial institution. Similarly, young people (aged 18-24; 23.6%) are less likely to have an account than older people (aged 25+; 38.6%). 
Similarly, the Central Bank of Egypt announced in Spetmeber 2017 that 32% of Egyptian adults are banked, substantially higher than the “one in 10” number usually mentioned. 
A World Bank Financial Capability and Inclusion Survey in Morocco indicates that 41% of Moroccan adults use a formal financial product or service, and this places Morocco well above the 18% average level of financial inclusion in the MENA region. Bank accounts are used by 28% of the adult population, 21% of women, and only 10% of the low income citizens. Microfinance reaches only 5% of the adult population, and 18% of adults use Islamic finance (Zottel e. al., 2014). 
A significant gender gap in account ownership persists in the Arab region, as men are almost twice as likely to have an account as women in the majority of Arab countries (see Table 1). Women, who are less than half as likely as men to have an account, lack access to formal financial services due to structural barriers (including legal restrictions), regulatory hurdles (too rigid know-your-customer requirements) and market issues, including the lack of appropriate products and inaccessible delivery channels (World Bank, 2016). 

Table 1: Total, Male and Female Account Ownership* (% ages 15+)

Youth constitute the largest age group among the population of Arab countries, but they face major obstacles to their access to financial services. The indicator commonly used to measure financial inclusion is account ownership at a formal financial institutions as a proportion of adults over the age of 15. However, most young people in Arab countries do not have financial independence before the age of 25. In the MENA region, 93% of 15-to-24 year-olds lack an account at a formal financial institution, which is the lowest in the world (World Bank, 2016).Young people under the age of 18 cannot open and manage their own bank accounts, which explains the low rates of financial inclusion in most Arab countries except the GCC countries, Algeria, Lebanon and Morocco. Table 2 shows the increase in account ownership in Arab countries when calculated as a proportion of adults over the age of 25.
Table 2: Account Ownership: Ages 15+ v. Ages 25+, 2014 (%)

Being financially excluded is also linked to income level: The richest 20% of adults in developing countries are more than twice as likely to have a formal account as the poorest 20%. As shown in Table 3, account ownership of the poorest 40% and the richest 60% of adults in Arab countries increased significantly since 2011. However, the association between financial exclusion and income level remains evident as account ownership of the richest 60% was substantially higher than that of the poorest segments in society in all Arab countries. In 2014, less than 10% of the poorest 40% of the population had an account in Mauritania, Sudan, Iraq, Egypt, Somalia, and Yemen with this figure reaching as low as 4% in Yemen and 5% in Egypt. At the other end of the spectrum, around 80% of Bahrain and UAE's poorest 40% had an account in a financial institution in 2014. 

Table 3: Account Ownership: Poorest 40% vs. Richest 60% (% ages 15+)

Similar to account ownership, the Arab world lags behind other regions in terms
of access to credit from formal financial institutions. Although 44% of adults reported having a loan according to the Global Findex survey, only 6% of them borrowed from a formal financial institution (see Figure 3). Table 4 shows the percentage of respondents who reported borrowing money from a formal financial institution for any reason in the past 12 months. Borrowing from a financial institution is generally and remarkably low in the Arab region, particularly in Maghreb countries Algeria and Morocco and least developed Arab countries Yemen and Somalia, and highest in Bahrain, Lebanon and the UAE. GCC countries, as well as Lebanon and Jordan, have a deeper outreach of formal credit when compared to other countries (CGAP and AMF, 2017). It can also be noted that in all Arab countries excluding Algeria and Yemen, men took more loans than women which may indicate that women have less access to formal channels and suffer more financial exclusion than men in the region, and hence lack the basic financial tools critical to asset ownership and economic empowerment. With regards to SMEs, which represent 80% of economic activity in the region, access to finance remains one of the greatest challenges facing them as only one SME in five has a loan, often in the form of a short-term loan. To meet the SMEs financing needs in the region, this percentage should grow by an estimated 300 to 360 percent, (AMF, 2016). 
Inclusive finance and equal access to credit to both rich and poor segments help bridge the mounting inequalities in the Arab region and alleviate poverty. However, despite the fact that the poor are often in need of more loans for education, health, and consumption expenditures, Table 4 shows that the richest 60% of the population borrows more from a formal financial institution than the poorest 40% in all Arab countries, possibly due to the higher risk associated with less-endowed borrowers who have less collateral guarantees (such as real estate and land) in case of a default. Consequently, the Arab region is the only region in the world where poverty has increased since 2010, and persisting inequality makes it hard for economic growth to be translated to poverty reduction due to a lack of equal and inclusive access to finance, opportunity, and empowerment. 

Figure 3: Regional Comparison – Loans from a Formal Financial Institution, 2014 (% ages 15+)

Table 4: Percentage of Adults who Borrowed Money from a Financial Institution during the Past Year, 2014

The source of loans taken by adults is an important indicator of the level of financial inlcusion and the competency of formal financial institutions in a country. According to the World Bank, in high-income OECD economies a financial institution was the most frequently reported source of new loans in 2014, with 18% of adults reporting that they had borrowed from one in the past 12 months. In all other regions, family and friends were the most common source of new loans. Overall in developing economies, 29% of adults reported borrowing from family or friends, while only 9% reported borrowing from a financial institution. Table 5 shows the percentage of adults who borrowed money from a formal financial institution vs. a private informal lender or family or friends over the past year. It is noteworthy that in all Arab countries excluding Lebanon, people borrowed the most from family and friends, an indicator of the shortcomings of formal financial institutions. Borrowing from friends or family was highest in Yemen, Iraq, Morocco, Somalia, and Sudan, and lowest in Lebanon, Algeria, and Tunisia. Borrowing from a private informal lender was highest in Iraq, Saudi Arabia, and Syria and lowest in Jordan, Algeria, and Sudan, while borrowing from a formal financial institution was highest in Bahrain, Lebanon, and the UAE, and lowest in Yemen, Somalia and Algeria. 

Table 5: Borrowing by Source, 2014

II. Financial Literacy and Financial Education
a. Definition
Financial literacy is defined as the ability to use skills, knowledge, attitude and behavior to effectively manage financial resources and make sound financial decisions, ultimately achieving lifelong financial security and well-being (OECD, 2012). It also refers to an evolving state of competency that enables individuals to respond efficiently to ever-changing personal and economic conditions. Financial literacy is acknowledged worldwide as an important element of economic and financial stability and development. Conversely, financial illiteracy shows through indicators of financial instability such as debt accumulation, inadequate savings, bad planning for the future (for example for considerable foreseen expenses, precautionary savings for an unforeseen deterioration of the financial situation, and retirement savings) and suboptimal investment practices (Kozup and Hogarth, 2008).
Similarly, Financial education is defined by the OECD (2005) as “the process by which financial consumers/investors improve their understanding of financial products, concepts and risks, and through information, instruction and/or objective advice, develop the skills and confidence to become more 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”. It also involves the teaching of financial knowledge, skills, behaviors, attitudes, and values, which enables individuals to make rational, savvy, and calculated daily life financial decisions. Financial education can be viewed as a capacity-building process over an individual’s lifetime, which results in improved financial literacy and well-being.

Figure 4: Delimitation of Financial Education

b. Importance 
In the aftermath of the global financial crisis, financial literacy and financial education have gained a prominent position in the global policy agenda. They are now universally recognized as core components of the financial empowerment of individuals and the overall stability of the financial system. Three high-level principles endorsed by G20 Leaders reflect this: Innovative Financial Inclusion (2010), Financial Consumer Protection (2011), and National Strategies for Financial Education (2012). In addition, in 2016, a new set of high-level principles on Digital Financial Inclusion were approved by G20 Leaders (OECD, 2017). Along these lines, the OECD Secretary-General stated that “financial literacy is an essential life skill […] which can make a crucial difference in the lives of people, in their opportunities, and in their success. It is a foundation stone for well-being, entrepreneurship, social mobility, and inclusive growth”. 
Financial literacy and financial education are particularly essential in times where increasingly complex financial products are easily available and accessible to a wide range of the population, and individuals are finding it difficult to make informed decisions regarding these financial matters. As governments seek to boost access to financial services and promote financial inclusion, the number of people with bank accounts and access to credit is rapidly increasing. Hence, financial ignorance carries significant costs while the potential benefits of financial literacy are manifold. For instance, it is found that consumers who fail to understand the concept of interest compounding spend more on transaction fees, run up bigger debts, and incur higher interest rates on loans (Lusardi and Tufano, 2015; Lusardi and de Bassa Scheresberg, 2013). Meanwhile, financially skilled individuals not only understand the basics of money management, but have the capacity to make rational and informed financial decisions, as well as plan and save for retirement. On a more advanced front, financially savvy investors are more likely to diversify risk by spreading their investments across several ventures (Abreu and Mendes, 2010).
Governments around the world are trying to increase financial inclusion by boosting access to bank accounts and other formal financial services but, unless people are equipped with the necessary financial skills, these opportunities can easily lead to high debt, mortgage defaults, or insolvency. This is particularly true for women, the poor, the young, and the less educated – all of whom suffer from low financial literacy and are frequently the target of government programs to expand financial inclusion (Klapper et al., 2015).
III. Financial Literacy: Global and Arab Trends
a. Financial Literacy around the World
The world’s largest, most comprehensive global measurement of financial literacy is the Standard & Poor’s Ratings Services Global Financial Literacy Survey. It assesses basic knowledge of four fundamental concepts in financial decision-making: risk diversification, inflation, numeracy (interest), and interest compounding. The survey is based on interviews with more than 150,000 adults in 144 countries. Below are the main findings of the 2015 S&P Global FinLit Survey. 

Figure 5: Financial Literacy – Main Global Findings

The survey finds that 33% of adults worldwide are financially literate; in other words, around 3.5 billion adults, most of them in developing economies, lack an understanding of basic financial concepts. Expectedly, financial literacy rates greatly vary between major advanced and emerging economies. On average, 55% of adults in the major advanced economies (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) are financially literate, while in the major emerging economies or the BRICS (Brazil, the Russian Federation, India, China, and South Africa) only 28% of adults are financially literate. The countries with the highest financial literacy rates are Denmark, Norway, and Sweden (71%), Canada (68%), the United Kingdom (67%), Germany and the Netherlands (66%), Australia (64%), Finland (63%), and New Zealand (61%). On the other end of the spectrum, the countries with the lowest financial literacy scores are Yemen (13%), Afghanistan and Albania (14%), Angola and Somalia (15%), Tajikistan (17%), Nepal, Haiti, and Cambodia (18%), Kyrgyz Republic and Bangladesh (19%). 
Moreover, financial literacy increases with income level, as rich adults have more financial skills than the poor. The S&P Survey finds that 31% of adults living in the richest 60% of households in the major emerging economies are financially literate, against 23% of adults who live in the poorest 40% of households. The size of the income gap is similar in the major advanced economies. Financial literacy also increases with educational attainment. Globally, a gap of about 15% points separates adults with primary, secondary, and tertiary education (Klapper et al., 2015).
Another finding is that credit is more common in rich countries than poor countries. Many borrowers in emerging countries are dependent on family and friends or on loans through informal lenders. Access to formal credit is often confined to the rich and well educated. In the major advanced economies, 51% of adults use a credit card, compared with only 11% of adults in the major emerging economies (Klapper et al., 2015).
Furthermore, the relationship between financial literacy and financial inclusion is found to be bidirectional; “while higher financial literacy might lead to broader financial inclusion, operating an account or using credit may also deepen consumers’ financial skills,” (Klapper et al., 2015).

b. Financial Literacy in the Arab World
The Arab region has made progress over the past decade in terms of financial literacy levels, financial education initiatives, and financial inclusion thanks to the combined efforts of banks, central banks, governments, and various NGOs and non-profit organizations. However, the Arab world still lags behind other regions as there remains a great potential to raise financial literacy rates and deepen financial inclusion. Table 6 below shows financial literacy rates in Arab countries included in the most recent S&P Global FinLit Survey. The average financial literacy rate among studied Arab countries is below the world average at 30.7%. Tunisia (45%), Kuwait (44%) and Lebanon (44%) have the highest percentage of financially literate adults, while countries such as Yemen and Somalia have one of the lowest financial literacy rates both regionally and globally at 13% and 15%, respectively. 
One striking feature of the empirical data on financial literacy is the large and persistent gender difference (Lusardi and Mitchell, 2014). As shown in Table 6, women have lower financial literacy rates than men in almost all studied Arab countries, with an average financial literacy of 33.5% for men and 27.7% for women, and with the gap reaching as high as 13% in Tunisia, 11% in Lebanon, and 10% in Algeria. Notably in the UAE, 41% of women are financially literate compared to 37% of men.
In line with global findings, rich adults in Arab countries (excluding Jordan and Sudan) tend to have more financial knowledge than the poor. For instance, in Saudi Arabia 35% of the richest 60% of households are financially literate while the poorest 40% of households have a financial literacy rate of 27% (see Table 7).
Moreover, in the majority of Arab countries included in the S&P Survey, adults aged 15-34 have higher financial literacy rates than age groups 35-54 and 55+, which indicates that financial education programs targeting the Arab youth, which are currently gaining increased popularity in the region, are an effective way of promoting financial knowledge and boosting financial literacy rates. For example, in Lebanon, 50% of adults aged 15-34 are financially literate, compared to 40% of adults aged 35-54, and 38% of adults above 55 (see Table 8). 

Table 6: Financial Literacy in Arab Countries (%)

Table 7: Financial Literacy in Arab Countries: Richest 60% vs. Poorest 40% of Households (%)

Table 8: Financial Literacy in Arab Countries by Age Groups (%)

IV. Recent Regional and National Financial Literacy Strategies and Initiatives in Arab Countries 

National strategies for financial education are gaining increasing importance on the agendas of governments on both global and Arab fronts. Morocco and Jordan are forerunners in the design and implementation of national financial education strategies in the Arab region, and several other Arab countries are in the process of drafting their own strategy including Saudi Arabia, Lebanon, Palestine, Tunisia, and Egypt. The most active countries in regards to financial education initiatives and programs are Egypt, Lebanon, Morocco, Jordan, and Palestine whereas Algeria is the least active. According to a study by the Arab Monetary Fund (AMF) and the German Society for International Cooperation (GIZ), “in terms of numbers of target beneficiaries, Egypt with more than two million, Palestine with more than 1.2 million and Yemen with more than 0.5 million beneficiaries have achieved the largest scale. About 26% of the overall initiatives have focused on targeting children, 51% on young people, 27% on women, 49% on SMEs and MSMEs, 38% on microfinance clients, and 6% on refugees or migrants,” (Attia and Engelhardt, 2016). 
The following section will provide an overview of major public and private sector financial literacy and financial education strategies, initiatives and programs in a number of Arab countries. 

a. Morocco: A Pioneer in Promoting Financial Education 
The Moroccan Foundation for Financial Education (FMEF) was created in January 2013 by an initiative of the central bank of Morocco (Bank Al-Maghrib). In 2014, it launched a three-year national financial education strategy (the first in the Arab region), which will be revised and/or reproduced every three years. The National Strategy emphasizes cooperation between national public and private stakeholders and partnership with international institutions to achieve the best outcomes and receive the most fundraising. 
The strategy is implemented via awareness-raising and financial education programs, as well as awareness and information campaigns, which target all the different segments of the Moroccan society. Awareness-raising activities include 1) financial education extracurricular activities for young people, such as an annual meeting between youngsters and banks, insurance companies, the Casablanca Stock Exchange, and Bank Al-Maghrib, 2) a financial education portal for young people and teachers, and 3) the integration of financial education into the national academic curriculum (Inspector’s Financial Education Guide, the Teacher’s Guide, and the Student Handbook). A play-based online financial education platform for young people and children was also launched in January 2016. Moreover, the strategy includes an action plan designed to prepare 3,000 trainers to train more than 20,000 beneficiaries who have dropped out of school by 2018. Along these lines, the Casablanca Stock Exchange launched a ‘school’ to familiarize bank staff and the wider public with financial products and the workings of the stock market and more than 50 training programs are offered to interested parties each year (Attia and Engelhardt, 2016). Similarly, the goal of the awareness and information campaigns is to develop the public’s financial knowledge and skills through several channels such as the internet, social networks and mass media (Radio TV campaigns) (Attia and Engelhardt, 2016). 
To target low-income households and illiterate people, the Moroccan Foundation for Financial Education partnered with the National Agency for the Fight against Illiteracy to integrate financial education into literacy programs. More than 600 trainers have already been trained as of 2017 to teach nearly 90,000 beneficiaries. Furthermore, a pilot was undertaken for farmers in partnership with Crédit Agricole (Morocco). This training was based on a preliminary needs assessment followed by regional campaigns in the form of awareness days dedicated to the financial education of small farmers. 1,046 farmers benefited from this pilot experiment and the number is expected to reach 10,000 beneficiaries by 2018 (AMF, 2017). 
In brief, the National Financial Education Strategy in Morocco prioritizes the most vulnerable (financially illiterate/excluded) groups and devises financial education initiatives and programs that target all segments mainly: 
• Children and youngsters
• Women
• Farmers
• Artisans
• SMEs
• Microfinance Sector
• Low-Income Households 
• Illiterate People
• Migrants (in partnership with the ILO)
• Entrepreneurs
b. Lebanon: Public and Private Efforts to Promote Financial Literacy 
According to the National Survey on Financial Capabilities carried out by the Basil Fuleihan Institute in collaboration with the World Bank in 2012, 69% of youth are not able to calculate a compound interest rate, 47% of households don’t establish monthly budgets, 50% don’t remember their previous week spending, 37% cannot make their ends meet, 32% didn’t consider establishing a retirement plan, 69% are not aware that NSSF does not offer a retirement plan, and 47% do not make any savings. 
As a result, Lebanon committed to developing a national financial education strategy in October 2015 but “this commitment faltered due to the fact that no single institution was tasked with leading the strategy,” (Attia and Engelhardt, 2016). 
However, several national initiatives were undertaken to improve the financial skills of the population such as: 
• Membership to the OECD international network for financial education in 2010.
• Organizing conferences at the national, regional and international levels.
• Carrying out a national survey to evaluate financial literacy in 2012.
• Setting up programs aiming at promoting economic and financial literacy among secondary public school teachers, and their students between 2009 and 2012. 
In addition, according to the AMF “Financial Education in the Arab World: Strategies, Implementation and Impact”, the central bank of Lebanon (Banque du Liban) included Financial Education in its action plans: 
• 2006: Developing the academic, technical and ethical skills of financial workers.
• 2014: Setting up consumer protection departments within commercial banks, supervised by the banking control commission. 
• 2015: Requiring banks to ensure the clients’ financial education and capacity building. 
• Issuing a series of booklets with the aim of promoting economic literacy, available in both Arabic and English in hardcopy or softcopy (electronically).
Another national financial education promoter is Al Majmoua, a Lebanese nonprofit microfinance institution that focuses on supporting micro-entrepreneurs, particularly women and Syrian refugees, in developing sustainable businesses by providing them with financial education and vocational training.
Lebanese banks also play an important role in boosting financial literacy. For instance, Byblos Bank (Lebanon’s third largest bank in terms of assets) launched a daily two-minute program on one of Lebanon’s leading television stations called “Fakker Maliyan” or “Think Financially”, which explains basic financial topics and concepts, from how banking and other financial products work to what you need to know to get the most out of a bank. The bank also launched “Nes W Finance” or “People and Finance”, the first print media initiative of its kind in Lebanon, which offered from November 2015 until May 2016 analysis and insight into key aspects of personal finance, from budgeting and investment products to broader economic issues. 
Moreover, Byblos Bank is taking its message of Financial Literacy directly to the Lebanese youth by conducting a series of MONEYSMART Boot Camps for participants aged 20-25. These camps provide information and insights about the fundamentals of a healthy money cycle – from earning and spending to saving, borrowing, and investing – which help participants make better-informed decisions on how to manage their finances.
c. Tunisia: Observatory for Financial Inclusion
To foster the development of the population’s financial capabilities, the Central Bank of Tunisia created in 2016 an Observatory for Financial Inclusion, which offers through its online platform educational packages on the use of financial services and on payment means. The Observatory also organizes events and campaigns to further extend the scope of financial education. To strengthen the role of digitization in expanding financial education, the Observatory has implemented an action plan to ensure 90% digital social network coverage for the country by 2020 (AMF, 2017).
It created a national financial education strategy based on: 
• Anchoring financial education into all segments of society in partnership with several stakeholders. 
• Setting up an integrated digital system. 
• Putting in place a shared ecosystem of media coverage and guidance for professionals, schools and universities. 
d. Jordan: A Successful National Financial Education Program 
The National Financial and Social Education Programme (NFSEP) was launched by the Central Bank of Jordan (CBJ) in May 2015 and will run until 2021, and is to be funded from commercial banks, financial institutions and civil society institutions. Targeted sectors include:
• Financial education in schools
• Financial education in higher education institutions
• Using public media to promote financial awareness
• Financial literacy for business development
• Financial education in the workplace
• Financial education for women and rural communities
• Electronic financial education. 
Since financial literacy is seen as a prerequisite for comprehensive development and economic growth, a national Financial Education Programme was launched in Jordan in 2016 initiated by the Socio-Financial National Committee in cooperation with the Education Ministry and INJAZ, as part of the Central Bank of Jordan’s strategy for financial inclusion, designed to improve financial awareness, protect service recipients and support online payments. Money management, saving and other basic financial skills are being taught as part of the Financial Education Programme, introduced to more than 350,000 students nationwide from the 7th to the 12th grades as part of the curricula.
e. United Arab Emirates: Banks’ Initiatives to Promote Financial Literacy 
According to the UAE Banks Federation, several banks have launched initiatives and programs to promote financial literacy such as: 
• Commercial Bank of Dubai: ‘Budget and Track’ is the Bank’s latest personal financial management tool recently launched on the online banking platform. This unique feature gives customers the ability to fully monitor their saving and spending habits, set financial goals and get advice on how to best manage their finances in a way that best fits their needs.
• Abu Dhabi Islamic Bank: SmartMoney Advice is a program designed by Abu Dhabi Islamic Bank to serve as a comprehensive financial guide for its customers. SmartMoney addresses all aspects of an individual’s financial literacy by providing professional advice on income management and savings as well as crucial insights on investment, Takaful insurance, and other financial matters.
• Mashreqbank: Mashreqbank actively promotes financial literacy by collaborating with educational bodies such as the Higher Colleges of Technology (HCT) and conducting interactive workshops and seminars on money management in schools, colleges and universities across the region. These initiatives are integral to creating a new generation that is fully equipped with the relevant fiscal knowledge to improve their financial situation. They also empower young entrepreneurs as they enter the job market and establish new businesses that will positively contribute to the Gulf’s economic well-being. 
• Citigroup has pledged $200 million over the next 10 years to support and promote key initiatives in the field of financial education. The assistance was activated in the 100 countries that Citigroup operates in. The UAE is a beneficiary of this program as Citigroup actively supports local financial education.
• Standard Chartered Bank aims to cultivate positive financial behavior among the UAE’s youth, which is why financial education serves as a top priority in its list of local community engagement programs. Its Financial Education for Youth program targets teenagers from 12 to 17 years of age, and features a wide range of modules that discusses how to manage money, start a business and invest in the future. Launched in December 2013, the program has reaped positive feedback, reaching over 2,000 students in the UAE.
• HSBC’s Financial Literacy Program was developed to foster responsible money management skills among the public, particularly youth between the ages of 16 to 25 and women entrepreneurs.
• Societe Generale Middle East launched a networking and financial literacy club, in an effort to empower businesswomen with financial decision-making.
In Abu Dhabi, Injaz partnered with Abu Dhabi Finance in 2015 to boost financial literacy among secondary school and university students. The partnership brings a pilot programme that aims to train over 1,500 students over three years. It covers financial planning, budgeting, saving, and how to identify investment opportunities (Diaa, 2016). 
f. Egypt: Shaping the Future
In 2012, a national initiative – Shaping the Future – was designed by the Egyptian Banking Institute (EBI) under the auspices of the Central Bank of Egypt, dedicated to the development and implementation of Financial Literacy and the development of Friendly Financial Products for Children and Youth. In 2013, EBI established a National Committee for Developing a Strategy for Financial Literacy in Egypt. The Egyptian Banking Institute’s achievements merit recognition as it trains more than 30,000 people, runs more than 1,500 training programmes, and delivers more than 35,000 training hours per year (Attia and Engelhardt, 2016).
Shaping the Future initiative aims to create a platform for the best practices and empower the national financial decision-making processes through a series of activities. These activities rely on two pillars: Financial Education and Awareness which targets delivering financial education and awareness to children and youth; and Friendly Financial Products which target supporting banks in promoting financial literacy as well as child and youth friendly financial products. These activities include:
• Encouraging banks to develop Child and Youth Friendly Financial Products.
• Encouraging the Training of the Trainer (TOT) program to create niche financial education teachers.
• Building a financial education curriculum in partnership with international partners and developmental agencies.
• Arranging visits to banks & financial institutions to teach children and youth about the different functions occurring inside a bank.
• Participating in Global Money Week annually; a global annual money awareness celebration initiated by the Child and Youth Finance International (CYFI).
• Conducting financial literacy sessions and interactive presentations in universities & schools in coordination with the Ministry of Education, Ministry of Youth and Sports and International Schools.
The Egyptian Banking Institute has been expanding the scope of Shaping the Future’s projects to target other segments in underprivileged areas:
• School Bank Project: designed by Child and Youth Finance International to increase financial inclusion of children & young people between 6 and 25 years of age, through the school system.
• Civil Society Projects: executing projects aiming to raise the financial awareness & financially educate individuals and households in underprivileged areas.
• Governmental Employees Projects: a financial awareness campaign targeting the education of government employees on how to efficiently use their bank account in e-payments.
g. Injaz Al Arab: A Prominent Regional Initiative on Financial Education
Established in 1999, Injaz Al-Arab is a non-profit organization that promotes youth education and training in the Arab world through a three pillar approach: workforce readiness, financial literacy and entrepreneurship. It works in Algeria, Bahrain, Egypt, Kuwait, Lebanon, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Tunisia, the United Arab Emirates and Yemen. 

Table 9: Injaz Al-Arab Network in the Arab Region

V. Conclusion: Recommendations and Delivery Methods to Promote Financial Inclusion and Raise Financial Literacy in the Arab Region

a. Promoting Financial Inclusion in Arab Countries 

The following are recommendations that we propose in order to promote financial inclusion in the Arab region:

• Diversifying and developing innovative low-cost financial products as well as creating an enabling environment for women and low-income segments to access financial services and institutions is essential in promoting financial inclusion in the region, especially considering the high unemployment and low level of wages. 

• Improving the financial infrastructure by refining the credit payment and reporting systems, creating central information systems allowing financial institutions to more efficiently evaluate risk of potential clients, enhancing creditor rights, facilitating collateral regimes, and reforming insolvency laws in Arab countries as well as enabling branchless banking innovations and the use of agents. 

• Establishing a Regulatory and Supervisory Framework that allows microfinance institutions to grow prudently as the region lacks a regulatory environment for MSME's to prosper because many Arab countries do not have available microfinance legislation.

• Expanding the actual outreach of formal financial services, which requires changes in the financial sector architecture. Morocco, the country that has made the most progress toward financial inclusion, has proactively changed its policies to embrace financial inclusion, notably by (i) granting a banking license to the postal network in 2009, leading to the creation of Al Barid Bank to reach the geographically excluded population, and over 500,000 new accounts were created during the first years of operation, and (ii) making it compulsory for commercial banks to offer low-income banking products […] which provide target groups of low income clients with adapted products using innovative technologies such as prepaid cards, mobile banking, tailored packages, etc. (Attia and Engelhardt, 2016).

• Developing national strategies for financial education in all Arab countries similar to those in Morocco and Jordan, which transcend basic financial concepts and cover day-to-day financial management, credit and debt management, long-term financial planning, use of financial services and products, budgeting, consumers’ rights and responsibilities, insurance, remittances and retirement. 

b. Raising Financial Literacy and Incorporating Financial Education in Arab Countries

Financial education is a perquisite as well as a byproduct of financial inclusion. Financial education is intended for all citizens of a country, regardless of their socio-professional background, business area, age, gender, residence or level of education. Faced with the specific context of each group in society, it is important to segment the population into target groups (households, companies, young people, women, the illiterate, etc.), with the aim of providing appropriately adapted financial education programs (AMF, 2017). Proposed recommendations to raise the existing low levels of financial literacy in the Arab region include:
• Integrating financial education programs into school and university curricula as well as literacy programs. 
• Using mass media (television, radio, magazines, and newspapers) as well as new technologies (e-learning, mobile phone apps, and social networks) as platforms to extend the reach of financial education programs. In addition to using government sponsored infomercials to deliver financial inclusion messages and associated education to large segments of the population. 
• Devising targeted financial education campaigns and programs for the youth, women, entrepreneurs, low-income citizens, the elderly, government employees, MSMEs… 
• Distributing free-of-charge financial education printed materials at Arab banks, central banks, schools, and universities (booklets, CDs, Flyers, Brochures…)

Figure 6: Proposed Targets of Financial Education Programs

VI. References

Arab Monetary Fund (AMF) and Bank Al-Maghrib, with support of the Moroccan Ministry of Economy and Finance (MEF) and in coordination with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), the World Bank, the Organisation for Economic Cooperation and Development (OECD) and The Moroccan National Foundation for Financial Education (2017). “Financial Education in the Arab World: Strategies, Implementation and Impact”. 

Atkinson, A. and F. Messy (2013), “Promoting Financial Inclusion through Financial Education: OECD/INFE Evidence, Policies and Practice”, OECD Working Papers on Finance, Insurance and Private Pensions, No. 34, OECD Publishing. http://dx.doi.org/10.1787/5k3xz6m88smp-en

Attia, H. & Engelhardt, H. (2016). “Financial Education Initiatives in the Arab Region: A stocktaking report”. Arab Monetary Fund (AMF) and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ). 

Consultative Group to Assist the Poor (CGAP) and Arab Monetary Fund (AMF), (2017). “Financial Inclusion Measurement in the Arab World”, Working Paper, January 2017. 

Diaa, S. (2016). “Financial literacy still needs more homework in the UAE”. Gulf News Money. 

Global Findex, 2014. http://www.worldbank.org/globalfindex
Klapper, L. et al. (2015). “Financial Literacy Around The World: Insights from the Standard & Poor’s Ratings Services Global Financial Literacy Survey”. http://gflec.org/wp-content/uploads/2015/11/Finlit_paper_16_F2_singles.pdf.

Kozup, J., and Hogarth, J. M. (2008). “Financial Literacy Public Policy and Consumer's Self-Protection – More Questions, Fewer Answers”. Journal of Consumer Affairs, 42(2). 

Lusardi, A., and Bassa Scheresberg, C. (2013). “Financial Literacy and High-Cost Borrowing in the United States,” NBER Working Paper 18969.

Lusardi, A., and Mitchell, O. 2014. “The Economic Importance of Financial Literacy: Theory and Evidence.” Journal of Economic Literature 52 (1): 5-44.

Lusardi, A., and Tufano, P. (2015). “Debt Literacy, Financial Experiences, and Over Indebtedness,” Journal of Pension Economics and Finance, Vol. 14, special issue 4, pp. 332-328, October.

Margarida, A. and Mendes, V. (2010). “Financial Literacy and Portfolio Diversification,” Quantitative Finance, Vol. 10(5), pp. 515-528.

OECD. (2005). “Improving Financial Literacy: Analysis of Issues and Policies”. 
OECD (2017), G20/OECD INFE report on adult financial literacy in G20 countries. 

Starček, S., and Trunk, A. (2013). “The Meaning and Concept of Financial Education in the Society of Economic Changes”. 

Payne, C. (2017). “Financial Inclusion and Financial Literacy in Kuwait”. Institute of Banking Studies Research – Kuwait. June 2017. 
http://www.kibs.edu.kw/wp-content/uploads/2017/06/Financial-inclusion-2.pdf

Yoshino, N., and Morgan, P. (2016). “Overview of Financial Inclusion, Regulation, and Education,” ADBI Working Paper 591.Tokyo: Asian Development Bank Institute. 
http://www.adb.org/publications/overview-financial-inclusion-regulation-and-education/

Zottel, Siegfried; Ortega, Claudia Ruiz; Randall, Douglas; Xu, Sarah Yan (2014). Enhancing financial capability and inclusion in Morocco: a demand-side assessment. Washington, DC: World Bank Group.
http://documents.worldbank.org/curated/en/936861468051895341/Enhancing-financial-capability-and-inclusion-in-Morocco-a-demand-side-assessment

 

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