I PLAN FOR MY MONEY!

Why consumer education?

Researchers on Consumer Education across the world have found that financial products and services are very complex in nature and the vast majority of people are unable to make informed choices of the products and services due to financial illiteracy. The current situation calls for appropriate interventions aimed at improving financial literacy which will in turn improve consumer knowledge of the financial markets and offer protection to the consumers.

Botswana, as part of the global village is not immune to the above situation as the larger proportion of the population is not knowledgeable about the financial products and services and the existing financial services law. There is therefore a need to develop a financially literate community which will in turn assist to ensure fairness, efficiency and orderliness of the non-bank financial sector. A financially literate community can in addition identify financial scams and swindlers as these thrive in communities which are poor and financially illiterate.

In Botswana there has been a shift from investing in non-financial assets such as property and cattle to investing in complex financial products in a quest to improve long term returns and diversify the investment portfolios.  The shift in financial decisions have however not been made easy due to general lack of knowledge of most financial products and services. This situation can be improved through consumer financial education.

Consumer education has a dual role to play; to educate those using financial products and services to make informed decisions, and to promote the use of financial services to those who are financially excluded. In helping today’s complex markets, consumer financial education is central to helping consumers make better decisions about the management of their money (Bernanke, 2002).

The Minister of Trade and Industry shares the same sentiment with Bernanke after her Ministry commissioned a study to determine the skills required by consumers of financial products and services. The study was done by Botswana Consumer Center for Advocacy Research and Orientation and it indicates the need for awareness of purchasing skills and knowledge of industrial class employees when borrowing money from financial institutions.

The study further indicates that half of the industrial class employees get loans from cash loans regardless of the high interest rates. The study recommended the need to put in place robust financial literacy programs for consumers in Botswana. This suggests that employees will always be in a debt trap and complaints lodged with NBFIRA will increase unless efforts to improve financial literacy are stepped up.