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Improving Women's Financial Literacy, Worldwide

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Are the 70 percent of the developing world's adult population who have no formal bank account doomed to a life of economic uncertainty and financial illiteracy?

If a woman's culture dictates that she should always put her family's financial needs ahead of her own, can she learn to set aside money for her own retirement without feeling guilty?

And, is it surprising that young adults in the U.S. have practically the lowest rate of financial literacy among all age groups, considering that only four states require high school students to take a personal finance course?

These are just a few of the complex issues raised at the seventh annual Financial Literacy and Education Summit hosted by the Federal Reserve Bank of Chicago and my employer, Visa Inc. Renowned U.S. and international financial experts and journalists led a lively discussion -- and fielded Twitter questions from roughly 2,000 participants (in person and online) -- around the theme, "Improving Women's Financial Literacy & Capabilities Globally."

Besides Keynote Speaker Richard Cordray, Director of the U.S. Consumer Financial Protection Bureau (CFPB), the panelists included: Yaseen Anwar, Governor, State Bank of Pakistan; Camille Busette, Assistant Director, CFPB; K. Oanh Ha, Vietnam Bureau Chief, Bloomberg News; Linah Mohohlo, Governor, Bank of Botswana; Bernie Ripoll, Parliamentary Secretary to the Treasurer, Australia; and international financial journalists Adina Chelminsky, Mexico, Maya Fischer-French, South Africa, Alison Griffiths, MSN Money, Canada, Mara Luquet, Brazil, and Amira Salah-Ahmed, Egypt.

Among the many fascinating details we learned about the state of women's finances around the world are:

  • Director Cordray noted that "a large majority of K-12 teachers in the U.S. say that personal finance should be taught in school, yet less than a third say they've taught lessons about money, and more than half feel unqualified to teach their state's financial literacy standards."
  • Camille Busette agreed that financial education should start early -- in kindergarten or earlier. "Managing one's money is a continuous task that has to be refreshed regularly," she said. She suggested starting with age-appropriate discussions about needs vs. wants and scaling it up with actual hands-on money management activities for older children.
  • Governor Mohohlo emphasized that it's not only important to teach women about money management, but also to teach them activities to avoid -- such as participating in Ponzi schemes or lending money to people without setting repayment and interest terms.
  • Parliamentary Secretary Ripoll added that women should feel empowered to ask questions or say no if they're asked to invest in something they don't understand.
  • According to Ms. Fisher-French, among the biggest financial hurdles an overwhelming number of South African women face is their status as single mothers -- around 56 percent. Of those, only about 21 percent can rely on financial help from their children's fathers.
  • Ms. Salah-Ahmed noted that the concept of financial independence is culturally very different in countries like Egypt, where children often live with their parents until getting married and may not even open a bank account or pay their own bills until their late 20s -- by which time they likely haven't learned practical money management skills.

Reaching the "unbanked." Circling back to the question of whether financial literacy hinges on access to a traditional bank account, Ms. Salah-Ahmend noted that roughly 90 percent of the Egyptian population is unbanked, meaning most of their financial transactions are unregulated and therefore more risky.

Ms. Chelminsky added that in many third-world countries, poorer people have much easier access to credit -- often through informal lending channels -- than to formalized bank savings products. This can create huge problems when their debt spirals out of control and they have no savings to fall back on. And Fisher-Finch countered that even in South Africa, where almost 70 percent of the population is banked, strict money-laundering laws require mountains of paperwork to open a savings account, whereas someone can take out a loan in just minutes.

Ms. Chelmkinski also noted that poor women are already very frugal when managing their household budgets and informal borrowing and investing do take place. For example, many will use spare cash to buy gold that they can wear, knowing they can always sell it when needed. "The idea is not to formalize all this informal lending, but rather for banks and governments to think outside the box and develop new products that cater to women that have minimal savings and spare cash," she said.

The panelists shared some alternative financing methods that are already in place and thriving:
  • Microfinance, where organizations like Kiva make small loans to people who can't get credit from traditional banks, is helping women achieve financial stability in many underdeveloped (and developed) nations. For example, said Governor Anwar, a young woman in Pakistan can now take out a microloan to buy a sewing machine, thereby creating her own thriving business. "The payback on these kinds of loans is almost 100 percent and it's good for the overall economy," he added.
  • Also in Pakistan, a large telecommunications company has partnered with a microfinancer to provide "branchless banking" via mobile phone technology to people far removed from banks. "We've got 45,000 agents transacting this kind of business now compared to only 13,000 in the branch network," explained Governor Anwar.

Bottom line: Women throughout the world face unique economic and financial literacy challenges, whether they're aspiring entrepreneurs in Botswana or Canadian working mothers sandwiched between aging parents and college-bound children. The key is for governments, financial institutions, educators and entrepreneurs to work together to devise financial tools and educational materials that can reach the female half of the world's population -- the younger, the better.

To watch a free webcast of the 2013 Financial Literacy and Education Summit, CLICK HERE.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.