With only a modest percentage of the population having bank accounts, and a low bank account per capita ratio being an international poverty indicator, the Central Bank of T&T plans to develop a financial inclusion policy to address this and other issues, Central Bank Governor Jwala Rambarran has said.
In a Q&A with the Bangkok-based Alliance for Financial Inclusion (AFI), issued as a release on April 19, Rambarran said: "The Central Bank views financial inclusion as a complement to its financial stability goals. The bank is currently in the process of conducting a follow up national survey to determine whether there have been improvements in the level of financial literacy and inclusion in T&T, and to assess the impact of the National Financial Literacy Programme (NFLP) interventions over the past five years. The findings will be used to direct our way forward and develop a financial inclusion policy."
Soon after its establishment in January 2007, the NFLP commissioned a national financial literacy survey, he told the AFI. "The results pointed to certain financial inclusion challenges/issues, such as only a modest percentage of the population with bank accounts; insufficient savings and a weak propensity to save; inadequate retirement planning; lack of understanding of basic financial products and services, and an overall relatively low financial literacy rate. In addition, the youth are not exposed to financial education as part of the school curricula," he said.
The 2007 survey took place when T&T was experiencing strong economic growth, increasing employment and rising incomes, he said.
"Subsequently, T&T has suffered from sub-par economic performance, which has, undoubtedly, forced lower and moderate income families to make some very difficult financial choices about budgeting, saving for emergencies and even postponing retirement," he said.
The Central Bank has pioneered several initiatives to manage the financial inclusion challenges facing T&T, he said. First, he gave some background on the Office of the Banking Services Ombudsman, which was established in May 2003, to investigate complaints in respect of services provided by banks and their subsidiaries.
In May 2005, the office was expanded to include the handling of complaints from participating insurance companies and was renamed the Office of the Financial Services Ombudsman. The Ombudsman has been able to achieve an impressive 94 per cent resolution rate for banking complaints, and a 97 per cent resolution rate for insurance complaints, he said.
"The consumer financial protection efforts of the Financial Services Ombudsman (FSO) are complemented by the interventions of the NFLP, and has been delivering relevant financial education programmes to members of the public," he said.
"Both the FSO and NFLP have been reaching out to the population by going into their communities, workplaces, schools, etcetera, to address issues such as saving, budgeting, investing, financial services and products, entrepreneurship and retirement planning. We intend to intensify financial education interventions and programmes in the future."
One common challenge facing the Caribbean region is the lack of rigorous, objective and reliable demand side data on how people save, borrow, make payments and manage risk, Rambarran said. Only two countries in the Caribbean–T&T and Haiti–are covered in the Global FINDEX database, he said. The Global FINDEX database provides systematic indicators on financial inclusion in 150 countries.
"This information is important to more accurately diagnose the state of financial inclusion, identify existing barriers and craft appropriate policy responses," he said.
Maya Declaration
The governor also said that at the 2013 AFI Global Policy Forum, which will take place on September 10-12, in Kuala Lumpur, Malaysia, "the intention is for the Central Bank of T&T to make a Maya Declaration Commitment at the forum."
He said: "Adopting the Maya Declaration provides a benchmark against which citizens can assess the performance of policymakers in respect of their financial inclusion goals. Whether it is establishing a national financial inclusion policy, or creating a regulatory framework that balances financial inclusion, financial stability and financial integrity, or collecting financial inclusion data, policymakers are committing themselves to specific actions to dramatically improve the quality of their citizens lives, especially those who are most vulnerable and at risk. This makes policymakers even more accountable to their citizens."
At the end of May, Rambarran will also be taking part in the 2013 Annual Conference of the Caribbean Group of Banking Supervisers. This year the conference will be hosted in Port-au-Prince by the Banque de la Republique of Haiti, that country's equivalent to a central bank. The Caribbean Group of Banking Supervisers (CGBS) was established in 1983 under the aegis of the Caribbean Community (Caricom) Central Bank Governors, with a mandate to enhance and coordinate the harmonisation of the bank supervisory practices in the English-speaking Caribbean, with a view to bringing them in line with internationally accepted practices.
CL Financial's region-wide shock
Asked what he hopes this meeting will achieve, Rambarran said: "As you may be aware, the January 2009 collapse of CL Financial and related companies in T&T was a major financial shock across the Caribbean. The collapse had spillover impacts in many Caribbean countries, prompting costly government interventions. One key objective of our participation in the Caribbean Group of Banking Supervisers is to consider best practices in market conduct and regulation of complex financial conglomerates, so as to prevent the recurrence of a similar financial crisis."
He said the recent global financial crisis and the CL Financial collapse harshly illustrate that "consumers who can make informed decisions about financial products and services, not only serve their own best interests, but collectively, they can also help promote financial stability. Going forward, financial inclusion strategies in which consumers take responsibility for their financial future will, therefore, be the most relevant area for T&T and the wider Caribbean region."
On why T&T joined the AFI on March 20, (2013), he said: "AFI provides an excellent opportunity for us to develop relationships with other countries and to leverage their knowledge and expertise to catalyze financial inclusion policy changes, and to help push the global financial inclusion agenda."
On becoming the 100th member of AFI, he said: "This is a milestone for the AFI as yet another country has demonstrated its confidence in the network's ability to assist in (the) development of standards to guide financial inclusion practices in developing and emerging countries. Further, with T&T coming on board, this may serve as a catalyst for other Caribbean countries to join AFI, making the network a true and credible 'southern' voice on issues of global financial inclusion."