THE ROLE OF MEDIA IN PROMOTING FINANCIAL LITERACY AS A TOOL FOR ENHANCING PUBLIC CONFIDENCE

Presented by PHILLIP ISAKPAEDITORBusinessDay

OUTLINE

The power of media in the 21st century Growing importance of financial literacy Media and financial literacy: the complex

nexus How media enhance financial literacy and

confidence What has media done so far? The task before us

THE POWER OF MEDIA IN THE 21ST CENTURY

MEDIA IN NIGERIA

Size of Nigeria’s media apparatus (2000 Estimates)Number of Television Sets 7.9millionTelevision Sets per 1,000 59Number of radio receivers 43.5millionNumber of individuals with internet access

Over 500,000

Number of newspapers in circulation daily

Over 250 thousand copies

Media refer collectively to all media technologies, including the Internet, television, newspapers, film and radio, which are used for mass communications, and to the organizations which control these technologies.

Source: www.pressreference.com

THE POWER OF MEDIA

A recent study by the National Endowment for Financial Education (USA) found that just 10 hours of financial literacy instruction will prompt most teenagers to start saving.

We saw in recent times the role media played in the revolutions in Egypt, Libya and other Middle East nations

Research has found that employers who provide financial education in the workplace are repaid up to 3 times the cost through reduced absenteeism, less time spent at work dealing with personal financial matters, and increased productivity.

THE POWER OF MEDIA

An OECD Survey conducted in a number of countries confirmed that people want to learn economics and finance from mass

media or new media. The reason being that they have access to mass media channels, use them on a daily basis and it does not

require much effort on their part.

GROWING IMPORTANCE OF FINANCIAL LITERACY

SOME DEFINITIONS

DEFINING FINANCIAL LITERACY

Financial literacy is the ability to make informed judgments and informed decisions regarding the use and management of money.

The US Financial Literacy and Education Commission defines it as “the ability to make informed judgments and to take effective actions regarding the current and future use and management of money”

Financial literacy is the ability to understand finance

A FINANCIALLY LITERATE INDIVIDUAL HAS …

the capacity to know when to seek professional advice and what to ask, and the ability to understand the advice given by professional advisers.

an understanding of the benefits and risks associated with particular financial decisions

the ability to understand basic financial concepts, including the main attributes of different types of investments and other financial products

basic numeracy skills, such as the ability to calculate rates of return on investments

WHY DOES FINANCIAL LITERACY MATTER TO INDIVIDUALS?

Financially literate consumers help to reinforce competitive pressures on financial institutions to offer more appropriately priced and transparent services

It helps to improve the efficiency and quality of financial services.

For regulators like NDIC, helping people to make informed financial decisions is central to protecting customers, promoting public awareness, and maintaining market confidence.

HOW DOES FINANCIAL LITERACY AFFECT FINANCIAL SYSTEMS’ SOUNDNESS AND EFFICIENCY? FL facilitates a more prudent management of

household balance sheets, it could reduce lending risks for banks and other providers of credit.

  Improved FL could result in more discerning choice of

investment and other financial products by consumers. This strengthens the incentives for financial institutions to respond innovatively to consumer demand, leading to a more dynamically efficient financial system.

  FL exerts stronger market disciplines on financial

service providers by exercising greater scrutiny over the risks of particular financial institutions and their products,

  Well-informed investment decisions, based on a high

level of FL, could be expected to result in a more productive allocation of resources through time, reflecting a more discerning approach to the balancing of risk and return.

ANY INDICATIONS FROM RESEARCH ON THE LEVEL OF FINANCIAL LITERACY?

An OECD survey (2005) found that individuals generally over-estimate their level of financial literacy.

A 2003 survey in German found that, 80 percent of respondents reported that they were confident in their understanding of financial issues. However, when tested on their financial literacy, only 42 percent were able to answer half of the survey questions correctly.

Similar results have emerged in the US, the UK and Australia. If this is the case with the developed world, what is the case with Nigeria?

WHAT IS THE RELATIONSHIP BETWEEN FINANCIAL LITERACY AND THE MEDIA?MEDIA AND FINANCIAL LITERACY

MEDIA AND FINANCIAL LITERACY

“ In a world of escalating financial complexity, there is an increasing need for financial

knowledge and at least basic financial skills (Morris L Wang 2001)”

Well tailored media satisfy this need and reduce the complexity in understanding the

financial landscape

MEDIA STAND AS A SOURCE OF INFORMATION FOR MULTIPLE USERS AND STAND AS A TOOL

FOR INSTILLING CONFIDENCE

HOW DOES MEDIA AFFECT PUBLIC CONFIDENCE?ENHANCING PUBLIC CONFIDENCE

ENHANCING PUBLIC CONFIDENCE

There is need to bring simplified financial reporting to the forefront of all aspects of media.

This will boost financial literacy and enhance public confidence

WE MUST TAKE SOME NECESSARY STEPS…

NECESSARY STEPS

The financial message should jump to the front page. It is not enough to reach out only to those Nigerians who already read the business papers or those who watch the financial news networks.

Media should educate and not just titillate. We should provide tips for investing wisely and avoiding fraud.

We should develop educational material to accompany financials and risk disclosures for financial institutions

NECESSARY STEPS…

The educational system, government agencies and research institutions should work with business news media to heighten public understanding of financial matters

FINALLY

Thank you