Financial literacy refers to the knowledge and skills needed to make informed and effective decisions about the use and management of money.
Understanding basic financial principles like budgeting, saving, investing, and debt management is part of this. As is knowing the many financial products and services on the market, including bank accounts, credit cards, and insurance. Financial literacy makes financial decision-making possible. This can increase one’s overall financial well-being and lower the likelihood of running into financial issues.
Current State of Financial Literacy in Lebanon
Although there is a shortage of data and statistics on financial literacy in Lebanon, several entities have done research to provide some insight. Only 40% of people in Lebanon have a basic comprehension of financial concepts. Additionally, only 30% of people have a bank account, according to a research by the Central Bank of Lebanon. Other surveys have shown that Lebanese people are unfamiliar with digital payments. They may also not have access to the necessary infrastructure and technologies to use them.
Lebanon has a lower degree of financial literacy than other countries in the region and the world. It ranks among the bottom quartile of nations in terms of financial literacy, according to the Global Financial Literacy Excellence Center. Other nations in the area, like the UAE, Saudi Arabia, and Qatar, have higher levels of financial literacy. This might be due to their greater rates of education and better access to financial services and products.
The Lebanese Economic Crisis
Currently, Lebanon is experiencing a severe economic crisis. It is characterized by a lack of basic goods and services, rising prices, and rising unemployment. The Lebanese Lira’s depreciation and a drop in purchasing power have made the problem worse. The political unrest and the government’s incapacity to deal with the situation have only aggravated things. This resulted in the population losing trust in the banking system and a move toward cash transactions.
The economic crisis could have a variety of effects on Lebanon’s financial literacy:
First, it could be challenging for many people and households to get financial education and information. Particularly due to the high unemployment rate and decline in purchasing power.
Second, households and individuals may find it challenging to obtain bank accounts, loans, and other financial services. This comes as a result of the decline in public confidence in the banking industry.
Third, households and individuals may find it challenging to employ digital payment systems that are more secure and traceable due to the move toward cash transactions.
In short, the current economic crisis in Lebanon may make it harder for people and households to become more financially literate. It also makes it harder for them to acquire financial services and products.
Challenges to Improving Financial Literacy
Improving financial literacy in Lebanon is faced with several challenges and barriers, which include:
- Lack of financial education in schools and the community: One of Lebanon’s biggest obstacles to financial literacy is the population’s lack of access to financial education. Many people lack access to or may not be able to afford financial education. They may find it challenging to comprehend financial items and services as well as to make wise financial judgments as a result.
- Access to financial resources and services is limited: The lack of access to financial resources and services is another issue that many Lebanese people must deal with. Many people lack access to bank accounts or other financial services. This makes it challenging for them to manage their finances, save money, or obtain credit. For low-income individuals and households, this may provide considerable difficulties.
- Stigma associated with discussing money matters and getting financial advice: In some cultures and societies, talking about money matters and getting financial advice is taboo. Individuals may find it challenging to acquire financial education, information, and assistance when needed as a result.
- Lack of trust in the banking system: The present financial crisis and the Lebanese lira’s depreciation have caused many to lose faith in the banking industry. The inability of people and households to access their own money and other financial services may further erode public confidence in the banking system and encourage a move towards cash transactions.
Raising financial literacy in Lebanon is difficult and calls for overcoming numerous obstacles.
To promote financial education, widen access to financial resources and services, and foster trust in the banking system, the government, financial institutions, and non-governmental organizations should collaborate.
Written by: Maria Sawaya