Financial inclusion in Armenia, measured by access of the adult population (15y+) holding an account at a formal financial institution, is around 17 percent (compared to 44.9 percent  in Europe and Central Asia). According to a nationwide survey conducted in 2012, a large portion of the population was not aware of specific financial products. Thirty-two percent of the adults took a loan from their family or friends, while only 19 percent  took a loan from a formal financial institution.

In 2010, the Central Bank of Armenia (CBA) participated in the OECD’s International Network on Financial Education (INFE) Pilot Study on financial education, which was followed by a World Bank supported baseline assessment survey in 2012. The data and findings informed the development of the National Strategy on Financial Education (NSFE) of Armenia.

The NSFE is spearheaded by the CBA, set-out to increase the level of financial literacy, improve the confidence in the national financial system and advance financial inclusion in Armenia. In the process of the strategy formulation, the CBA collaborated with a multitude of stakeholders and formed a national Steering Committee (SC) of development and further implementation of NSFE. The SC officially met for the first time in mid-2012 and supported the finalization of the NSFE. Formal government adoption of the NSFE followed a year later in 2014.

However, the CBA felt the need for a more comprehensive, in-depth understanding of the national financial literacy level. Even though the results of previous surveys were used during the elaboration of NSFE, the usefulness and applicability of existing information was seen as a challenge. Previous surveys missed relevant, country-specific financial education aspects, such as the wider economic impact, safety, long-term savings, consumer protection rights, etc. Hence, the CBA called for a sound framework to enable comprehensive monitoring of the NSFE in terms of its effectiveness and proper public accountability.

As a result, the CBA decided to design and implement the Financial Capability Barometer (FCB) framework to address these challenges. In 2013, CBA agreed to use the grant program of the Alliance for Financial Inclusion (AFI) to fund the Financial Capability Assessment Project (FCAP), which started in early 2014. The objective of the FCAP is to ensure the success of the NSFE by effectively setting policy priorities, strategies and benchmarks for the development of financial educational reforms as well as monitoring the effectiveness of NSFE on regular basis and keep public accountability. More specifically, expected outcomes of the grant were a national representative baseline of financial capability in Armenia and measurable targets for the NSFE.

Financial education protects consumers against financial risks and fraud. It helps to strengthen trust in the financial institutions and enhance responsible, financial activity by the individual. Ultimately, the financial system deepens and becomes more stable. Given comparatively low levels of financial inclusion and financial awareness in Armenia, the goal of the FCAP, i.e. improved financial capability of the population in Armenia, is highly relevant.

As cornerstone of the NSFE, the FCAP has had a significant impact on the landscape of financial education in Armenia and will continue to do so in the future. FCB findings were used to review the NSFE and define the current target therein. The NSFE implementation is expected to result in the financial education of 75 percent  of all Armenians by 2034. FCB findings set the current regulatory and policy focus on the promotion of financial education in rural areas and for women as well. The FCB competency matrix is the basis for formulating an integrated approach in public financial education and is integral part of the revision of national education system.

Although the FCAP has come to an end, the FCB survey is set to be carried out in regular, five year intervals. It has become an integral part of the 20-year NSFE overall in Armenia. The findings of each FCB survey will result in a review of the NSFE and will guide the development of the action plan for the new five-year term.

The survey results have provided Armenians with an indication on the level of financial education needs across the population. The FCAP achieved its objective and delivered on its outcomes. The project had positive, far-reaching impacts on the grantee as well as the majority of financial education stakeholders in Armenia. It resulted in new insights for better policy decision-making and improved programming. Relevance and effectiveness of the FCAP was very high. The same holds for efficiency and sustainability of the project. Most notably, the FCAP had a direct, positive impact on national targets, financial as well as education policy, improved programming and capacity of stakeholders.

The FCB methodology is tested and sound. It has been vetted by national as well as international researchers and policymakers. The modular structure provides a flexible toolkit that can be applied in other countries as well. Hence, it provides a practical solution to a comprehensive understanding of national financial literacy, highly valuable for other financial education policymakers in the AFI network.

For any questions regarding the Financial Capability Barometer (FCB) approach, CBA will be glad to share its experience and support with other AFI member countries in the process of a financial capability assessment. Please reach out to Eliki Boletawa via email at eliki.boletawa@afi-global.org for more information.

ABOUT THE AUTHORS
Armenuhi Mkrtchyan is the Head of Consumer Rights Protection and Financial Center at the Central Bank of Armenia. Eliki Boletawa is the Head of Policy Programs & Regional Initiatives at the Alliance for Financial Inclusion.