UK backs lessons in banking to help Africa’s poor

25 January 2008

A new fund to increase financial know-how amongst the world’s poorest people was launched today by International Development Secretary, Douglas Alexander.

The £4 million Financial Education Fund, which is the first of its kind, will back the best ideas to help raise financial literacy amongst poor consumers and businesses in Africa.

At present more than two billion people, many of them living on less than $1 a day, do not have access to basic financial services taken for granted in rich countries, such as bank accounts, insurance or loans.

Africa has the world’s lowest savings rate and financial literacy levels - in Zambia nearly 50% of the adult population don’t understand how to use basic financial products such as savings accounts. And while only one in 13 people in the UK doesn't have a bank account, in Africa the figure is almost three in four. But financial education can make a real difference by increasing awareness and the use of financial services, which in turn promotes economic growth and helps to tackle poverty.

Management of Financial Education Fund open to tender

The fund, the running and management of which is now open to tender, will support innovative projects in Africa that improve financial literacy. This could be done through the school curriculum, road shows, mass media campaigns, better banking services or by bringing the private sector, governments and civil society together to meet the rising demands for financial education. The long-term aim for the fund will be to replicate successful schemes across Africa.

Speaking at the World Economic Forum in Davos, where Africa’s development has been high on the agenda, Douglas Alexander said:

"The Financial Education Fund is about giving poor people the chance to take control of their finances. By boosting financial literacy we can help close the widening poverty gap and encourage enterprise and wealth creation in Africa.

"Africa is seeing a growth in new financial products, like mobile banking, but it’s no good having competition if consumers don’t understand the services available to them. Financial education can help poor consumers and businesses recognise the benefits of bank accounts and in doing so promote a better business climate in poor countries."

"This is another example of the government and private sector working together to achieve the Millennium Development Goals."

The fund will look to back new proposals from government, NGOs and others to improve financial literacy, but also innovative projects from the private sector for co-funded ventures that are:

• targeted at the financially excluded
  
• unlikely to take place without public intervention
  
• potentially have wider economic benefit.