Two-thirds of adults worldwide are not financially literate and there is a wide gap between men and women’s literacy, including in highly developed countries, the Standard & Poor’s Ratings Services Global Financial Literacy Survey (S&P Global FinLit Survey) has found.
In the GCC region however the results were not as disparate, with 40 per cent of men being financially literate in comparison to 36 per cent of women. Interestingly, all ages interviewed in the region scored similarly on their respective financial literacy rates with all age ranges achieving an average of 38 per cent literacy. More specifically, 44 per cent of adults in Kuwait are found financially literate, compared with 40 per cent in Bahrain and 31 per cent in Saudi Arabia.
The S&P Global FinLit Survey found that citizens, in the UAE specifically, with less education and lower incomes, are more financially literate than their counterparts in most other emerging economies. However the survey results also show that UAE adults have a relatively weak understanding of compound interest given the high credit card use in the region.
Courtney Geduldig, Executive Vice President of Public Affairs at McGraw Hill Financial, parent of S&P said: “We are committed to creating stronger financial markets all over the world. We believe there are correlations between financial literacy, financial access, and the strength of markets. Addressing financial literacy is a key strategy in building stronger, more accessible and sustainable markets around the globe.”
The S&P Global FinLit Survey shows that in almost every country apart from the UAE, there is a material gap between men and women. Worldwide, there is a five-point gender gap, with 35 per cent of men being financially literate compared with 30 percent of women. However, in the UAE, women’s financial literacy averages 4 percentage points higher than men’s. Notably, in China and South Africa, there was no gender gap.
Leora Klapper, lead economist, the World Bank Development Research Group said: “With technology spreading the design of innovative banking services and payment methods, it’s critical that we understand who knows what around the world. My hope is that this data will help policymakers in finding ways to boost financial literacy and consumer protection and help open the door to greater financial inclusion and economic empowerment.”
The survey results come from interviews conducted with more than 150,000 adults in more than 140 countries who were tested on their knowledge of four basic financial concepts: numeracy, interest compounding, inflation, and risk diversification. The data were collected in 2014 by Gallup as part of the Gallup World Poll and analytical support was provided by researchers at the World Bank Development Research Group and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University.
# Within the G7 group (Canada, France, Germany, Great Britain, Italy, Japan, and the United States) of countries, financial literacy varies enormously, from a low of 37 percent in Italy to a high of 68 per cent in Canada.
# In the US, about 60 per cent of adults have a credit card. According to the survey findings, more than a third of these adults have relatively low financial literacy, and 34 percent could not answer the question on compound interest correctly.
# 30 per cent of Americans who finance their homes through bank financing could not answer the question on compound interest correctly.
# 61 percent of adults in China do not save for old age. About 72 per cent of those non-savers have low financial literacy, according to the survey findings.
# About 47 per cent of adults in India – 415 million adults – lack a bank account. Roughly 80 percent of those without bank accounts have weak financial literacy.
# There is wide variation in financial literacy rates across economies in Sub-Saharan Africa. At 15 per cent, Angola and Somalia are among the countries with the world's lowest financial literacy rates. At 52 per cent, Botswana's rate is the region's highest and comparable with the average of high-income OECD economies.