Bangladesh's financial literacy rates are alarmingly low, with a large portion of the population lacking in basic knowledge of managing money, budgeting, and investing. Financial literacy - the ability to understand and apply financial skills effectively - is essential for making sound decisions.
According to the Financial Inclusion Insights (2018) Program by Inter Media Research, as of December 2023, Bangladesh's financial literacy rate is approximately 28 per cent, meaning around 70 per cent of the Bangladeshis lack this fundamental understanding. This deficit affects how people handle their finances, make investments, and manage loans, ultimately impacting their financial security and quality of life.
A key issue is the lack of knowledge about financial products such as savings accounts, loans, and insurance. Without this understanding, people miss opportunities to enhance their financial security and often find themselves in risky situations. This lack of awareness also makes them vulnerable to scams, as fraudsters target the financially uninformed with promises of quick, large profits through bogus schemes, leading to significant losses, especially among low-income individuals who cannot afford to lose their hard-earned money.
Another challenge is the lack of awareness regarding interest rates on savings and loans. Many people do not understand how compound interest affects their savings and loan repayments, leading them to take out costly loans or miss out on long-term savings benefits. Investment knowledge is also limited, especially concerning the Dhaka Stock Exchange (DSE). While the stock market can be a means to creating wealth, most people avoid it or invest based on rumours, leading to financial losses and instability.
The lack of financial literacy has serious consequences for people's financial well-being. Many fall into debt traps, miss financial opportunities, and fail to save for emergencies or retirement, leaving them financially insecure. While banks, NGOs, and other organisations have launched programmes to teach people how to save, budget, and borrow effectively, these initiatives often fail to reach rural or low-income communities, where guidance is most needed. The government and financial institutions could also implement public awareness campaigns to explain financial products, warn about scams, and promote safe investment practices.
Improving financial literacy is crucial for creating a more financially secure and educated public. People with greater financial awareness are less likely to fall victim to scams, make better financial decisions, and explore safe investment opportunities, including the stock market. Raising financial understanding would lead to a stronger and more economically stable society.
Al Mahin Shoikot
Department of Accounting and Finance
North South University
[email protected]
