The overall state of literacy in Pakistan leaves a lot to be desired. The general masses, especially the underprivileged segments in both urban and rural areas, still remain oblivious of the importance of educating themselves or their children. The education system is confined to some out-dated Syllabi, which needs some comprehensive efforts to streamline our methodology with the dynamic global standards. If the public sector education system is not modernized and upgraded soon, our common students will surely be left far behind in the highly competitive and professional world that demands an increasingly sophisticated and evolved workforce, to carry out the futuristic ideas and initiatives.
Daunting challenges
Faced with such daunting challenges in Pakistan, the general practice of tutoring is commonly based on “Ustaad and Shagird” (Master and Apprentice) model to impart basic training or functional literacy. However, in today’s fast changing world we should be using the mass media and multi-media options to reach out to the 170 million people across the nation and prepare them to be productive citizens in the 21st century. Information and technology are fast outpacing the learning curve of even developed economies, thus our public needs to quickly catch up with global progress.
Fighting with conformity
Our current education system does not enable the youth to fully exploit their potential and creativity by experimenting and innovating, as it emphasizes more on following the predefined procedures. In order to unleash the benefits of the modern financial framework for the poor man, the masses must acquire a basic understanding of how to use this system. But due to the lack of effective educational initiatives, a solid foundation for mass literacy could not be built so far. Low financial literacy is a core reason why local, international or agricultural banks face difficulty in promoting their services and explaining the advantages of their products to rural agricultural communities at large.
The informal credit system
In rural Pakistan there does exist an age old informal system of providing credit to the poor rural populace. The landless and small farmers in rural areas have to depend on informal credit providers such as money lenders, friends and relatives, village shopkeepers and commission agents, primarily because the villager does not possess anything that can be mortgaged in the formal banking system.
Panchayat system
Normally every village has a Panchayat (village elders committee) that helps the villagers in maintaining religious customs and addressing economic needs or social crises. Certain religious factors promoted by these committees also contribute towards making “The Bank” an unpopular resource among the villagers at large. Therefore, these people generally avoid banking and the concept of interest (Mark-up). This makes them dependant on their traditional borrowing patterns and savings traditions.
These panchayats encourage poultry farming to help meet daily expenses. Also home industries like making clay pots, pickles, papars, rilly (traditional bedsheets), hand woven blankets and shawls, etc. have emerged over the decades. Landless and small farmers possess mud godowns where they store their grains like wheat and rice, as a year long supply of food for the family and save themselves from the fluctuating prices the whole year around.
Marketable securities
The traditional practice by rural dwellers has been to keep a small number of livestock which is seen as a saving and insurance against any instant requirement for finances. These animals are equivalent to marketable securities in a modern day financial system. Whenever money is required for events like marriage, child-birth, death, medical ailments or the event of crop or market failure, live stock is disposed off. So the prime reason to invest in live stock in rural areas is for insurance and savings besides dairy production.
The Bachat Committee
A popular method of saving and fulfilling large financial requirements is the saving-committees (Bachat Committee- BC). Every participant in the committee contributes a small amount each month, which is collected and awarded to one member of the committee on a monthly basis. Every month one member of the committee is awarded the collection, until all the committee members have been paid their due amount. Rural people also tend to save in gold and silver in the form of bangles, rings, nose-pins or earrings as a source of saving for hard times and also passed on to daughters as dowry on their weddings.
Rural financial planning
All this confirms that even the illiterate rural populace has some basic idea of financial planning. Then why is it that they shy away from the formal systems of banking and financial management. A very basic reason that has been consistently pointed out by various market participants such as Citi Foundation and Tameer Microfinance Bank, have been the villager’s ignorance regarding the financial banking process. The rural population considers the bank as an institution designed to cater to the rich land-lords and thus keep their distance from formal institutions.
Psychological barriers
In the face of such challenges and psychological barriers, a programme is being initiated by the State Bank of Pakistan (SBP) called the “Financial Literacy Program” (FLP), funded by the Asian Development Bank (ADB) and conducted in collaboration with Bearing Point Consultants.
A State Bank initiative
The initiative is aimed at increasing financial awareness amongst the rural public, of how banking institutions and branchless banking works. It will help them understand their rights and obligations. The program is designed to reach farmers, house-maids, peons, janitorial staff, industrial workers, domestic workers and other low income sections of society by educating them about the benefits of using banking facilities.
The program is designed to change the prevalent attitudes and practices of the rural populace and empower them to plan their domestic finances while creating new livelihood options in future. The programme will effectively teach them on how to save, avoid expensive credit deals and extortion, while promoting the advantages of various banking facilities available in the rural Pakistan.
Ensuring financial inclusion
This FLP program hopes to impart sufficient knowledge about basic financial concepts such as budgeting, savings, investments, debt management, financial products and branchless banking. During the initial pilot phase in 2012 it will target about 50,000 beneficiaries, with a strong focus on the low-income groups. Once the pilot phase has been successfully implemented, the second phase of the program will be launched to encompass up to 500,000 individuals. The program will rely on partnerships with financial service providers and network organisations to reach numerous remote districts of Pakistan.
The State Bank of Pakistan (SBP) is paving the way, by recognizing the need of the hour and investing in this much needed educational initiative to provide a pillar of support for the poor helpless people of the country. Thus helping them to stand on their own feet and pull themselves out of their impoverished lifestyles.