Kenan Institute urges concerted effort to lift Thai financial literacy

The institute recommends that in order to urgently enhance national financial-literacy efforts, stakeholders should join forces to raise public awareness and stimulate the public’s interest in this crucial area.

Regulators should work together more closely, and in the same direction, in order to provide more financial protection to people, enhance their financial knowledge and launch more semi-compulsory programmes on savings, financial management and debt control, it said.

The institute yesterday released the results of its "Literacy Improvement for better Finance in Thailand (LIFT)" research study, which was conducted with support from the Citi Foundation.

The one-year study, which started in November 2013, focused on financial literacy among three key groups: young adults, low-income workers and farmers.

It found that these groups have low levels of financial knowledge and poor personal financial management.

Low levels of financial knowledge – or functional financial literacy – mean that individuals lack critical logical thinking and calculation skills.

Poor personal financial management is often reflected in poor financial behaviour, such as failing to repay loans, which is especially common with student loans, the study found.

Kenan Institute Asia chairman Piyabutr Cholvijarn yesterday said that with support from the Citi Foundation and the assistance of Citi, Thailand, the institute had conducted the research study as part of the LIFT project, which assessed the government’s policies relating to debt and savings, and engaged stakeholders across all segments of society, including debtors, policy-makers and bankers.

He expressed concern that the ratio of household debt to gross domestic product could reach 100 per cent in the next few years.

As of the third quarter of last year, the total amount of household debt in the Kingdom’s formal financial system stood at Bt10.2 trillion, or 84.2 per cent of GDP, one of the highest rates in Southeast Asia, according to the Bank of Thailand and the National Economic and Social Development Board

The household-debt-to-GDP figure was up from 55.6 per cent in 2008.

Darren Buckley, country head and Citi country officer, Citibank, added: "Citi is an industry leader in its support of financial-literacy education. In 2004, Citi announced a 10-year, US$200 million [Bt178 billion] commitment to meet the growing financial education needs of the communities.

"In 2014 alone, the number of financial-literacy projects conducted globally by the Citi Foundation numbered 167, which helped over 1.2 million people around the world."

The LIFT project was initiated in Thailand in response to rapidly rising household debt levels at the rate of 15 per cent per year since 2010, he said.

This high level of debt, coupled with a falling savings rate – down 16 per cent per year during the past decade to 5.8 per cent per annum since 2010 – should alarm everyone, he stressed.

He said all stakeholders in the country’s financial system had a duty to ensure that those who used financial products and systems did so responsibly.

He added that it was important that the government had recognised the critical need to address financial-literacy education, and had already begun the process of addressing this.

The LIFT project aligns well with these efforts, including the need for more resources to be focused on low-income workers, farmers and students, Buckley said.