Elvira Nabiullina's speech at 10th All-Russian Congress of Financial Education Volunteers
Good afternoon, dear colleagues.
I am pleased to welcome all of you: those in the room and those who have joined us via video link. I have studied the project descriptions and I am looking forward to hearing the details soon. These are all very different creativity projects, so it is interesting to find out more about them.
We attach great importance to your efforts. Social initiative — which they are — delivers flexibility and knowledge of the realities of daily life, rather than what we notionally call the knowledge of ‘target audiences’. It also creates trust, since people tend to trust people like themselves who are nearby. As you know, the Bank of Russia has joined forces with the Ministry of Finance to transform the strategy for improving financial literacy into building financial culture. However, the creation of financial culture requires trust in sources of information.
In this sense, volunteers have a very responsible mission. The financial market is rapidly advancing, and is therefore highly innovative. This is certainly a welcome trend it that it creates new opportunities for people, but it also brings new risks. Continuous learning is a must for volunteers who need to spread current, not obsolete, knowledge among people.
Jointly with the Financial Literacy Development Association, we see one of our key objectives in helping train volunteers, provide them with information and expertise, and enable experience exchange.
We rely on your help in determining our priority areas. Financial education, financial literacy and financial culture all make up a never-ending resource-consuming process, but our resources are limited, and this makes us identify priority areas.
Let me remind you of the priorities we have identified for ourselves, although your feedback is essential here: we need to make sure you support them. You could come up with some further priorities.
Now, our first priority is the fight against fraud. All the available data and everyday experience suggest that fraudsters are evil for people regardless of age, social status and, unfortunately, level of education if people lack appropriate financial knowledge.
The second priority is enabling financial services to the elderly, people with disabilities and institutionalised children. Many of them are vulnerable, lonely and need a special approach. They are the easiest targets of unfair practices and fraudsters.
Finally, the third priority for us is ensuring the availability of services in sparsely populated and hard-to-reach areas of our country. We must make sure the world of finance is no less available to residents of such areas than in major cities. Essentially, this is about financial inclusion, which however depends on how well people know about the services they could use, especially about online remote services.
Clearly, no matter how hard we seek to focus on priorities, the range of urgent tasks is likely to expand.
A further priority of continued focus is support to residents of new regions. The help of financial education volunteers is absolutely critical here.
Furthermore, we are currently making efforts to advance long-term saving and investment instruments — the Long-term Savings and Individual Investment Account (IIS-3) programmes, our joint projects with the Government and the Ministry of Finance that have been long in the making. Next year, in addition to IIS-3 and the Long-term Savings Programme, we are due to launch unit-linked life insurance. These are the priorities, and we can only deliver on them by advancing financial literacy. These programmes will only make a difference if people have long-term financial planning competences, and let me stress ‘long-term’. Otherwise, all this will be a non-starter. What is going on? We can see that people are willing to assume long-term liabilities, for example mortgages or long-term loans, but they are not ready to entrust anyone with their financial resources for long. This is clear from the fact that more than 85% of household funds sit in current accounts and one-year or shorter-term deposits. That is, these are all short-term funds. Doubtless, long-term savings are enabled by, beyond financial literacy and investment instruments, financial stability and sustainably low inflation, when people have no fear their money might depreciate if they entrust it with someone for long. No less important is a mature culture of savings.
In this context, let me revisit the fight against fraud, given the importance of this topic and its clear sensitivity for everyone. Over the last few years, we have zeroed in on the safety of transfers. We have introduced legal frameworks and cooling-off periods, and we are working with banks to see if these measures are adequate. However, as I have mentioned this on multiple occasions, a fraud credit scheme is taking hold. Going beyond a transfer of savings to fraudsters, the ploy is to make people take on a loan, that is, people end up both borrowing from banks and transferring money to fraudsters. Current discussions are centred on what potential safeguards we could put in place, but this is certainly an area where we need to work more with people and alert them to such schemes.
Another increasingly common problem is unfortunately schoolchildren and students becoming involved in criminal schemes. When schoolchildren and students receive their cards, fraudsters may often use them as droppers. Fraudsters get their hands on the cards to cash out and withdraw funds. Certainly, this is where financial competence is indispensable for schoolchildren and students. When they receive their first card, they should know that their credit history will suffer if they are used as droppers, and that they may find it hard to use financial services for daily needs moving forward. More so, their involvement in a criminal scheme may result in restricted access to online payments and cards.
Our data suggests that not only schoolchildren and students are at risk of falling prey to criminals, but also people who come from rural areas to stay in cities. At risk are also overindebted borrowers, including unemployed people, who resort to various schemes to pay back loans. The takeaway here is that nothing good would come out of the desire to make quick money through questionable schemes. While we are in contact with banks about these problems, the role of volunteers cannot be overstated.
Beyond the efforts to counter fraudsters I have described, it is imperative we promote the basic competences that give confidence to people entering the financial market. Such competences will enable them not only to counter fraudsters and hard selling but also to choose better financial services, boosting their wealth. In this regard, in working with volunteers we need to identify fraudulent sources of information so that people have a critical view of those advising how to make quick money. This sort of advertising is plentiful. Meanwhile, trusted sources need to be relied on, including those certified by the Financial Literacy Development Association. We need to advance trusted sources of information. It is unfortunately common when they throw dust into the eyes in the guise of teaching.
Of the new work formats, let me mention cooperation with employers. Recently at the St. Petersburg Economic Forum, we signed an agreement with the Russian Union of Industrialists and Entrepreneurs, which ensures that the employer association is involved in these efforts on a regular basis. We also have joint programmes and projects with several major employers, but what is important here is that small and medium-sized enterprises and generally a larger number of companies become involved. This is where we deal with a new type, or category, of volunteers — such companies’ staff. We also need to involve them in our joint activities and so make best use of this valuable channel of communication and training. Corporate training practices — when volunteers working nearby teach financial services and the associated risks — can be a very impactful channel.
Let me conclude my welcoming remarks and give the floor to Mikhail Mamuta, who oversees and coordinates this focal area at the Bank of Russia.
