Rebuilding confidence in Russia's financial system

             It was no accident that the final act of Russia's Group of Eight presidency last year was a Finance Ministry conference on one of the country's most intractable problems: the poor level of financial literacy.

This problem is not unique to Russia. A poor understanding of financial products and markets is widespread throughout the developed world. The consequences are well-known: levels of indebtedness have reached serious proportions, defaults on credit card payments and mortgages are common, and poor protection of individual household finance owing to insufficient insurance and pension coverage remain a problem.

This has led many governments to tackle financial illiteracy head-on through a combination of legislation on financial products, improvement of the school curriculum and partnerships with business to provide education and support for those in difficulty.

In the Soviet era, financial services and the concepts of lending and borrowing were all but absent. In the 1990s, the population was fleeced by currency devaluations and pyramid schemes. As a result, people are not particularly open to the new financial products currently flooding the market.

Various sources indicate that 40% of Russians do not use banking services; 63% have no trust in Russian banks; 74% have never taken out an insurance policy; and 90% of plastic card users received them through salary-payment schemes. A significant part of the population, especially the poor, is still largely unfamiliar with financial products and highly suspicious of banks...


The above is the introduction to a recent Moscow Times opinion piece written by Brook Horowitz, executive director of IBLF's Russia Partnership. Read the full article.

Access to capital is an important component for the growth of any society, but there is mistrust among Russians about the effectiveness of the country's banking system. IBLF believes that the financial services industry can take a lead in helping the government rebuild trust in that system and encourage ordinary Russians to use the products available to them.

IBLF is working in a number of ways to address the problem, and last October launched a task force of 50 companies, NGOs and academic institutions to promote financial literacy in Russia.

The aim is to improve financial literacy among young Russians through the involvement of business, including development of employee engagement programmes, web-based training, publications and use of mass media.

IBLF's work to improve financial literacy includes:

	Advocating and highlighting leadership from business: for example, Visa, the credit card company, is planning a TV advertising campaign to raise awareness on financial literacy; and Merrill Lynch is planning to translate its stock market training programme for young people into Russian
	Promoting the concept of micro-credits for young entrepreneurs: IBLF's Youth Business International programme, which helps fund and mentor young entrepreneurs, is launching in Russia. The project is being supported by ABN Amro Bank and Oxfam and will enable entrepreneurs to gain access to capital and advice, and learn how to build their own businesses.
	Training young people: New Life Scenarios, an IBLF project which aims to prepare young people for the world through workshops and training, is helping young people learn about personal finance planning and saving & investment. The project was launched in Poland but last year expanded to St Petersburg — and IBLF has now won funding from the EU to expand this to 10 cities throughout Russia.

Visit the Russia Partnership's website for more on IBLF's financial literacy work and other projects in Russia: http://eng.iblf.ru