The household debt problem that recently made headlines in several newspapers is certainly not new.
The problem of excessive household debt is among myriad financial problems that indicate financial fragility in the household sector. Apart from the debt-related issues, a number of Thais are often excluded from mainstream financial institutions.
Putting aside the supply-side constraints that hinder people's access to financial products and services, especially low-income earners, it is quite common that people trapped in indebtedness are likely to lack essential financial knowledge and skills, resources or even self-control. The questions are: How serious is the problem, and what should be done?
A study of the Asian Development Bank on financial inclusion in Thailand showed that the problems of over-indebtedness and an increased dependence on moneylenders have grown in some regions. The lack of financial education among low-income people has been attributed as a factor that has contributed to this low level of financial inclusion.
A study on demand-side constraints in some provinces conducted by the Thailand Development Research Institute found that the lack of access to credit is quite prevalent. A number of contributing factors include the presence of short-term illiquidity, a lack of collateral and poor credit history. All these factors are partly the consequence of a lack of financial literacy.
Furthermore, a recent survey jointly conducted by the Bank of Thailand and the National Statistics Office found that a number of Thais are not well-equipped with essential financial knowledge and many do not behave in a financially responsible way. The financial literacy level of the average Thai was below the average score of 14 countries that participated in the Organisation for Economic Co-operation and Development (OECD) survey.
In light of people's lack of awareness and knowledge of proper financial management, growing household debt and rapid and drastic changes in an increasingly complex financial landscape, coupled with limitations of government policy to lift people from poverty and financial difficulties, the development of financial literacy for all people at different ages is definitely an issue that needs to be addressed.
Although financial literacy can play a vital role in equipping all individuals with the knowledge, skills and opportunities they need, the process of developing financial literacy for a more sustainable financial future takes time and needs a long-term commitment. It requires a lifetime learning process, which should start at an early age.
To effectively develop the next generation's financial literacy, financial education should be introduced in the formal education curriculum.
Evidence from countries where financial education is available in the system suggests that financial literacy education is usually taught to students either as a separate subject or as a cross-curricular subject with a varying number of hours during which financial education is taught in a year. However, there has been no consensus about how financial education should be introduced to schools and colleges.
According to Pisa 2012, in which 18 countries and economies participated in the optional financial literacy assessment, the United States is the only country where the majority of students (about 58%) were taught financial education in schools as a separate subject. The majority of students in the OECD were taught financial education in schools as a cross-curricular subject, or integrated into various subjects across the curriculum such as English, mathematics, humanities, business, economics, technology and enterprise, civics and citizenship.
What are the situations in Asian countries such as Singapore and Shanghai in China? Singapore takes a cross-curricular approach in providing financial knowledge to students through various core subjects such as mathematics, social and character development lessons, English language, and moral education. In Shanghai, some financial education topics have been integrated into its national curriculum with some autonomy provided to schools in teaching financial education.
However, to achieve a stable financial future and decent outcomes, making financial education a part of the formal education system alone is not enough to translate financial knowledge into action.
A major challenge centres on the design and the delivery of quality financial education that is fun and accessible. It must address the challenges of the real world and engage the learners in activities that help them master essential financial skills and competencies as well as the good behaviour related to personal financial management.
Even though many agencies in Thailand are developing financial literacy programmes, current efforts are not sufficient to create a substantial impact because of a lack of coordination.
This situation calls for holistic development and promotion of financial literacy at all levels of education. Also, the development of financial literacy should be extended to disadvantaged groups.
Chaiyasit Anuchitworawong is a research fellow at the Thailand Development Research Institute. Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.