Empowerment and (dis)trust
By Julia
I know well from my own life how women in particular can be either held back by their lack of financial literacy, or empowered and propelled by the confidence that knowing how to manage your money can give you.
In much of my life, I have found that I tend to gravitate towards the things I am passionate about regardless of whether or not they overlap with my existing skills or expertise. This was certainly the case in choosing a project to formulate a financial literacy program for women in Moldova. While I am not a CFP or really a finance person at all, I know well from my own life how women in particular can be either held back by their lack of financial literacy, or empowered and propelled by the confidence that knowing how to manage your money can give you.
Financial literacy can also be so broad a topic that it’s difficult to know from what angle to approach it. However, our client immediately helped us to move in the right direction when she mentioned that many Moldovan women do not even have bank accounts. In the US, where only 5% of households are unbanked, it is hard to conceive of a place where the majority of people do not have a bank account. As of the World Bank’s latest Global Findex Report in 2017, only 44% of Moldovan adults surveyed had a bank account. Of the 56% surveyed who did not have a bank account, the leading reasons for not having an account included a lack of trust in financial institutions and insufficient funds (either generally, or to open a bank account).
Although the US’ economic situation has been insecure since the subprime mortgage crisis of 2008, there are very few people who will say they actually feel putting their money into a bank account runs the risk that they won’t get it back. While we have a great deal of income inequality in the US, and more poverty than many politicians will readily admit, most people have never experienced a systemic banking failure as recently as Moldovans have.
In 2014, one billion dollars were embezzled from the three largest banks in Moldova. All three banks were taken over by a few private companies and subsequently gave sizable loans to shell companies. These companies then transferred the money to other shell companies in Europe and Hong Kong to conceal the identities of the ultimate beneficiaries of the theft. The Moldovan government ultimately decided to secretly bail out the three banks using emergency reserves and creating a deficit in the public budget equal to a third of Moldova’s GDP. Many citizens ultimately saw government officials as being complicit in the theft and this bailout engendered a decline in trust in government.
In our moving forward to consider our client’s request to formulate a program encouraging economic empowerment for women in Moldova, I believe this idea of trust surrounding personal finance in Moldova is the first thing we have to address. Knowing now what has driven public distrust of banks, we need to find out what drives citizens to trust financial institutions, especially after a public corruption scandal.