CBID pioneers financial literacy initiatives in Cyprus
On Friday 4 November 2016, Dennis Philip (Professor in Finance) and Panayiotis Andreou (Adjunct Professor) at Durham University Business School organized the Economic and Social Policy Forum on “Financial Illiteracy” at the Central Bank of Cyprus in collaboration with Cyprus University of Technology. The event was sponsored and supported by the Central Bank of Cyprus and the Cooperative Central Bank.
The speakers at the forum included Dr. Costas Mavrides (MEP and Member of the European Parliament Committee on Economic and Monetary Affairs), Dr. George Kyriacou (Chief Economist of the Central Bank of Cyprus), Nicholas Hadjiyiannis (CEO of the Cooperative Central Bank, Cyprus), Prof. Dennis Philip (Durham University), Dr. (c) Constantinos Georgiou (Inspector of Secondary and Vocational Education, Ministry of Education and Culture) and finally Dr. Panayiotis Andreou (Cyprus University of Technology and Durham University), who chaired the discussion.
The purpose of the forum was to highlight the problem of financial illiteracy in Cyprus and bring together the important governing bodies to discuss possible avenues for change, which can shape policies and central bank interventions.
The Organisation for Economic Co-operation and Development (OECD) defines financial literacy as “the knowledge and understanding of financial concepts and risks, and the skills, motivation and confidence to apply such knowledge and understanding in order to make effective decisions across a range of financial contexts, to improve the financial wellbeing of individuals and society, and to enable participation in economic life.”
The researchers from Durham University Business School presented the Cyprus financial literacy evidence collected from a pilot study of around 400 Cypriot students aged between 18 and 36 years old from wide-ranging academic disciplines, therefore the next generation who will be contributing to the wider economy.
The research focused on capturing the understanding of key financial knowledge dimensions including time value of money, interest paid on loans and savings, the risk and return relationship, benefits of diversification, and the meaning of inflation. The findings indicated that most dimensions of financial knowledge recorded an average score much lower than the global average produced by OECD’s survey of 30 countries around the world. The results showed that overall only 22% of respondents got all the questions correct, a percentage that is rather low when one considers the high level of education received by Cypriot students in the main areas of study.
Professor Philip says, “There was consensus among the speakers that financial illiteracy is a real problem at all levels of Cypriot society and the responsibility for information falls on the state, competent institutions and the citizens themselves, who should be empowered to understand their rights and make sound financial decisions.”
All the speakers were unanimous, in that the forum should be the starting point for a serious dialogue to further highlight the issues of financial illiteracy and made notable suggestions, including initiating a national benchmark survey to measure the financial literacy level among the wider Cypriot public and at the same time the creation of a national body to coordinate information and the training of citizens.