Weak financial culture still prevails among Albanians
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- Overall citizens living in urban areas are more familiar with the concepts regarding a person’s financial education, compared to surveyed from the rural areas. Also the level of education indicated a higher level of financial knowledge and education, and there was not a great difference on the knowledge level among sexes.
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TIRANA, June 17- The Bank of Albania recently published the data from the second survey in measuring the level of financial culture of the population conducted during the summer of 2015. The results obtained show that Albanians do not possess very good financial knowledge with an index of 12.7 out of 21, or only one point below the average of the OECD countries, and 0.6 points below the average of all countries that participated in this survey. More than 90 percent of respondents are able to perform simple calculations, only half of them know how to calculate a simple interest rate, while a quarter answer erroneously and the same percentage do not know how to respond.
Only 29 percent of them respond to the question of compound interest, while half of them give a wrong answer. Only 52 percent of respondents correctly answer the question that tests the recognition of money value on time. 89 percent of respondents are familiar with loan interest, while 78 percent of them know and understand the relationship between risk and return from an investment, 71 percent know the concept of inflation and its effect on livelihood, only 66 percent of them responded correctly to the question of the relationship between risk and diversification of the portfolio, and 95 percent take their finances in consideration prior a purchase. The analysis of the answers obtained for questions that measure financial knowledge, according to socio-demographic characteristics, reveals that there is no difference in the financial knowledge of men and women.
Regarding financial products, the least known products is the microfinance credit with only 17 percent of respondents knowing about it, while the most well-known is a savings account at a 79 percent rate. However, only 30 percent of them own such an account. Meanwhile, the current account is known by 58 percent of respondents but is owned by 51 percent of them. The data collected by the sample prove that Albanians are not very involved financially. Although with a 4 percent increase from 2011, only 46 percent of respondents reported having owned and used a current or savings account in the last two years.
Albanians have financial knowledge of the needs, as they use very little financial products, although they know their importance. Country-level data shows that 15 percent of respondents own insurance products and 18 percent of respondents own at least one credit product. Measuring the level of financial knowledge of the Albanian population is accomplished with a set of 8 survey questions, which consider concepts such as inflation, diversification, risk and return on investment, simple and compound interest, and measure their accounting skills. Answers showed that Albanians possess medium-level financial knowledge, marking 64 percent correct answers.
As performing simple mathematical actions with a mind fulfills the mastery of financial knowledge to a financially educated individual, 9 out of 10 respondents correctly answer the question. In terms of socio-demographic characteristics, there is no difference between men and women (91 percent), whereas higher levels of education appears to have a significant impact on the ability of the respondents to conduct arithmetic actions, with 97 percent correct answers from individuals with higher education, as opposed to only 69 percent of those without a school or part-time education.
Overall citizens living in urban areas are more familiar with the concepts regarding a person’s financial education, compared to surveyed from the rural areas. Also the level of education indicated a higher level of financial knowledge and education, and there was not a great difference on the knowledge level among sexes. What was noticed, especially with loans, was that persons with higher income were also better financially educated than the rest of the surveyed persons. Positive remarks from the survey were also the fact that 81 percent of citizens manage to pay all their bills on time, 3 in 4 individuals agreed to attend to their personal finances, 71 percent manage a family budget. Relevant to that, 43 percent of surveyed admitted to having managed to cover all monthly expenses, while those who couldn’t, either got a loan from friends and/or family, or cut expenses. Nevertheless, the report estimated that 50 percent of all expenses are made for food.
