On February 28, 2019, International Conference “Deposit Insurance and the Public: Promoting Communication, Financial Literacy and Transparency” will be hosted in Almaty by Kazakhstan Deposit Insurance Fund (KDIF) and International Association of Deposit Insurers (IADI) with support of National Bank of Kazakhstan.
Financial literacy determines daily financial decisions made by all people in regard to income and expense planning, money management, choice of investment tools, awareness of personal savings protection. Financial literacy allows people to secure their money, and also contributes to greater activity of people on the financial market, which facilitates its further development and financial stability as a whole.
Is not easy to assess and measure the degree financial literacy among public. There is no uniform approach in the world as to assess financial literacy of people. However, the main criteria are awareness (understanding of the basic financial fundamentals) and financial conduct of a consumer. Thus, according to a survey data obtained by an international rating agency, the share of financially literate adult population in Kazakhstan is rated at 40 per cent . For instance, this rating reaches 70 per cent in Denmark, Norway and Canada.
Depositors’ confidence of protection of their savings in banks is also a part of financial literacy. Deposit insurance system shall not be deemed to be effective if the depositors are not aware of, or do not understand the principles of protection. According to research by Canada Deposit Insurance Corporation (CDIC), a notice of deposit insurance in media increases the depositors’ confidence in protection of their savings by 50 per cent. This confidence reduces the risk of bank run in the event of dissemination of negative information and contributes to resilience of financial system. The likelihood of bank run is increased by 40% if depositors are not aware of protection of their savings .
The experience of KDIF in reimbursing the depositors of three banks in liquidation (300,000 depositors) in 2018 – 2019 showed that, despite the effort to inform the public, a significant number of depositors are not aware of deposit insurance or do not believe to be reimbursed. KDIF took the measures to increase the capacity of call-center and enhanced its engagement in social media in addition to press releases and news items on the website and in the media so as to expand information coverage. The task of KDIF was to inform the depositors of preparedness to pay-out and to give answers to all questions in a transparent and timely manner.
For instance, over the course of two months, about 4,000 calls have been received by the KDIF call center. Depositors received a 24/7 support via a dedicated chat in Telegram. The surge in depositors’ activity on these communication channels fell on the waiting period for payments, the primary matters of interest being timing, amount and order of reimbursement. The number of calls dropped sharply after start of pay-out (almost twice). The bulk of incoming calls accounted for Almaty and Astana (87%), while the activity in other regions in Kazakhstan was much lower. Thus, the KDIF still faces the objective to find new effective channels to inform public during a period of stability and to ensure coverage in other regions as well.
The problem of increasing financial literacy of people is acute both in Kazakhstan and in other developing and developed countries worldwide as well. Improving financial literacy is a long-term objective requiring comprehensive study and application of best practices in other countries. To this end, KDIF with the support by the National Bank of Kazakhstan became the host of the IADI International Conference “Deposit Insurance and the Public: Promoting Communication, Financial Literacy and Transparency” in Almaty.
The ultimate goal of IADI is to maintain stability of financial system in the world via development of standards and guidance in deposit insurance. In its operations KDIF is guided by the IADI Core Principles. IADI represents 110 members, including 86 deposit insurers, 10 central banks and government agencies, and 14 partners including World Bank, International Monetary Fund, European Bank for Reconstruction and Development and Alliance for Financial Inclusion. Membership in IADI grants its members access to vast knowledge and experience in deposit insurance, as well as the opportunity for an independent expert assessment of the deposit insurance system effectiveness country.
In coordination with Basel Committee for Banking Supervision and the Financial Stability Board, IADI provides forum for discussion of the matters in regard to raising public awareness of deposit insurance. In 2012, the IADI Research and Guidance Committee developed an enhanced guidance for effective deposit insurance systems as applied to public awareness of deposit insurance systems. Public awareness is a part of the IADI Core Principles which apply for assessing effectiveness of deposit insurance systems worldwide. However, changing economic conditions and constantly evolving financial markets require revision of the existing measures to raise financial literacy of people, which is the main rationale for the International Conference in Almaty.
To host the International Conference itself is not aimed to promptly resolve all problems remaining in regard to financial literacy of people in Kazakhstan. Above all, the event is expected to spur open dialogue and common strategy for growth in financial literacy and culture of financial conduct. Exchange of experience in the format of an international conference makes it possible to adopt the most effective and successful methods, determine further actions and reinforce communication.
Kazakhstan Deposit Insurance Fund (KDIF) is an organization of the National Bank of the Republic of Kazakhstan established in 1999 to protect the rights and legitimate interests of depositors of second-tier banks.
International Association of Deposit Insurance Systems (IADI) is a professional association representing 110 deposit insurance organizations, central banks and international financial organizations. The Association provides for forum to exchange experience between its members in order to strengthen financial stability around the world. The IADI was established in May 2002 and is domiciled at the Bank for International Settlements in Basel (Switzerland).