Financial literacy is becoming an increasingly important factor in modern society, especially in countries in transition such as Montenegro. Given globalization, technological development and changes in the way of doing business, it is important that citizens possess appropriate financial skills in order to make the right decisions and maintain the stability of personal finances.
The latest research conducted by the OECD (Organization for Economic Co-operation and Development) showed, as "Vijesti" was told by this organization, that the level of financial literacy in Montenegro is below the average of OECD member countries and the Southeast European region, which indicates the need for further improvement in this area.
Recognizing the importance of financial education, Montenegro has launched a series of strategic initiatives, including the adoption of the Financial Education Development Program for the period from 2023 to 2027, which aims, as explained by "News" at the Central Bank (CBCG), to improve the level of literacy among citizens and encompass a wide range of target groups, from children and youth, to the unemployed, the elderly and rural communities.
With the help of international partners, such as the OECD, Montenegro is moving towards harmonizing its activities with the best practices of other countries.
FINANCIAL EDUCATION DEVELOPMENT PROGRAM
In recent years, the Central Bank of Montenegro has recognized the need to actively work on improving financial education. Through various activities, such as campaigns, workshops in schools and the development of educational tools, the Central Bank of Montenegro strives to contribute to better informing citizens about financial issues. In addition, numerous initiatives have been implemented to protect consumers and spread knowledge about banking products, which shows that financial education has become crucial for the long-term economic progress of the country.
"Recognizing financial literacy as an important priority, which is increasingly gaining importance with globalization and the development of technology and modern business, the Central Bank of Montenegro is actively working on the financial literacy of citizens," said Advisor Marija Radenović.
She explained that in 2019, they initiated the development of a strategic document aimed at raising the level of financial literacy in the country, and that this initiative was concretized by the formation of the National Committee for the Development of Financial Education in 2020, as a working body of the Financial Stability Council.
"In addition to the Governor of the Central Bank of Montenegro, who chairs the Committee, the members of this body are the Minister of Finance, the Minister of Education, Science and Innovation, the President of the Capital Market Commission and the President of the Insurance Supervisory Agency. Two years later, in 2022, the Financial Stability Council adopted the Financial Education Development Program in Montenegro 2023-2027. which represents a strategic framework for implementing activities in the field of financial education. During the preparation of the Program, the Central Bank of Montenegro had continuous communication with the OECD, as the goal was to align the document with their recommendations and positive experiences of other countries."
She states that the program is implemented through annual action plans that specify a wide range of activities in the field of financial education, and that the activities are designed to respond to current market and economic needs, with a special focus on children and youth.
The OECD said that a survey conducted in the period 2019-2020 showed that the financial literacy of adults in Montenegro is below the average among the 12 OECD member countries that participated in the survey, as well as slightly lower than the average for countries in Southeast Europe.
"The OECD defines financial literacy as a combination of financial knowledge, financial behavior and financial attitudes. Adults in Montenegro performed lower in all three components compared to the OECD average. In the field of financial knowledge, they were at the level of the South-Eastern European average, while they had lower results in financial behavior and attitudes, indicating significant room for improvement," the OECD said.
The OECD highlights that Montenegro has only recently adopted a Financial Education Development Program, led by the National Committee for the Development of Financial Education, which will coordinate the work of many stakeholders already active in providing financial education to citizens.
"It is still too early to draw conclusions, but it will be very important to monitor and evaluate the implementation of the national strategy in order to identify successful examples and challenges, and address them by adjusting programs, initiatives or coordination mechanisms as necessary," the OECD pointed out.
Also, since 2017, the OECD has been implementing a technical assistance project in ten countries, including Montenegro, which aims to assist countries in knowledge exchange, capacity building and research in the field of financial literacy, in order to develop, implement, review and improve their national financial literacy strategies.
The Central Bank of Montenegro carries out a number of educational activities, including campaigns, workshops and digital educational content. Radenović emphasized that it organizes activities such as “Savings Week”, “World Money Week” and educational workshops in schools and universities. The supreme monetary institution has also launched Financial Entertainment, an educational and entertainment magazine available on its website, as well as the mCBCG mobile application, which allows users to find out about the consumer credit offers of all banks in Montenegro.
RESEARCH
When asked how they assess the level of financial literacy of Montenegrin citizens, Radenović said that in 2020, the OECD conducted a survey on the level of financial literacy of adults in seven countries participating in the project and Montenegro, with an average score of 55 percent, ranked sixth.
"These results indicated the need to further improve financial literacy in the country, which was crucial and motivated the Central Bank of Montenegro to initiate the development of the Financial Education Development Program in Montenegro 2023-2027. Recently, the scientific and research institution Center for Finance conducted a survey on financial literacy in Montenegro, according to the OECD methodology and on a sample of 1.000 respondents. The survey showed that Montenegrin citizens best understand the concepts and products they use and that are current, so that as many as 95% of respondents know what a loan is, 93% understand the term interest on a loan, and 82% understand the meaning of the term inflation. Although these basic concepts are familiar to citizens, knowledge drops considerably when it comes to, for example, a compound interest account. This term is known by 32% of respondents, while less than a fifth of respondents (19,8%) understand the difference between installments and annuities," Radenović stated.
According to her, regarding the findings related to financial behavior, the data is worrying that 52% of respondents, mostly young people and pensioners, responded that their monthly income does not always cover their monthly expenses (this percentage was 50% in the previous survey).
"The results also show that 51% of respondents have a household budget, while 39% pay their bills on time. When it comes to savings, 39% of respondents keep money at home, which shows some progress compared to the 2020 survey, when 45% of respondents did so. When it comes to citizens' attitudes on the topic of finances, which are the most difficult to influence because they are tied to the cultural framework, 41% of respondents say they prefer to spend rather than save, and 51% agree with the view that money is there to be spent," Radenović said.
Understanding basic financial concepts is crucial, as Radenović states, for making informed decisions, whether it's managing a personal budget or planning for long-term financial security.
Insurance awareness insufficiently developed
The President of the Council of the Insurance Supervisory Agency (ANO), Marko Ivanović, told "Vijesti" that the surveys they conducted showed that the level of financial literacy of citizens of Montenegro, as in many countries in the region, is assessed as low to moderate, and awareness of insurance is still insufficiently developed.
“This is the result of a combination of factors, including a lack of formal financial education, cultural habits, and a certain skepticism towards insurance companies. The vast majority of citizens do not recognize the importance of insurance (life, health, property, or auto insurance) as a risk management tool. For example, life insurance is often considered a “luxury,” while property insurance is rarely available to property owners,” said Ivanović.
He said that among vulnerable groups with a low level of financial literacy, he recognizes young people, pensioners, the unemployed, but also certain categories of employees with lower incomes.
"Each of these groups has specific challenges in managing their finances and understanding key concepts such as savings, investments and insurance. The Agency, in cooperation with the National Bureau of Insurers of Montenegro, has prepared a strategic document "Development Communication of the Insurance Sector in Montenegro 2024-2027 - Strategic Guidelines", on the basis of which a significant number of activities aimed at further strengthening the insurance culture will be designed and implemented in the coming period," said Ivanović.
According to him, in order to raise the culture of insurance, primarily among the younger population, the communication strategy will use a technologically advanced education channel "AI Chatbot" based on artificial intelligence, which will be able to answer citizens' questions 24/7 and clarify their doubts about insurance products, with an emphasis on those product categories that citizens know relatively less and use less, such as property insurance, accident insurance, health insurance, etc.
"This tool aims to define key directions of the strategy for the further development of financial literacy, based on the information collected from communication with citizens. We will continue with activities to organize educational lectures, thematic workshops and conferences, create an electronic Bulletin and publish educational texts, which citizens can familiarize themselves with on the Agency's website and page on the social network LinkedIn," said Ivanović.
As part of the campaign to raise financial literacy, ANO organized “Insurance Day” and the annual awards ceremony in cooperation with the Faculty of Economics of the University of Montenegro. On the occasion of the Agency Day, on December 11, awards are also given for the best bachelor's, master's and doctoral theses in the field of insurance, thus stimulating the development of scientific thought and promoting excellence in research in this sector.
22 institutions participated in the implementation of the program
Radenović stated that in order to improve financial literacy and educate citizens, they have prepared an Action Plan for this year, the implementation of which involves more than 20 institutions and organizations from the public, private and non-governmental sectors.
"The plan includes various activities aimed at improving financial literacy, such as workshops, lectures, the production of educational videos, podcasts and blog series, competitions, etc. There is a special focus on children and young people because we believe that working on financial education from an early age is key to creating a responsible and financially educated generation," Radenović emphasized.
In order to ensure an efficient platform for networking efforts, exchanging information and coordinating activities in the field of improving financial literacy, the Central Bank of Montenegro initiated the signing of the Memorandum of Cooperation on the Implementation of the Financial Education Development Program, which has been signed so far by 22 institutions from the public, private and non-governmental sectors.
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