Not Trusting Putin and Pals, Russians Embrace Financial Literacy
By Jeanne Doran
June 28, 2017
Vladimir Putin and Russian oligarchs may be squirreling away billions of dollars. But ordinary citizens in that vast nation are feeling the squeeze from a lingering economic malaise. Many are looking to beef up their financial literacy skills; they are expressing interest in things like debit cards and credit, according to a report in the Russian daily newspaper Izvestia.
Top Russian banks report the number of phone calls from customers is surging, and the calls are lasting longer. At banking giant VTB, customer calls are up 20% in a year. At B&N Bank, one of Russia’s largest commercial banks, the number of calls increased 150%. Rosselhozbank, an agricultural state bank, reports customer calls have risen 8%.
Dynamics in Russia are pretty much the same as in countries all over the world: economic instability generates jitters that lead to more financial worry and restraint. “In turbulent times people tend to want to save money, and therefore savings bank products and deposits are popular,” Citibank director Anna Tsverkova told Russia Beyond the Headlines, an English-language newspaper covering news of Russia.
Recognizing a general thirst for financial education, the Russian government sponsored a financial literacy summit this spring. A key topic: how government bonds work and why they may be a wise investment for savers.
Technology is also driving financial literacy. Banks are looking into additional online banking services and bill-paying operations as well as mobile financial products to increase engagement among customers.
Interest in financial literacy and banking services is more widespread in urban areas than in rural communities with less wealth. The average income for a person living in a Russian city with a population of 100,000 or less is 30% lower than in cities of at least one million.
Despite heightened interest in financial literacy programs, results have been mixed. For example, fewer than half of Russians understand the bedrock concept of risk diversification with investments, according to an OECD report. On the other hand, Russian 15-year-olds scored better than average and showed one of the biggest improvements in financial knowledge in the recently released OECD Program for International Student Assessment.
Many Russians do not trust that the state has their best financial interests in mind. They worry, for example, that lessons on government bonds may be more about the government borrowing at low interest rates than people saving for retirement. This is a nation that endured a wave of financial pyramid schemes in the 1990s and has seen oligarchs amass world-class riches while ordinary people struggled. The Russian ruble collapsed with oil prices in 2014—on the heels of a massive debt default in 1998.
The good news is that people are watching their money more closely and want to learn how to manage their affairs better. So they are more apt to get the information they need to protect their assets and make better decisions.