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An analogy about cars, trust and financial capability

Siegfried Zottel's picture

Imagine you need a car to commute long distances to your workplace or the closest supermarket, to visit your parents and to bring your child to school. Therefore, you want to spend the money you have been able to put aside on a large purchase: a new and reliable car.  However, you do nFinancial education enables the unbanked to participate in financial markets.  (Credit: The Advocacy Project, Flickr Creative Commons)ot know how to drive, nor how do you have even a basic understanding of any technical aspects of a car, not to mention any knowledge about how to maintain a car.
Also, imagine that everything you have heard so far about car dealers from your family, friends and neighbors is that they have a very bad attitude, do not act in your best interest and try to sell you overpriced vehicles with hidden fees and features you do not need. Given your lack of knowledge of how to choose and use a car and your lack of trust, would you still feel confident about approaching a car dealer? Most probably not.

This analogy also applies to one’s participation in financial markets. Especially in developing economies, where most globally unbanked people live. If you do not have knowledge of features and risks associated with financial products, do not know how to choose and use these products, lack any basic understanding of inflation, interest rates and compound interest, it is unlikely that you will participate in financial markets, or that you will benefit from them if you do. A lack of trust in financial service providers will do the same.

Can industries take flight in conflict situations?

Can industrial interventions in conflict areas, such as the West Bank,  improve prospects for future generations? (Credit: delayedgratification, Flickr Creative Commons)The World Bank is actively expanding its portfolio in the world’s most troubled conflict zones. This invites the question: What can the Bank accomplish in countries riven by conflict? I would flip this question around and ask: What steps are needed by the country to rebuild itself?

Whenever I have asked in-country practitioners (whether Bank staff or local NGOs or journalists) what the country really needs, the answer I have heard most often has been: “Jobs.” Get them good jobs, higher incomes, and break the vicious trap of poverty and violence, is the common refrain.