Singapore adults most financially literate in Asia: survey

Singapore has the highest percentage of financially literate adults in Asia.
Singapore has the highest percentage of financially literate adults in Asia. ST PHOTO: DANIEL NEO

HONG KONG - Singapore has the highest percentage of financially literate adults in Asia, a continent where 73 per cent of adults do not adequately understand key monetary ideas, a new study has found.

As many as two-thirds of adults in the world are financially illiterate, according to a survey by ratings agency Standard & Poor's.

In one of the most extensive studies on the topic, S&P conducted interviews with more than 150,000 adults in more than 140 countries who were tested on their knowledge of four basic financial concepts: numeracy, risk diversification, inflation and compound interest (saving and debt).

The agency's Global Financial Literacy Survey (S&P Global FinLit Survey) established regional difference in knowledge between East Asia, South Asia and Southeast Asia, but said that the percentage of financially literate adults across Asia was lower than the global average, the agency said on Wednesday.

The survey defines East Asia as China, Hong Kong SAR, Japan, South Korea, Mongolia and Taiwan.

South Asia comprises Afghanistan, Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka, while Southeast Asia includes Cambodia, Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

While Singapore had the highest percentage of financially literate adults at 59 per cent in Asia, while only 18 per cent of Cambodian and Nepalese adults were able to correctly answer the questions on basic financial concepts.

In China, 63 per cent of adults who own a credit card are financially illiterate. Overall, 28 per cent of Chinese adults were financially competent.

Excluding China, 40 per cent of East Asian adults were sufficiently familiar with the financial concepts tested by the survey.

The East Asian results are higher than the global average of financially literate adults (33 per cent), while Southeast Asia's scores were closer the global average at 31 per cent. Less than a quarter of South Asians correctly identified the concepts posed by pollsters, a significantly lower percentage than the global average.

"Understanding concepts like interest, inflation and the importance of savings are at the core of economic development," said Matthew Bosrock, Executive Managing Director and Head of Asia-Pacific for Standard & Poor's Ratings Services. "A lack of basic financial understanding is one of the factors obstructing faster growth in Asia. This survey gives policymakers the tools to identify the gaps in education and also a chance to improve access to financial products."

While the array of financial products available in Asia continues to grow rapidly, S&P's FinLit Survey suggests that most consumers lack a general understanding of credit, compound interest and other key concepts.

The data were collected in 2014 by Gallup as part of the Gallup World Poll and analytical support was provided by researchers at the World Bank and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University.

rupsk@sph.com.sg