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17 November, 2020 06:18:18 PM

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Aging population and the necessity of financial literacy: Bangladesh perspective

Most of the old age population in developing nations depends on other family members. From the perspective of the social context old-age population of Bangladesh depends on their offspring's income and family assets.
Md. Aminul Karim
Aging population and the necessity of financial literacy: Bangladesh perspective

Population and development are now a common interest around the world. The twenty-first century is expected to a common problem “aging population” in many developed and developing countries.

UN predicts the number of people aged 60 or more will be 2.1 billion by 2050. Bangladesh, being an emerging country of South Asia, will have an aging population of 55 million by 2061. With a population of 180 million, the country is going through a demographic dividend. According to recent data of UNFPA (2018), the population aged between 10-24 years is 27.9 percent and 15-64 years is 68 percent of the total population. As the country is enjoying a higher life expectancy of 73.6 years there will be a huge aging population in the upcoming future.
This current population will bring a dramatic change in demographic structure by reducing the labour force and increasing the dependency ratio. A reduction in the labour force and a higher dependency ratio will create some challenges and risks. Social and economic activities will face a new dimension with this active aging population. Some major challenges will arise in fiscal management, old age saving, demand for goods, and services. Higher demand for healthcare services will ask for higher government expenditure in healthcare sectors. This will impose a threat to other macroeconomic issues.
Evidence from a previous study says that people from developing countries save less than developed nations for old-age support. Most of the developed nations have a public- pension programme which plays an important role in old-age saving but the developing countries like Bangladesh don’t have this kind of resource to fund old-age population. In addition to this, the social safety programmes of Bangladesh are also fragile and need a structural reformation. Most of the old age population in developing nations depends on other family members. From the perspective of the social context old-age population of Bangladesh depends on their offspring's income and family assets.
A high dependency ratio and lower labour force participation rate will negatively affect the socio-economic scenario by imposing burden on next generation. Hence it requires an emphasis on saving schemes and profound observations on other financial activities of current generation. Current economic data of Bangladesh shows a higher consumption and lower domestic savings.


Figure: Consumption and domestic savings as a percentage of GDP. Source: Bangladesh Economic Review (2019)

Fewer savings and underdeveloped financial markets will make it worse to support this current generation at the elderly. Saving is regarded as one of the key drivers of economic prosperity and it has positive effects on accelerating economy developing countries and Bangladesh must focus on it. Additionally, Bangladesh has not been developed its potential in financial sectors with its economic growth. To ensure economic growth along with poverty reduction access to finance is very much important. Bangladesh Bank had taken several steps to promote financial inclusion, but no competent measurement has been taken incorporating this old age population.
The lack of financial literacy and information gaps persists in this current young population. A study from Bangladesh Bank (2019) estimates that 61% of people had no use of the mobile phone for transferring money and most of the people depend on commercial agents for any financial assistance. Besides in the case of insurance markets, the study says 42 percent of people have no idea about insurance coverage programs while only 14% of people know about insurance. In the case of information gaps, 23.9 percent of people have no trust in insurance companies because of rigging issues, and 47 percent of people have no idea about an insurance policy.
Therefore, it is clear from the evidence that financial exclusion persists in recent times. Generally, financial exclusion arises from both the demand and supply side. From the demand perspectives low income and assets, social exclusion, and lack of financial knowledge exclude people from better financial services and products. Exclusion from the supply-side consists of the availability of services (i.e.: low bank branch concentration), perplexing in the documentation process, unsuitable products. The problems of both demand and supply sides require key observation for the upcoming future. Many developed nations have taken polices to address the problems old age population incorporating financial literacy, but we have not addressed this yet If we want to create a better future, we must transform our apathy towards solving the issues of financial exclusion.
It becomes necessary to accretion financial literacy in this current population to reduce the burden on dependency on the next generation. Focusing on data collection and evidenced based policy intervention will be necessary for policy makers to take decisions. Current consumption and saving behaviour will affect the demand for financial services. Therefore, it will require data-driven policy interventions. As evidence (BB 2019) says the current population has a lack of access to information about financial services and products, ensuring and developing a good information hub is a dire need.
A study by Khalily, MA Baqui, and P. Miah (2016) shows that education has a positive impact on financial literacy. So, creating awareness and incorporating financial education at a young age will be a viable solution for financial inclusion. Additionally, the financial products should be developed addressing the diversified needs. Digital financial services, proper planning for using current resources and assets, and consumer protection related policies must be emphasized. Social security programmes for women should be put forward.
Therefore, the gist of the story is: to ensure a better future for this aging generation and reduce the burden of interdependency with future generations requires good financial knowledge and proper vision of the government and other related organizations.

The writer is MSS in Economics, Bangladesh University of Professionals. Email: [email protected]

 

 

 

 

 

 

 

 

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Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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