World Bank Signed a Loan Agreement for the Financial Education and Financial Literacy Project in Russia

Research conducted by the Russian Microfinance Center shows that in 2009, 50 percent of the economically active population in Russia (about 40 million) did not have access to credit. In addition, as much as US$50 billion have been taken out of circulation because of the undeveloped infrastructure in many remote areas in Russia. Therefore, on average regional financial inclusion in Russia is only four percent of that in Moscow. This research is available in Russian here.

Growing demand has fostered rapid development of the microfinance sector in Russia. According to the Russian Microfinance Center, in 2009 Russians invested about US$553 million of their savings in credit cooperatives; $104 million of private funds and $104 million of governmental subsidies have been invested in commercial MFIs; and finally commercial banks extended $69 million of credit to the microfinance sector in Russia. Therefore, the Russian microfinance sector is large and growing while, based on RMC’s estimates, it is still serving only one percent of the population (compare that to four to seven percent in other BRIC countries).

Microfinance providers in Russia realize that in order to address such regional differences in the provision of financial services, federal and regional governments need to work together to provide population with means to safely save, obtain credit, and access to bank accounts. RMC concluded that if the Russian government works together at the federal and regional levels to develop appropriate regulations to address disproportionate development of financial services in Russia, by 2020 credit will form 44 percent of GDP while savings will form 42 percent.

In a Memorandum of Understanding signed between the World Bank and the Eurasian Development Bank (EDB) on March 14, 2011, the Banks confirmed findings of the RMC by highlighting importance of regional and federal cooperation in Russia when creating financial education and consumer protection programs.

On March 17, 2011, Philippe Le Houerou (Vice-President for the Europe and Central Asia Region at the World Bank) and Alexei Kudrin (head of the Russian Ministry of Finance) signed a $25 million Loan Agreement for the Financial Education and Financial Literacy Project. This project, worth a total of $113 million, was prompted by a need to encourage more citizens with middle and low incomes to save regularly as well as to participate in financial services.

The main objectives of this project are:

• to improve financial literacy of the public—with a particular focus on school-age and university students, as well as on adults and middle-class households;
• to improve the regulatory framework emphasizing consumer protection in financial services by sharing information, and establishing a financial ombudsman;
• to establish hotlines and advisory centers across the region; and
• to conduct awareness campaigns through media to educate public about the importance of this project.

This project is expected to be implemented on a larger federal scale from 2011 until 2016, and it will require engagement of federal ministries, professional associations, educational institutions, and financial sector consumer advocacy groups.

At a federal level, interventions will aim to:

• design a national strategy for improving financial literacy;
• put in place a system to evaluate the degree of financial literacy of the public;
• create nationwide resources to promote financial literacy and protect consumers; and
• build the capacity of state NGOs and institutions of national importance.

At a regional level, interventions will aim to:

• carry out programs to deliver training courses for school-age students;
• conduct workshops and consultations for young people; and
• disseminate modern teaching and learning materials.