/fr/file/financial-literacy-epale-3Financial Literacy EPALE
EU Funding Executive Marija Elena Borg from the Malta Business Bureau assesses the significance of financial literacy for entrepreneurs.
Literacy – in all its forms – is a basic need for human development. In an increasingly complex financial environment, being financially literate does not only benefit the individual, but also positively contributes to the effective functioning of a society’s economic stability and development.
What is financial literacy?
The Organisation for Economic Co-operation and Development (OECD) and the International Network on Financial Education (INFE) define financial literacy as:
“A combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial wellbeing”.
It is true that people have always had the responsibility of managing their own finances, but recent developments have made people feel more financially anxious.
For instance, the introduction of complex financial instruments for borrowing and saving have rendered financial markets increasingly sophisticated. Moreover, modifications made to social security policies have shifted much of the responsibility and risk for financial decisions away from the government and employers and to the individual worker. With the sharp increase in life expectancy, appropriate financial education should be regarded as a form of assurance of financial well-being.
Why is it important for entrepreneurs to be financially literate?
Throughout their business journey, entrepreneurs face complex decisions. Equipping them with financial literacy skills is therefore believed to contribute to an improved understanding of financing options and the availability of financial support services.
The Association of Chartered Certified Accountants (ACCA) presents the following list of ‘financial education needs’ for entrepreneurs:
- to distinguish between personal and business finances;
- to be a competent buyer of financial services – understanding financial products, their costs and risks;
- to anticipate the business’ future financial needs under alternative scenarios;
- to assess the risks to which the business is exposed and prepare appropriate responses;
- to understand the decision-making process of finance providers, and thus appreciate how the business can become creditworthy or investment-ready;
- to relate the business’ financial needs to a country’s regulatory and fiscal framework – to appreciate the notions of regulatory and tax efficiency;
- to exercise financial management – i.e. to use financial information to analyse business performance and create policies and controls that optimise this.
Erasmus+ Project: Financial and Forecasting Models for Entrepreneurs (INVEST)
Aware of the fact that the 2008 financial crisis prompted the adoption of a more analytical financial approach by entrepreneurs, the Malta Business Bureau partnered up with six other European organisations on an Erasmus+ project seeking to boost financial literacy, particularly amongst micro entrepreneurs (small business owners).
The dissemination of a survey to establish the current level of financial literacy in the participating countries (Malta, Italy, Greece, the Netherlands and the United Kingdom), has re-confirmed that entrepreneurs possess limited confidence in dealing with financial issues. As a result, the project consortium is currently developing an e-learning toolkit, which is expected to provide entrepreneurs with sufficient financial knowledge to make responsible economic, financial and investment choices.
This toolkit is expected to be launched in all five countries, in December 2017. Stay tuned!
Marija Elena Borg is the EU Funding Executive at the Malta Business Bureau, which serves as the EU-advisory office of the Malta Chamber of Commerce, Enterprise and Industry and the Malta Hotels and Restaurants Association.