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Financial Literacy in Suriname

Financial Literacy in Suriname

January 28, 2021 by Maricruz Arteaga Garavito - Diether W. Beuermann - Veronica Frisancho - Jeetendra Khadan 1 Comment


It has long been understood that financial literacy and financial inclusion can increase household’s financial resilience. That is especially true in times of economic crises, such as that of the current Covid-19 pandemic. People with financial skills can better plan, save for retirement, and accumulate more wealth. Adept at modern financial technologies, like cards, apps and online payment facilities, they are also less likely to experience interruptions in basic services and in money flows, including income.   

Given the vast importance of these skills, and their added value during a time of extreme stress, the IDB has made a concerted effort to measure financial literacy in parts of the region where information on it is scarce. This included a survey on financial literacy carried out in Barbados in May/June 2020 and more recently one in Suriname, which we describe, along with background in the following paragraphs.    

The COVID-19 pandemic has exacerbated Suriname’s ongoing economic crisis. The pandemic arrived at a time when Suriname was already in a deep macroeconomic crisis characterized by twin deficits (fiscal and current account), high double-digit inflation, high debt levels, depleted international reserves, and banking sector vulnerabilities. The social distancing and travel restrictions imposed by the country to curb the spread of COVID-19 aggravated the precarious economic situation through job losses, business closures, loss of household income and other highly undesirable impacts, such as reported increases in domestic violence. As a result, the quality of life of Surinamese households is being negatively affected.  

Financial literacy data gap in Suriname. To address the data gap on financial literacy in Suriname, the IDB included a financial literacy module as part of a nationally representative telephone survey in the country. The sample was drawn from the 2016/17 Suriname Survey of Living Conditions (SSLC), allowing us to explore the evolution of household’s characteristics across time. The survey was conducted from April 16 to July 5, 2020 and featured three financial literacy questions measuring the understanding of respondents on three fundamental financial concepts: 1) interest rates, 2) inflation, and 3) risk diversification. The financial literacy score is defined as the sum of correct answers (out of the 3 questions). Then, individual-level scores are averaged to obtain the financial literacy index which ranges between 0 and 3. The use of standardized questions that have been applied internationally enables comparisons of  financial literacy performance across multiple countries.  

Financial literacy in Suriname is relatively high at the national level, but there are differences amongst demographic groups. The results of the survey show that Suriname has relatively high levels of financial literacy by international standards. The financial literacy index for Suriname is 1.92 compared to 1.65 for Barbados and 1.73 for the United States (USA). Suriname had a higher percentage of people providing the correct answer on all three questions than those countries (Figure 1). 

Figure 1. Percentage Who Answered Correctly by Question and Country

Even though Suriname’s financial literacy scores are high, there are significant differences among demographic groups. Poor and low-income households score below more advantaged counterparts (Figures 2 and 3). Those that work in the agricultural sector or are self-employed also score relatively low on the financial literacy index (Figure 4). Financial literacy levels are positively correlated with educational level (Figure 5), and individuals below retirement age have a higher financial literacy index score (1.98) than individuals 60 years old or older (1.79), particularly those 30 to 40 years old (1.99).

Figure 4. Financial Literacy Index Score by Work Sector

Figure 5. Financial Literacy Index Score by Education

There is a positive association between financial literacy and the usage of alternative payment methods. The use of alternative payment methods (cards, transfers, checks, apps, and online payment facilities) became increasingly important during the pandemic. Households and businesses with limited access to digital financial services face a higher risk of interruptions to basic services and essential money flows (wages, business sales, remittances, loan payments, government support, etc.). As shown in Table 1, households that have consistently used alternative payment methods are more likely to have a higher financial literacy index score. In addition, since the beginning of the curfew, 7% of households have begun to use alternative forms of payment.  The active alternative payment user base, however, has not increased: 6% of households indicated they did not use these services between March and June, even though they had previously done so. Possible reasons include: (i) an announcement that commercial banks stopped using checks in August 2020; (ii) withdrawal and deposit limits imposed by commercial banks since March 2020; (iii) anecdotal evidence suggesting that due to the COVID-19 restrictions there was an uptick in economic activity at small businesses with  limited access to alternative payments options; and (iv) lower levels of trust in the financial system that could  have arisen due to governance-related issues in 2020.    

The share of the population that continues to use cash as its sole payment method is still considerably high, at 49%. The slow increase in uptake may be related to a lack of access to financial services, especially for vulnerable groups such as small and micro enterprises, those in the informal sector, and poor and rural communities, as well as infrastructure and connectivity constraints. As shown in Table 2, the share of the population that continued to use non-cash payment methods in the Great Paramaribo area was 44%, compared to 23% in the non-Great Paramaribo area.  

Table 1. Financial Literacy Index Score and Use of Alternative Payment Methods 

Financial Literacy Index Score and Use of Alternative Payment Methods

Table 2. Share of the Population by Use of Alternative Payment Methods and Region 

Note: The non-Paramaribo domain considers the Rest of the Coastal Region and Interior. Estimates for the non-Paramaribo domain have a smaller sample size due to the nature of the telephone survey. 

Targeting financial literacy initiatives to key demographic groups, addressing connectivity constraints and improving access to digital financial services can help improve financial resilience, especially for poor households. The IDB survey contributes significantly to the understanding of financial literacy in Suriname. The data allows us to better target efforts to deliver financial education as we can identify sections of the population that are still lagging. We observed a relatively slow increase in the uptake of digital payment methods during the pandemic. This may be related to a lack of access to digital financial services, gaps in banking and financial inclusion, and inadequate infrastructure as it relates to internet penetration and a reliable electricity supply in some geographic areas of the country. Furthermore, although Suriname is often described as a “cash economy” with a relatively large informal sector, authorities are engaged in ongoing efforts to improve financial education and financial technologies. Encouragingly, we observed that higher financial education is associated with greater use of alternative payment methods. The country should continue to accelerate efforts to improve financial education, targeted to vulnerable groups, and promote digital financial inclusion. This will be critical to building financial resilience and supporting an inclusive socioeconomic recovery for Surinamese households and businesses.


Filed Under: Social Issues Tagged With: #FinancialLiteracy

Maricruz Arteaga Garavito

Maricruz Arteaga Garavito is an external consultant for the IDB. Her career background is in economics with emphasis on program evaluation. Her research interests include public health, education, and gender equality. Maricruz has consulting experience in the United States, Latin America and the Caribbean.

Diether W. Beuermann

Diether W. Beuermann is a Lead Economist in the Caribbean Country Department of the Inter-American Development Bank. He has led research and data collection projects in various countries, including Barbados, Colombia, Guyana, Jamaica, Peru, Russia, Suriname, The Bahamas, Democratic Republic of Congo, Trinidad and Tobago, and the United States. His research has covered the effects of different information and communication technologies on agricultural profitability, child labor, academic performance, pre-natal care, and neo-natal health. He has also conducted research on the effectiveness of participatory budgeting, the short- and long-run effects of educational quality, the multidimensional nature of school causal effects, the determinants of school choice, the effectiveness of math-focused parenting programs, the role of remittances as a social insurance mechanism, the effects of early-life weather shocks on short- and long-term human capital accumulation, the effects of public health insurance on health outcomes and labor supply, the effects of behavioral-based entrepreneurship training on firm profitability, the effects of blue-collar crime on financial access and credit prices of affected firms, and whether and how conditional cash transfers may affect the effectiveness of other human capital development policies. He has published in several leading international peer-reviewed journals, including the Review of Economic Studies, American Economic Journal: Applied Economics, Journal of Human Resources, Journal of Health Economics, Journal of Development Economics, and World Development. He holds a B.A. in Business Management and a B.Sc. in Economics from the Universidad de Lima, a M.Sc. in Finance from the University of Durham, and a M.A. and Ph.D. in Economics from the University of Maryland-College Park.

Veronica Frisancho

Verónica Frisancho es economista senior en el Departamento de Investigación del Banco Interamericano de Desarrollo (BID). El trabajo de Verónica mejor se describe como microeconomía aplicada, y su principal campo de especialización es la economía del desarrollo. Su investigación en estas áreas incluye un énfasis en educación, mercados laborales en países en desarrollo, violencia doméstica e inclusión financiera.

Jeetendra Khadan

Jeetendra Khadan is a former Senior Economist who held the position of Country Economist for Suriname within the Caribbean Country Department at the Inter-American Development Bank. He also worked as the Country Economist for Trinidad and Tobago and Research Consultant at the Inter-American Development Bank in Washington DC. Prior to that, Jeetendra worked as a lecturer in the Economics Department at The University of The West Indies, St. Augustine campus where he taught courses on international trade, international finance, economic integration, econometrics and mathematical economics, and was the lead researcher on several projects for international and government organizations. Jeetendra has written and published books, book chapters, and articles in peer-reviewed academic journals such as The Economic Journal, Empirical Economic Letters, Research in Applied Economics, Economics Bulletin, Journal of Developing Areas, Economies, Journal of Social and Economic Studies, Transition Journal, Journal of Eastern Caribbean Studies, UWI Press, the International Monetary Fund, and Inter-American Development Bank working paper series on issues related to trade policy, macroeconomics, private sector development and other contemporary issues. Jeetendra holds a Ph.D. in Economics from the University of the West Indies.

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Comments

  1. Randolph Williams says

    February 8, 2021 at 4:39 pm

    Interesting. I expected Barbados to have higher levels of financial literacy than Suriname. So thank you. But I wonder how Guyana would fare. Would it be difficult to survey Guyana and others for comparison.

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