Financial Capability Survey Report

Financial Financial Capability Capability

Survey ReportSurvey Report

CBREDGedu College of Business Studies, RUB

in collaboration withRoyal Monetary Authority of Bhutan

Financial Capability Survey Report i

Table of ContentsAcknowledgement viiAcknowledgement vii

Executive Summary 1Executive Summary 1Introduction 1

Findings 1

Overall Financial Capability Index 2

Introduction 4Introduction 4Financial Capability 4

Objective of the Survey 6

Significance of the Study 6

Methodology 7Methodology 7Study Design 7

Data Collection 7

Data Analysis 8

Interpretation of the Scores 9

Detailed Findings 10Detailed Findings 10Overall Financial Capability Index 10

Financial Capability Theme Wise 11

Financial Capability by Selected Demographic Information 11

ii Financial Capability Survey Report

By Education Level 12

By Age 12

By Occupation 13

Financial Knowledge 14

Overview of Financial Knowledge 14

1. Economic Impact 15

2. Budget Management 16

3. Savings and Long-term Planning 17

4. Productive Credit and Debt Management 18

5. Financial Shopping 19

6. Digital Financial Services 20

7. Consumer Protection 21

8. Insurance, Risks and Investments 22

Financial Skills 23

Overview of Financial Skills 23









Financial Attitude 30

Overview of Financial Attitude 30




Financial Capability Survey Report iii






Financial Behavior 35

Overview of Financial Behavior 35








Conclusion 41Conclusion 41

References 42References 42

iv Financial Capability Survey Report

List of Tables

Table 1: Number of respondents according to the two Geogs of Chhukha Dzongkha and their respective Chiwogs 7

Table 2: Primary occupation of the respondents 8

Table 3: Financial Capability Index 10

Table 4: Financial capability according to occupation 13

Table 5: Level of qualification and performance on Economic Impact skills 25

Table 6: Comparison of Bhutan’s index with five other countries . 41

List of FiguresComparison of the four domains of Financial Capability between Bhutan and Armenia (Source of Armenia Data - Alliance for Financial Inclusion, 2020) 3

Figure 1: Comparison of the four domains of Financial Capability between Bhutan and Armenia (Source of Armenia Data - Alliance for Financial Inclusion, 2020) 11

Figure 2: Overall mean score and the scores by thematic area and financial capability domains 11

Figure 3: The overall score according to gender 12

Figure 4: The overall score according to educational qualification 12

Figure 5: The four domains according to age of the respondents 13

Figure 6: Overall financial knowledge 14

Figure 7: Overall economic impact score. 15

Figure 8: Knowledge about financial institutions 15

Figure 9: Overall budget management score 16

Figure 10: Having knowledge of financial services 16

Figure 11: Overall score of Savings and Long-term Planning 17

Figure 12: Concept of savings and long-term planning 17

Figure 13: Overall score of Productive Credit and Debt Management 18

Figure 14: Knowledge on Productive Credit and Debt Management 18

Figure 15: Overall score of Financial Shopping 19

Figure 16: Knowledge on Financial Products 19

Figure 17: Overall score on Digital Financial Services 20

Figure 18: Knowledge of Digital Financial Services. 20

Figure 19: Overall score on Consumer Protection 21

Figure 20: Knowledge on Consumer Protection 21

Figure 21: Overall score on Insurance, Risks and Investments 22

Figure 22: Knowledge on risk and return 22

Financial Capability Survey Report v

Figure 23: Financial Skills score 23

Figure 24: Overall score of Economic Impact 24

Figure 26: Have money left at the end of the month 26

Figure 27: Overall score of Savings and Long-term Planning 26

Figure 28: Overall score on Productive Credit and Debt Management 27

Figure 29: Score on Financial Shopping 28

Figure 30: Total score on Digital Financial Services 28

Figure 31: Use of digital financial devices and transacting 29

Figure 32: Discovered illegal use of card details 29

Figure 33: Score on Insurance, Risks and Investments 30

Figure 34: Overall Financial Attitude Score 31

Figure 35: Overall score on Economic Impact 31

Figure 36: Score on Budget Management 32

Figure 37: Overall score on Savings and Long-term Planning 32


Figure 39: Overall score on Financial Shopping 33

Figure 40: Overall score on Digital Financial Services 34

Figure 41: Overall score on Consumer Protection 34


Figure 43: Overall Financial Behavior score 36

Figure 44: Overall score on Economic Impact 36

Figure 45: Overall score on Budget Management 37

Figure 46: Overall score on Savings and Long-term Planning 37


Figure 48: Overall score of Financial Shopping 38

Figure 49: Overall score of Digital Financial Service 39

Figure 50: Overall score of Consumer Protection 39


vi Financial Capability Survey Report

AuthorMr. Tsagay [Lecturer]

Mr. Rinchen Dorji [Lecturer]

Designer

Passang Dema ([email protected])

Financial Capability Survey Report vii

AcknowledgementAcknowledgementThe Gedu College of Business Studies (GCBS) would like to acknowledge the Royal Monetary Authority of Bhutan (RMA) for entrusting GCBS with confidence to undertake this project and for rendering full support and guidance throughout the implementation of the project. The College also would like to thank the enumerators and willful respondents for making this pilot study a success.

Disclaimer

Arguments and opinions presented in this report do not necessarily reflect the official views of the research center/institute/organizations.

Financial Capability Survey Report 1

IntroductionThis is a pilot study geared towards adapting and validating questionnaire items pertaining to Financial Capability formulated by the international organizations like the OECD/INFE and AFI to determine the financial capability of the Bhutanese populace. In this regard, the Financial Capability is defined as the financial knowledge, skills and attitude required to make informed and responsible decisions about their personal finances and take the right actions according to the situation. Knowing the financial capability is vital since with the modern development and increasing integration into the global society, the financial markets are becoming more competitive and complex.

Thus, there is a need to not only evaluate the effectiveness of various financial and educational polices and programs but also financial capability of the citizens in the country. This will also assist in identifying potential gaps in the related policy frameworks as well keeping track of the growth of the financial capabilities in the country. This report therefore, is to develop a methodology that will seek to measure financial capability of the country’s population and assist in identifying weak areas of financial capability as well as identifying target population for financial programs.

The study adopted the questionnaire and methodology applied by the OECD/INFE and AFI, and the questionnaire items are based on the nine key thematic areas categorized under four domains of financial capability developed by the RMA for financial inclusion. The integration ensured the comparability of Bhutan’s financial capability with the rest of the world where similar surveys are conducted. In order to test the questionnaire, 482 samples comprising of 60% males and 40% females belonging to 10 different occupational groups are collected. The rationale for this categorization is to ensure the validity and reliability of the instrument across different educational background and diversity of respondents.

Findings Although an existence of an international benchmark or index could not be established, the OECD/INFE used 21 points to establish an index while the AFI expressed the points in terms of percentages. Since normalizing it out of 100% is more understandable, this study reported the level of financial capability in terms of percentages. However, the number of items in a theme or a domain and their difficulty level need to be kept in mind while consuming the results.

Executive SummaryExecutive Summary

2 Financial Capability Survey Report

Score out of 100 Level of Financial CapabilityBelow 25 Percentile Very Low

Between 25 - 50 Percentile Low

Between 50 - 75 Percentile Reasonable

Above 75 Percentile High

Overall Financial Capability IndexThe data collected using the survey instrument is used to compute financial capability scores comparable to both the OECD/INFE scores as well as the AFI Financial Barometer. The Financial Literacy Index using the OECD/INFE method computes the index based on three domains: Financial Knowledge (7[1] ), Financial Attitude (9) and Financial Behavior (5). Whereas the current study added an extra domain - Financial Skills according to the RMA’s financial inclusion strategy. Thus, the current method computed the index based four domains. However, the indices are computed to be out of 100% for better readability and understanding. It can be observed that the index computed based on the OECD/INFE method is fairly better than that based on the four domains owing to lesser number of questionnaire items used in the former’s case.

Financial Capability Index

Domains OECD RMAKnowledge 60.50% 52.21%

Skills NA 52.88%

Attitude 70.89% 41.95%

Behavior 67.52% 31.16%

Index 66.30% 44.55%

The overall financial capability is 44.55%. The scores on Financial Knowledge and Financial Skills are Reasonable (above 50%) while the scores on other two domains of Financial Attitude and Financial Behavior are relatively lower with 41.95% and 31.16% respectively. The low scores on behavior and attitude indicate the inability to think and act according to the knowledge and skills they possess.

A comparison has been done to determine Bhutan’s standing in terms of other countries since such a survey is being piloted in Bhutan. The comparison was drawn against the publication of Alliance of Financial Inclusion (2020) report which contained the data collected and funded by Central Bank of Armenia. Bhutan scored comparatively better on Knowledge and Skills while Armenia scored higher on Attitude and Behavior. However, the overall average is almost same with just 1% difference.

1 The numbers in the brackets indicate the total scores awarded to each category. For example, the Financial Knowledge is assessed out of 7 maximum possible points in case of OECD/INFE method while for the AFI method, it is assessed out of the total number of possible points.


41%

50% 49%

38%45%

29%

48%

57%

44% 44.0…

0%

10%

20%

30%

40%

50%

60%

Knowledge Skills Attitude Behavior Average

Bhutan Armenia

Comparison of the four domains of Financial Capability between Bhutan and Armenia (Source of Armenia Data - Alliance for Financial Inclusion, 2020)

Therefore, this pilot survey has proven that the present study and its methodology is applicable and comparable to the international studies, and also, the financial capability of the selected Bhutanese populace is comparable to other countries. However, a more representative sample is required to infer the results to the whole nation.


IntroductionIntroduction

Financial CapabilityThe definition of financial capability is closely linked to the extended meaning of financial literacy. As argued by Hung et al. (2009), financial literacy does not only mean financial knowledge but also the financial skills, behavior, and the mutual relationship between them. Similarly, Organization for Economic Cooperation and Development (OECD) proposed financial literacy as a combination of awareness, knowledge, skills, and behaviors necessary to make sound financial decisions and ultimately achieve individual financial wellbeing (Johan, 2017). These definitions clearly indicate that financial literacy is more than just knowledge, and includes attitudes, behaviors and skills of the population. Most importantly, the fact that these definitions lay emphasis on the financial decision-making process and financial wellbeing as the ultimate outcome makes the meaning of financial literacy very similar to that of financial capability. As a result, some studies treat financial literacy as synonym to financial capability (eg. Hung et al, 2009; Zottel et al, 2013; Definit, 2013).

Therefore, in the words of Zottel, et al. (2013), financial capability is

“…the internal capacity to act in one’s best financial interest, given socioeconomic and environmental conditions. It encompasses the knowledge (literacy), attitudes, skills, and behavior of consumers with respect to understanding, selecting and using financial services, and the ability to access financial services that fit their needs”.

Furthermore, the National Financial Literacy Strategy (NFIS) defines a financially capable person as

“a person who has the knowledge, abilities, skills and culture, which give them the opportunity to be informed, make responsible decisions about their personal finances, and take the right actions according to the situation”.

Similarly, there are a lot of other definitions of financial capability differing only in terms of expressions and wordings. What appears apparent in all these definitions is the inclusion of four main components of financial capability such as Knowledge, Skills, Attitude, and Behavior. This study adopts the operational definitions proposed by Zottel et al. (2013).

With modern development and increasing integration into global society, Bhutan has experienced massive changes in social and economic phenomenon. Of the many changes, one that deserves a mention here is the growth of financial market especially in the recent past. Financial products and services expanded manifold in increased variety and access. A number of banking products and services were introduced and offered to population across the country. According to the RMA’s State of the Financial Inclusion 2020 report, saving account ownership increased drastically by 8.52% in 2020 compared to 2019 and the life insurance


increased to 16.73% from 13.69% in 2019. Similarly, e-Money increased from 9.9% to 20.5%. This is a significant development within a short span of time, resulting in Bhutan being highly rated in terms of financial literacy in the survey of world financial literacy (Klapper, Lusardi, & van Oudheusden n.d.).

With these changes came greater challenges to the country’s population. Each individual is now faced with more responsibility than ever before. Financial markets became competitive and complex making financial decisions challenging for everyone. The emerging cases of financial frauds and scams are some of the associated challenges. Further, uncertainty over the global economic environment exacerbates the problem. These concerns leave individual persons and organizations increasingly responsible for their own income planning and risk management which requires certain level of financial capability. In Bhutan like in many other societies, financial capability of its citizens is low as demonstrated by series of instances. There are reported cases of individuals falling victim to financial scams (Tshering 2018), large number of citizens (i.e. around 32,000 individuals comprising nearly 4.5% of the country’s population) applying for Kidu relief fund within three months from April to June during Covid-19 crisis (Subba 2020). Also, the rising loan default rate (Royal Monetary Authority 2019), low rate of savings, and low rate of community participation in stock market in the country are some examples suggesting that Bhutanese people are financially incompetent and remain highly vulnerable to changing situations. The lack of financial literacy, weak consumer protection, and low level of trust in financial system are also reflected in Niang et al (2013).

Against these backdrops, institutions and organizations in Bhutan have taken various initiatives to raise the level of financial abilities of the country’s population. For instance, the Central Bank – Royal Monetary Authority (RMA) initiated National Financial Literacy Strategy [NFLS] 2018-2023 to promote financial knowledge, confidence and consumer protection among the people of Bhutan. The NFLS also identifies financial capability as one of the pillars of national financial inclusion strategy. Towards achieving this end, a new dedicated office – Financial Inclusion and Literacy Division was set up in 2017. Further, various awareness campaigns were organized all over the country, Youth Ethics (YE) Banking and the Student Business Seedling Program (SBS) were introduced, the country participated in the celebration of Global Money Week, and national financial literacy curriculum is being integrated with the mainstream education curriculum. Similarly, banks and other financial institutions introduced numerous banking and insurance schemes over the recent years. These are furthered by growing interest in developing interventions and strategies to raise levels of financial capability.

The need for financial capability also arises from the proven association between financial capability and welfare of individuals through better management of one’s resources. In the words of Mundy (2011, p. 8):

“People who are financially capable are able to make sound financial decisions for themselves and for their families; to make informed choices between different financial products and services; to budget and to plan ahead financially; to build up some savings; to avoid becoming over-indebted; to identify, and protect themselves against financial risks; to invest prudently; and to understand their rights and responsibilities.” (Mundy, 2011)

Therefore, to evaluate the effectiveness of various financial and educational policies and


programs in the country, and to identify potential gaps in the related policy frameworks, it is important that financial capability of the country’s population be examined from time to time. However, there is no accepted tool that can be used to measure financial capability at the moment. Different countries, organizations, and scholars use their own framework to study this construct. This report therefore, proposes to develop a methodology that will seek to measure financial capability of the country’s population.

Objective of the SurveyThe overall objective of this project is to develop an internationally comparable methodology to study the financial capabilities of Bhutan’s population, which in turn would help assess the effectiveness of various national financial policies and financial education programs. Further, the study would also facilitate monitoring the implementation of financial literacy and capability programs. However, since this study is a pilot project, it proposes specifically to:

i. Study financial capability with respect to personal finances of the people of Chukha Dzongkhag.

ii. Identify weak areas of capability or identify target populations for financial programs.

iii. Identify potential channels for delivering information and financial education.

Significance of the StudyThe report can be used to provide evidence on the need for financial capability and capacity building including consumer protection and financial inclusion activities. The findings can aid in setting priorities and devising mechanisms for the national financial literacy strategies by the relevant agencies. It would also help in financial capability and financial inclusion related projects since the target groups can be easily identified. Nevertheless, this study developed an internationally comparable financial score and can be used as a benchmark for performance indicators for future projects.


MethodologyMethodology

Study DesignThis study used a cross-sectional empirical study wherein quantitative data from the respondents regarding their financial knowledge and capability are collected based on the questionnaire developed by the Organization for Economic Cooperation and Development /International Network on Financial Education (OECD/INFE). The questionnaire is supplemented with questions developed by the researchers in collaboration with the Royal Monetary Authority of Bhutan to ensure financial inclusivity and positive impact of the survey. Adoption of OECD/INFE questionnaire allows the computation of a financial literacy index that is comparable to other countries that followed the same method.

Data Collection This is a pilot study covering only the two Geogs, Bongo and Darla of Chhukha Dzongkhag. Darla and Bong Geogs are selected owing to the diversity of respondents in terms of education qualification, socioeconomic background, ethnicity, and demographic structures. The pilot survey enumerated a total of 482 respondents covering seven Chiwogs of the two Geogs as shown in Table 1.

Table 1: Number of respondents according to the two Geogs of Chhukha Dzongkha and their respective Chiwogs

Geogs Chiwogs Frequency Total

Darla

Sinchula-Samerchen 37

275Nimgang-Tabji 124

Tabthangbu-Norgaytoed 59

Chumedlakha-Gengue 55

Bongo

Gedu-Miritsemo 160

207Chungkha-Chasilakha 28

Bongo-Phasuma 19

Total 482 482

The respondent samples are selected based on the quota sampling method in order to capture subjects with diverse backgrounds for the pilot study. As shown in Table 2, majority of the respondents (25.1%) were farmers followed by business owners (11%) and with almost equal


representation of civil servants, corporate employees, private employees, college students, high school students and unemployed individuals constituting over eight percent each of the total respondents.

Table 2: Primary occupation of the respondents

Primary Occupation Frequency PercentCivil servant 42 8.7

Corporate Employee 41 8.5

Private Employee 39 8.1

Other Govt/Autonomous Agency 12 2.5

Business 53 11.0

College Student 39 8.1

High School Student 41 8.5

Unemployed 37 7.7

Farmer 121 25.1

Monks 28 5.8

Others 29 6.0

Total 482 100.0

After identifying the quota of the respondents required, the respondents are enumerated following the convenient sampling method, while ensuring that only eligible adults between the age range of 15-79 years are chosen in accordance with the international best practices. Further, for diversity and representation, all types of ethnicity, age groups, and genders are captured by the pilot survey as discussed in the later sections.

The respondents were chosen and enumerated using face-to-face interview method via field visits. Interviewers/enumerators were trained, briefed and then deployed at the relevant locations to intercept potential respondents. The enumerators were trained not only in understanding and interpretation of the questionnaire in English but also its translation in other local dialects such as Lhotshamkha and Tsangla. They were also briefed about the concepts, terminologies, policies and regulations regarding financial institutions as well as their products and services. The data is collected over a course of about two weeks with ten trained enumerators.

Data Analysis The data is analyzed based on the method propounded by OECD/INFE. According to the OECD/INFE toolkit (2018), the data is supposed to be analyzed as follows:

1. The Financial Knowledge score is to be computed as the number of correct responses to the seven Financial Knowledge questions with a score ranging from 0 to 7, where each question carries a maximum of 1 point. They have also detailed the method of computation of the individual items and scores.


2. The Financial Behavior score is to be computed similar to Financial Knowledge scores. However, 9 questionnaire items are used here so the score ranges from 0 to 9.

3. The Financial Attitude score is to be computed as the average response across three attitude questions, that is, the sum of the values for three statements divided by three (after recoding to account for values -97, -98, -99 as 3). Thus, the attitude score ranges from 1 to 5.

4. The Overall Financial Literacy score is to be computed as the sum of the three previous scores (Financial Knowledge (7), Financial Behavior (9) and Financial Attitude (5)). Thus, the overall score would be between 1 and 21. The score could also be normalized to 100 for reporting by multiplying by 100/21.

Similarly, the same process is followed to compute the score for Financial Skills where 1 point is awarded for correct answer and 0 otherwise. For the overall score and the individual thematic scores, the obtained score is computed out of the total items that constituted the theme and expressed out of 100% and interpreted according to the AFI’s Financial Competency Framework as the OECD/INFE’s framework is not able to adopt all the questions.

Interpretation of the Scores Although there are no standard published measurement benchmark or threshold of interpreting the scores, a toolkit on the website: http://microfinanceopportunities.org suggested the following with 30 questions assessed one point each:

Range of Test Scores (out of 30 questions) Level of Financial Capability

0 – 10 Low

10 - 20 Medium

20 - 30 High

The scores can be roughly translated to below 33% for Low, between 33% to 66% for Medium and above 66% for High. Borrowing the concept from the aforementioned source, the current study used the scoring as follows after converting the scores to 100%:

Score out of 100 Level of Financial CapabilityBelow 25 Percentile Very Low

Between 25 - 50 Percentile Low

Between 50 - 75 Percentile Reasonable

Above 75 Percentile High

The rationale for considering below 50% as low is the general understanding of 50% as the median score out of 100.


Detailed FindingsDetailed Findings

Overall Financial Capability IndexThe Financial Literacy Index using the OECD/INFE method computes the index based on three domains: Financial Knowledge (7[2] ), Financial Attitude (9) and Financial Behavior (5). Whereas the current study added an extra domain - Financial Skills according to the RMA’s financial inclusion strategy. Thus, the current method computed the index based four domains as compared in Table 3. However, the indices are computed to be out of 100% for better readability and understanding. It can be observed that the index based on the OECD/INFE method is fairly better than that based on the four domains owing to lesser number of questionnaire items used in the former’s case.

Table 3: Financial Capability Index

Domains OECD RMAKnowledge 60.50% 52.21%

Skills NA 52.88%

Attitude 70.89% 41.95%

Behavior 67.52% 31.16%

Index 66.30% 44.55%

The overall financial capability is 44.55%. The scores on Financial Knowledge and Financial Skills are Reasonable (above 50%) while the scores on other two domains of Financial Attitude and Financial Behavior are relatively lower with 41.95% and 31.16% respectively. The low scores on behavior and attitude indicate the inability to think and act according to the knowledge and skills they possess.

A comparison has been done to determine Bhutan’s standing in terms of other countries since such a survey is being piloted in Bhutan. The comparison was drawn against the publication of Alliance of Financial Inclusion (2020) report which contained the data collected and funded by Central Bank of Armenia. Bhutan scored comparatively better on Knowledge and Skills while Armenia scored higher on Attitude and Behavior. However, the overall average is almost same with just 1% difference.

2 The numbers in the brackets indicate the total scores awarded to each category. For example, the Financial Knowledge is assessed out of 7 maximum possible points in case of OECD/INFE method while for the AFI method, it is assessed out of the total number of possible points.


41%

50% 49%

38%

45%

29%

48%

57%

44% 44%

0%

10%

20%

30%

40%

50%

60%

Knowledge Skills Attitude Behavior Average

Bhutan Armenia

Figure 1: Comparison of the four domains of Financial Capability between Bhutan and Armenia (Source of Armenia Data - Alliance for Financial Inclusion, 2020)

Financial Capability Theme WiseOut of the four key domains of Financial Knowledge, Skills, Attitude and Behavior, the highest score is on the Skills with 53% closely followed by Knowledge at 52%. The lowest score is on Behavior at 31%. These scores indicate that although the respondents have adequate level of Financial Knowledge and Skills, their Financial Attitudes and Behaviors are relatively lower.

Knowledge Skills Attitude BehaviorOverall average 52% 53% 42% 31%8 Insurance, Risks and Investments 82% 86% 51% 3%7. Consumer Protection 44% 99% 43% 25%

6. Digital Financial Services 28% 44% 30% 33%5. Financial Shopping 57% 53% 10% 23%4. Productive Credi t & Debt

Management 24% 5% 43% 22%

3. Savings And Long-Term Planning 72% 38% 60% 30%2. Budget Management 65% 48% 50% 66%1. Economic Impact 45% 49% 49% 47%

0%50%

100%150%200%250%300%350%400%450%500%

Figure 2: Overall mean score and the scores by thematic area and financial capability domains

Financial Capability by Selected Demographic InformationBy Gender

While the scores of the male and females are tied on Financial Attitude with a score of 42% each, the females scored relatively higher on all the other three domains as shown in Figure 2. The scores indicate that even though both the genders have reasonable financial knowledge


and skills, their attitudes and making use of their knowledge is relatively low.

Figure 3: The overall score according to gender

By Education Level

In all the four domains, the respondents with tertiary education scored relatively higher compared to their counterparts. And across all the domains, the respondents with either no education or non-formal education scored the lowest.

69% 65%44% 35%

53%

57% 55%

43%31%

47%

52% 51%

41%

31%

44%

47% 56%

42%

31%

44%

44% 49%

40%

33%

42%

39%42%

40%

28%

38%

0%

50%

100%

150%

200%

250%

300%

350%

Knowledge Skills Attitude Behavior Overall

No Education

Non-formal

Primary

Lower/Middle Secondary

Higher Secondry

Tertiary

Figure 4: The overall score according to educational qualification

By Age

The respondents in the age range of 20 to 49 years of age scored the highest in Knowledge, Skills and Behavior domains with comparatively higher scores to the remaining age groups. However, the scores on attitude are relatively similar with the scores ranging between 40% and 43%.


46% 43% 42% 21%

48% 45% 41%24%

59% 58% 43%

32%

51% 55%42%

33%

53% 55%

41%

34%

43% 44%

41%

29%

41% 45%

40%

28%

45% 44%

42%

29%

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

Knowledge Skills Attitude Behavior

70 - 79

60 - 69

50 - 59

40 - 49

30 - 39

20 - 29

18 - 19

15 - 17

Figure 5: The four domains according to age of the respondents

By Occupation

Overall, the civil servants scored the highest (54%) followed by corporate employees (51%). The college students as well as the other government/autonomous agencies also scored 50% each. The remaining category of occupation scored below 50% with the lowest tying at 39% between high school students and farmers.

Table 4: Financial capability according to occupation

Occupation Knowledge Skills Attitude Behavior OverallCivil Servant 65% 65% 45% 40% 54%

Corporate Employee

65% 61% 42% 37% 51%

Private Employee

48% 51% 41% 31% 43%

Other Govt/Autonomous Agency

57% 60% 45% 37% 50%

Business 50% 57% 42% 35% 46%

College Student 68% 59% 43% 30% 50%

High School Student

48% 43% 41% 22% 39%

Unemployed 56% 53% 43% 27% 45%

Farmer 41% 44% 41% 29% 39%

Monks 42% 48% 43% 27% 40%

Others 56% 63% 41% 36% 49%

Mean 54% 55% 42% 32% 46%


Financial Knowledge

Overview of Financial Knowledge

Financial knowledge is an essential part of financial competency since it helps individuals to compare financial products and services and make appropriate, well-informed financial decisions (OECD/INFE, 2020). Having a basic understanding of the financial concepts coupled with numeracy skills would ensure their financial well-being by being able to navigate the financial matters more confidently. As a result, knowing the level of financial knowledge of the general population is important, thus, this section explores the basic financial knowledge by focusing on the responses to the knowledge questions designed to test different aspects of knowledge.

The analysis of the survey data is done in two ways, firstly, as mandated by the OECD/INFE, seven knowledge designed to test different aspects of knowledge that are widely considered to be useful to individuals when making financial decisions are analyzed and presented followed by more detailed and contextualized questions that are relevant to the Bhutanese population. Following the scoring convention of OECD/INFE toolkit, a financial knowledge score is computed by allocating one point for each correct answer and a zero otherwise.

This section discusses the Financial Knowledge component of the Financial Capability, followed by detailed explanation with respect to its eight domains: 1. Economic Impact; 2. Budget Management; 3. Savings and Long-term Planning; 4. Productive Credit and Debt Management; 5. Financial Shopping; 6. Digital Financial Services; 7. Consumer Protection; and 8. Insurance, Risks and Investments.

Overall, majority of the respondents scored between the 25th percentile and the 75th percentile. While only 9.3% scored above the 7th percentile and 3.5% below the 25th percentile.

3.5

42.7

44.4

9.3

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0

Below 25 Percentile

Between 25 - 50 Percentile

Between 50 - 75 Percentile

Above 75 Percentile

Financial Knowledge

Figure 6: Overall financial knowledge


1. Economic Impact

The main intents of the theme, Economic Impact is to determine if the general population/respondents know the various financial products and services, financial institutions that provide financial services, including the role of the RMA (the Central Bank), and macroeconomic concepts such as inflation, and so on. However, to determine the Financial Knowledge under the Economic Impact theme, a question containing six matching sub-questions were used.

Overall, majority (40%) of the respondents scored below 25% followed by 29.3% scoring between 50% and 75%. Only 12.9% of the respondents scored above 75% and the remaining 17.6% between 25% and 50%.

193

85

142

62

40

17.6

29.5

12.9

0

20

40

60

80

100

0

50

100

150

200

250

Below 25 Percentile Between 25 - 50 Percentile Between 50 - 75 Percentile Above 75 Percentile

Percen

t

Freq

uency

Economic ImpactTotal: 482

Score

Figure 7: Overall economic impact score.

Under the Economic Impact theme, the respondents were asked to match the mentioned financial institution with their respective functions. The majority of the respondents knew about the various functions of the banks followed by the functions of RICBL and the NPPF. Very few respondents knew about the functions of the Credit Information Bureau (CIB) and the Royal Securities Exchange of Bhutan Limited (RSEBL).

91.4

96.5

96.4

98.3

86.3

92.9

8.6

3.5

3.6

1.7

13.7

7.1

75% 80% 85% 90% 95% 100%

RMA

RICBL

NPPF

Banks

RSEBL

CIB

Have a Knowledge of Financial Institutions:

Yes (%) No (%)

Total Respondents163

284

197

73

56

416

Figure 8: Knowledge about financial institutions


2. Budget Management

Having knowledge about Budget Management would mean testing the respondent’s knowledge about the meaning of budget, various types of costs, net income, bank account and payment cards. On Budget Management, the majority (41.5%) scored above 75% while 36.7% of the respondents scored between 25-50%. The Budget Management theme constituted of three questions, their knowledge about credit card, current account and savings account.

21

177

84

200

4.4

36.7

17.4

41.5

0

20

40

60

80

100

0

50

100

150

200

250


Percen

t

Freq

uency

Budget Management

Total: 482

Score

Figure 9: Overall budget management score

When asked if a respondent has heard about credit card, current account and savings account, 95% of the respondents reported to have heard about the savings account, about 53% heard about current account and less than 50% only heard about credit card.

47.9

53.1

95

52.1

46.9

5

0% 20% 40% 60% 80% 100%

CreditCard

CurrentAccount

Sav ingsAccount

Have a Knowledge of Financial Services:

Yes (%) No (%)

Total Respondents

482

Figure 10: Having knowledge of financial services


3. Savings and Long-term Planning

The theme, Savings and Long-term Planning tested the respondents on the goal of saving, making investments, diversification and the concept of simple and compound interest. Three questions were used to determine the Financial Knowledge under the Savings and Long-term Planning domain. Over 80% of the respondents score above 80% on this domain while only 1.7% scored below 25%. There are also significant number of respondents (33.2%) who scored above 75%.

8

66

248

160

1.713.7

51.5

33.2

0

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency

Savings and Long-Term Planning

Total: 482

Score

Figure 11: Overall score of Savings and Long-term Planning

The Savings and Long-term Planning theme is measured using three questions: concept of basic numeracy, inflation and diversification. Similar to all the Financial Knowledge questions, this portion is also measured on a binary scale where 1 means the correct answer and 0 otherwise. The performance is highest on the concept of inflation while less than half the respondents answered the diversification question correctly.

79.7

91.7

44.8

20.3

8.3

55.2

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Numeracy

Inflation

Diversification

Knowledge on Savings and Long-Term Planning

Correct (%) Wrong (%)

Figure 12: Concept of savings and long-term planning


4. Productive Credit and Debt Management

The theme, Productive Credit and Debt Management confirms whether the respondents knew of the Credit Information Bureau (CIB) and also their knowledge of their credit history. Thus, two binary questionnaire items were used to determine their knowledge under this theme. As can be seen in Figure 13, there are no respondents who scored between 25% and 50%. The majority (56.8%) scored below 25% followed by 39% scoring between 50% to 75%, while the remaining 4.1% scored above 75%.

274

0

188

20

56.8

0

39

4.10

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency

Productive Debt and Credit Management

Total: 482

Score

Figure 13: Overall score of Productive Credit and Debt Management

The Productive Credit and Debt Management is measured by two questions: the respondent’s knowledge of the existence of the CIB and credit history. Only a small minority (8.5%) among the respondents knew about the existence of CIB. On the other hand, only 271 of the 482 respondents responded to the knowledge of credit history and 38.8% of them mentioned being aware of their credit history.

8.5

38.8

91.5

17.4

0 20 40 60 80 100

Knowledge of CIB

Knowledge of credit history

Knowledge on Productive Credit and Debt Management:

Yes (%) No (%)

Total Respondents

271

482

Figure 14: Knowledge on Productive Credit and Debt Management


5. Financial Shopping

Financial Shopping pertains to the knowledge of information sources for getting all the necessary information about financial products and services. The respondents were asked if they have had heard of financial products and services.

48

144

168

122

10

29.934.9

25.3

0

20

40

60

80

100

0

20

40

60

80

100

120

140

160

180


Percen

t

Freq

uency

Financial Shopping

Total: 482

Score

Figure 15: Overall score of Financial Shopping

Among the various financial products, Insurance (92.5%), Vehicle loans (90.0%) and Mortgage or home-loans (87.1%) are the most popular whereas respondents knew less about Bonds (22.4%), Microfinance loans (26.6%) and Unsecured loans (32.8%).

46.3

87.1

73.4

32.8

90

26.6

92.5

42.9

22.4

53.7

12.9

26.6

67.2

10

73.4

7.5

57.1

77.6

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Private pension or retirement product

Mortgage or home-loan

Loan secured on property

Unsecured loan

Vehicle loan

Microfinance loan

Insurance

Securities and shares

Bonds

Knowledge on Financial Products:

Yes (%) No (%)

Figure 16: Knowledge on Financial Products


6. Digital Financial Services

This theme, Digital Financial Services, determines the knowledge regarding different digital financial services that are available in Bhutan. Three questions were used to quiz check the respondents’ knowledge regarding digital financial services. Almost 80% of the respondents scored below 50% with 44.6% of the respondents scoring below 25%. Only 6.6% of the respondents scored over 75%.

215

154

81

32

44.6

32

16.8

6.60

20

40

60

80

100

0

50

100

150

200

250


Percen

t

Freq

uency

Digital Financial Services

Total: 482

Score

Figure 17: Overall score on Digital Financial Services

Out of the three questions, the first two were quite straightforward wherein the respondents were asked if they have ever heard of ‘crypto-assets’ and ‘mobile banking’. However, the third question specifically asked: “Do you know which card allows such transactions as cashing out money, effecting payments online or in a shop for an amount greater than you have on your balance?”. The majority of the respondents do not know about the Digital Financial Services, although their knowledge about Mobile Banking is the highest but still less than 50%.

20.5

40.7

24.3

79.5

59.3

75.7

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Crypto-assets

Mobile Banking

Credit Card Payment

Have a Knowledge of Digital Financial Services:

Yes (%) No (%)

Figure 18: Knowledge of Digital Financial Services.


7. Consumer Protection

The Consumer Protection theme explored whether the respondents knew about their personal rights and how to protect those rights. It also checked if the respondents were aware of the institutions and authorities that deal with consumer complaints. Over 70% of the respondents scored below 50% while only about 15% scored above 75%.

27

345

38

72

5.6

71.6

7.914.9

0

20

40

60

80

100

0

50

100

150

200

250

300

350

400


Percen

t

Freq

uency

Consumer Protection

Total: 482

Score

Figure 19: Overall score on Consumer Protection

The knowledge regarding Consumer Protection is constructed based on three items: Knowing where to complain; Knowledge of CPF rules and regulations; and Financial consumer rights and responsibilities. While the majority (93.6) knew where to complain if they became a victim of illegal activities of a financial institution, only a few (21% or less) were aware of the Consumer Protection for Financial Services (CPF) Rules and Regulations 2019, and Financial Consumer Rights and Responsibilities.

93.6

17.6

21

6.4

82.4

79

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Know where to complain

Aware of Consumer Protection forFinancial Services (CPF)

Aware of financial consumer r ights andresponsibilities

Knowledge on Consumer Protection:

Yes (%) No (%)

Figure 20: Knowledge on Consumer Protection


8. Insurance, Risks and Investments

The final theme is about Insurance, Risks and Investments wherein the respondents were tested on the concept of risk and return. Only one question on the concept of risk and return was asked. The majority scored above 75% and the remaining scored below 25% with no one scoring between 25% and 75%.

85

397

17.6

82.4

0

20

40

60

80

100

0

50

100

150

200

250

300

350

400

450

Below 25 Percentile Above 75 Percentile

Percen

t

Freq

uency

Insurance, Risks and Investments

Total: 482

Score

Figure 21: Overall score on Insurance, Risks and Investments

The statement, “an investment with a high return is likely to be high risk” posed to the respondents and ask whether the statement is true or false. A greater number (82.5%) of the respondents correctly answered the question while the remaining 17.6% failed to do so.

82.4 17.6

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Higher the risk, higher thereturn

Knowledge on Risk and Return:

Yes (%) No (%)

Figure 22: Knowledge on risk and return


Financial Skills

Overview of Financial Skills

Financial Skills means the ability to use relevant financial knowledge and numeracy skills to solve financial problems or create opportunities for financial benefits. For example, being able to compare financial products and services before availing them is a demonstration of Financial Skill. This section discusses the Financial Skills component of the Financial Capability, followed by detailed explanation with respect to its eight domains: 1. Economic Impact; 2. Budget Management; 3. Savings and Long-term Planning; 4. Productive Credit and Debt Management; 5. Financial Shopping; 6. Digital Financial Services; 7. Consumer Protection; and 8. Insurance, Risks and Investments.

10

177

230

2.4

42.4

55.2

0

20

40

60

80

100

0

50

100

150

200

250

Below 25 Percentile Between 25 - 50 Percentile Between 50 - 75 Percentile

Percen

t

Freq

uency

Financial Skills

Total: 482

Score

Figure 23: Financial Skills score

1. Economic Impact

This theme, Economic Impact, examined whether the respondents are able to evaluate the impact of inflation and exchange rate on their personal finances. Two questions were asked on inflation and exchange rate. On the Economic Impact front of the Financial Skill domain, almost half (49.8) scored between 50-75% while about a quarter (24.5%) scored above 75%. The remaining 25.7% scored below 25%.


124

0

240

118

25.7

0

49.8

24.5

0

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency

Economic Impact

Total: 482

Score

Figure 24: Overall score of Economic Impact

The majority (57.8%) of the respondents were not able to compute or determine the impact of inflation while 60.4% of them were able to determine the exchange rate correctly for trading. A further analysis based on Level on Education revealed that respondents with Tertiary education performed relatively better in both the scenarios.

47.9

53.1

52.1

46.9

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Computeimpact ofinflation

Decideexchange

rate

Have a Knowledge of Financial Services:

Correct (%) Wrong (%)

Total Respondents

482

Figure 25: Ability to compute the impact of inflation and decide the exchange rate


Table 5: Level of qualification and performance on Economic Impact skills

Skills Level of Education

Correct Wrong Total

Compute Impact of inflation

Tertiary 57 44 101

Higher Secondary

36 45 81


38 55 93

Primary 27 34 61

Non-formal Education

5 5 10

No Education 40 94 134

Total 203 277 480

Decide exchange rate

Tertiary 65 36 101

Higher Secondary

46 34 80


58 33 91

Primary 37 22 59

Non-formal Education

5 5 10

No Education 62 48 110

Total 273 178 451


The theme, Budget Management is to determine if the respondents were able to manage budget deficit if needed by monitoring their budget. The Financial Skill on Budget Management is deduced based on the statement “I have money left over at the end of the month”, which ranged from the scale 1 to 5 where 1 being “Always” and 5 “Never”. The variables are then recoded to 0 and 1 following the OECD/INFE convention. Thus, a score of 1 indicates that the respondent possesses Financial Skills to manage budget since they have money left at the end of the month. A score of 0 (zero) indicates otherwise.

Since only one questionnaire item was used to test the Budget Management skills, a respondent would have scored either 0 or 1. A score of 0 would place them below 25% while a score of 1 would place them above 75%. The result indicates that more than half (52.5%) of the respondents do not have money left over at the end of the month.


253

0 0

229

52.5

0 0

47.5

0

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency

Have money left at the end of the month

Total: 482

Score

Figure 26: Have money left at the end of the month


One of the objectives of Financial Skills under the Savings and Long-term Planning theme is to evaluate if the general population has the basic financial skills. One of such skill is the ability to compute simple and compound interest and their impact on the principle amount. To test the respondent’s skill, two questions were asked: First question was about computing interest for one year (simple interest) while the second question quizzed on the amount accumulated in the account at the end of five years (compound interest).

Overall, more than half (51.7%) of the respondents scored below 25% while over 27% scored above 75%. The remaining 20.5% scored between 50-75%.

249

0

99

134

51.7

0

20.527.8

0

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency


Total: 482

Score

Figure 27: Overall score of Savings and Long-term Planning



The Productive Credit and Debt Management front of Financial Skills determined whether the respondents were able to access the information from the Credit Information Bureau (CIB) and use them to their advantage. Out of the total respondents, only 5% of them were able or knew how to access the CIB information and use them to their advantage.

458

0 024

95

0 05

0

20

40

60

80

100

0

50

100

150

200

250

300

350

400

450

500


Percen

t

Freq

uency

Productive Debt and Credit ManagementTotal: 482

Score

Figure 28: Overall score on Productive Credit and Debt Management


The Financial Shopping capability demonstrates the ability to get the necessary financial information from different sources in a short period of time and be able to review the conditions of financial products or services to make the right decision. Only one questionnaire item was used to determine whether the respondents used the concept of Financial Shopping. More than half (53.3%) of the respondents indicated that they had either considered several options from different companies before making the decision or considered various options from one financial company.


225

0 0

257

46.7

0 0

53.3

0

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency

Financial Shopping

Total: 482

Score

Figure 29: Score on Financial Shopping


The Digital Financial Services entail the use of digital platform and devices to perform financial transactions. Two questionnaire items were used to check if the respondents were using the Digital Financial Services. More than half the respondents use mobile banking apps as well as are able to transact via mobile banking apps.

215

0

106

161

44.6

0

2233.4

0

20

40

60

80

100

0

50

100

150

200

250


Percen

t

Freq

uency


Total: 482

Score

Figure 30: Total score on Digital Financial Services


55.4

60.4

44.6

39.6

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Use mobi le banking apps

Transact via mobilebanking apps

Use of digital financial devices and transacting

Yes (%) No (%)

Figure 31: Use of digital financial devices and transacting


As consumers of financial products and services, knowing about Consumer Protection and consumer rights are vital to the users. This theme, Consumer Protection, is to assess if the respondents were able to approach official authorities in case of a complaint or be able to detect financial fraud. However, the questionnaire item asked if they have “discovered that someone has used your card details to pay for goods without your authorization” in the last two years. Only three respondents out of 482 has confirmed that it happened to them.

3

479

0.6

99.4

0

20

40

60

80

100

0

100

200

300

400

500

600

Yes (%) No (%)

Percen

t

Freq

uency

Found illegal use of payment card

Total: 482

Score

Figure 32: Discovered illegal use of card details



As users of financial products and services, not only knowing about financial benefits but knowing and making informed decisions about financial risks are vital. Users should also know the importance and benefits of insurance and the harms of gambling or irrational borrowings. Thus, this theme, Insurance, Risks and Investments is to assess the competencies in terms of insurance, risks and investments. The questionnaire item just checked the basic idea of interest and only 14% of the respondents got the answer wrong.

67

413

14

86

0

20

40

60

80

100

0

50

100

150

200

250

300

350

400

450

Wrong Correct

Percen

t

Freq

uency


Total: 480

Score

Figure 33: Score on Insurance, Risks and Investments

Financial Attitude

Overview of Financial Attitude

Financial Attitude means the state of mind, judgement or opinion of a person that would influence their decision whether to act or not on their financial knowledge and skills. This section discusses the Financial Attitude component of the Financial Capability, followed by detailed explanation with respect to its eight themes: 1. Economic Impact; 2. Budget Management; 3. Savings and Long-term Planning; 4. Productive Credit and Debt Management; 5. Financial Shopping; 6. Digital Financial Services; 7. Consumer Protection; and 8. Insurance, Risks and Investments.

Overall, 95.4% of the respondents scored between 25-50%, 4.1% scored between 50-75%, and the remaining 0.4% scored below 25%. There is no one scoring 75% and above.


2

460

20 00.4

95.4

4.1

0

20

40

60

80

100

0

50

100

150

200

250

300

350

400

450

500


Percen

t

Freq

uency

Financial Attitude

Total: 482

Score

Figure 34: Overall Financial Attitude Score

1. Economic Impact

The theme, Economic Impact of the Financial Attitude determines whether the users of the financial products and services or the general population trust the main financial institutions and whether they value following important financial and macroeconomic indicators. The questionnaire items ranged from asking their perceptions about their financial statuses to their perception of financial services.

The overall score for Economic Impact is below 75% with the majority (61.4%) scoring between 25-50%.

1

296

185

00.2

61.4

38.4

00

20

40

60

80

100

0

50

100

150

200

250

300

350


Percen

t

Freq

uency

Economic ImpactTotal: 482

Score

Figure 35: Overall score on Economic Impact


Budget Management in Financial Attitude term means valuing planning and budgeting the daily affairs, especially that involves finances. A positive attitude towards the use of insurance services as well as use of specific tools or apps to manage budget are some of the examples.


However, in this case, only a statement on a scale of 1 to 5, where 1 meant ‘Always’ and 5 ‘Never’, was used to assess the Financial Attitude on Budget Management. The result indicated that majority of the respondents chose around the mean since majority of them lie between 25% to 75%. Further, a significant number (23.4%) of them are below 25% indicating, “My finances control my life”.

113

153

133

83

23.4

31.727.6

17.2

0

20

40

60

80

100

0

20

40

60

80

100

120

140

160

180


Percen

t

Freq

uency

Budget Management

Total: 482

Score

Figure 36: Score on Budget Management


This theme, Savings and Long-term Planning determines whether the respondents value saving and investing. The overall scores were computed based on two measurements: one scale of 0 to 1 and the other of a 5-point scale. In both the cases, higher a point means a positive attitude. Overall, the majority (58.5%) of the respondents scored between 50-75% meaning mostly scored around 3 out of 6 points.

0

86

282

114

0

17.8

58.5

23.7

0

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency


Total: 482

Score

Figure 37: Overall score on Savings and Long-term Planning



The attitude towards a Productive Credit and Debt Management is important to stay away from financial debt. Everyone should be able to not only choose debt based on their budget but also be able to choose debt financial services based on different characteristics. Overall, the majority of the respondents scored below 50% indicating a negative attitude towards Productive Credit and Debt Management.

59

389

32212.2

80.7

6.6 0.4 0

20

40

60

80

100

0

50

100

150

200

250

300

350

400

450


Percen

t

Freq

uency

Productive Debt and Credit Management

Total: 482

Score



Financial Shopping entails the knowledge and comparison of various financial products and services before subscribing to them. The Financial Attitude towards Financial Shopping indicates the value one holds towards official and professional sources of information and also values the advice from officials and professional sources. The majority of the respondents scored below 25% in this case.

457

223 0

94.8

4.60.6 0

0

20

40

60

80

100

0

50

100

150

200

250

300

350

400

450

500


Percen

t

Freq

uency

Financial Shopping

Total: 482

Score

Figure 39: Overall score on Financial Shopping



The Digital Financial Services is about the attitude towards the use and trust in digital financial products and services. This allows users to make informed and responsible choices around online financial transactions to purchase goods and services. Here, a lower score is better. For example, the statement “Mobile baking has made my life easier” has to rated on a 5-point scale where 1 means “Completely agree” and 5 means “Completely disagree”.

259

209

14 0

53.7

43.4

2.9

0 0

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency


Total: 482

Score

Figure 40: Overall score on Digital Financial Services


The Consumer Protection theme determines whether the respondents valued their personal rights protection in a formal way with trust official authorities and value the role of the Financial System Mediator. The users should be wary of the financial scams and do not trust suspicious financial services and offers. Here also, a lower score is better and the majority of the respondents scored below 50%.

121

272

87

2

25.1

56.4

18

0.40

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency

Consumer Protection

Total: 482

Score

Figure 41: Overall score on Consumer Protection



This theme, Insurance, Risks and Investments of the Financial Attitude domain determines the attitude towards financial risks and temptations involved in everyday life. It also involves the attitude towards various financial activities such as investment versus gambling, savings, savings in insurance and so on. The majority (about 66%) of the respondents scored below 50% indicating a positive attitude towards Insurance, Risks and Investments.

1

316

155

100.2

65.6

32.2

2.1

0

20

40

60

80

100

0

50

100

150

200

250

300

350


Percen

t

Freq

uency

Consumer Protection

Total: 482

Score


Financial Behavior

Overview of Financial Behavior

Financial Behavior means the actions taken based on the Financial Knowledge, Financial Skills and the Attitudes one possesses. Having the required knowledge, competent skills and a positive attitude would lead to better Financial Behavior, meaning taking meaningful financial decisions. Thus, this section discusses the Financial Behavior component of the Financial Capability, followed by detailed explanation with respect to its eight domains: 1. Economic Impact; 2. Budget Management; 3. Savings and Long-term Planning; 4. Productive Credit and Debt Management; 5. Financial Shopping; 6. Digital Financial Services; 7. Consumer Protection; and 8. Insurance, Risks and Investments.

All the Financial Behavior questions were accessed out of 1 and followed a binary scale. The overall Financial Behavior score is as depicted in Figure 43. The majority of the score lies between 25-50% band followed by respondents scoring below 25%. There are no individuals that scored above 75%.


145

327

10

30.1

67.8

2.10

20

40

60

80

100

0

50

100

150

200

250

300

350

Below 25 Percentile Between 25 - 50 Percentile Between 50 - 75 Percentile

Percen

t

Freq

uency

Financial BehaviorTotal: 482

Score

Figure 43: Overall Financial Behavior score

1. Economic Impact

The Economic Impact theme of Financial Behavior indicates the task of following important financial and macroeconomic indicators as well as the use of different financial services. The majority of the respondents scored below 50% with only 2.1% scoring above 75%.

138

254

80

10

28.6

52.7

16.6

2.10

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency

Economic Impact

Total: 482

Score

Figure 44: Overall score on Economic Impact


Under the Budget Management theme of Financial Behavior, planning and creating budget in advance is considered vital. One is expected to spend income based on the budget and monitor budget using specific tools including statements for bank accounts and payment cards. Overall, the majority (53.9%) of the respondents scored above 75%.


24

54

144

260

5 11.2

29.9

53.9

0

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency

Budget Management

Total: 482

Score

Figure 45: Overall score on Budget Management


Whether a person is financially smart is determined by his/her investment plan and skills. The Savings and Long-term Planning theme explored whether the respondents are using basic formal saving schemes such as pensions, saving accounts and insurances. More than half (51.9%) of the respondents scored below 25% while only 1.2% scored above 75%.

250

176

50

6

51.9

36.5

10.4 1.20

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency


Total: 482

Score

Figure 46: Overall score on Savings and Long-term Planning


The use of formal channel to take on debt considering one’s personal budget is a key element of Productive Credit and Debt Management theme under the Financial Behavior domain. The majority of the respondents scored below 25% while there are no one scoring between 25-50%.


275

0

201

6

57.1

0

41.7

1.20

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency

Productive Debt and Credit ManagementTotal: 482

Score



It is essential to compare financial products or services from different providers as well as the same provider. The Financial Shopping entails choosing from any financial products or services based on information gathered. Over 98% of the respondents scored below 50%.

264

205

12 1

54.8

42.5

2.50.2

0

20

40

60

80

100

0

50

100

150

200

250

300


Percen

t

Freq

uency

Financial Shopping

Total: 482

Score

Figure 48: Overall score of Financial Shopping



Digital Financial Services involve the use of safety methods for online financial transaction services including protection against scams, viruses, identify thefts, and password corruption.

219237

24

2

45.449.2

5

0.4 0

20

40

60

80

100

0

50

100

150

200

250


Percen

t

Freq

uency


Total: 482

Score

Figure 49: Overall score of Digital Financial Service


The Consumer Protection ensures that the consumers are protected from financial harms such as scams and in order to achieve this, consumers need to read contracts before singing and approach official authorities responsible for dealing with complaints in case of mishaps.

61

375

37912.7

77.8

7.7

1.9 0

20

40

60

80

100

0

50

100

150

200

250

300

350

400


Percen

t

Freq

uency

Consumer Protection

Total: 482

Score

Figure 50: Overall score of Consumer Protection



Being informed about the changing nature of financial scams and identify theft so that financial risks are mitigated. Choosing good insurance and investment schemes to make financially smart decisions constitute the Insurance, Risks and Investments theme.

471

9 2 0

97.7

1.9 0.40 0

20

40

60

80

100

0

50

100

150

200

250

300

350

400

450

500


Percen

t

Freq

uency


Total: 482

Score



ConclusionConclusionThis is a pilot study to test the internationally comparable Financial Literacy Index questionnaire in the Bhutanese context as well as develop our own set of questions to determine the Financial Capability of the Bhutanese populace. The majority of the questions were adopted from the OECD/INFE Financial Literacy Toolkit with modifications and additions to suit the local context. Overall, no significant differences are seen when compared to indices of other countries as shown in Table 6.

Table 6: Comparison of Bhutan’s index with five other countries[3] .

Domain France Ukraine Thailand UK Canada BhutanKnowledge (7) 4.9 4 3.9 4.2 4.9 4.2

Attitude (5) 3.2 2.4 3.1 3.3 3.5 3.5

Behavior (9) 6.7 5.2 5.8 5.6 6.2 6.1

The above table indicated that the adoption of the questionnaire yielded similar results, hence, no instrument bias was observed. However, a more extensive survey (as recommended by the OECD/INFE) needs to be conducted to confirm the results since this is only a pilot study.

3 The data of other countries are sourced from “Financial Literacy, Financial Inclusion and Financial Well-being in Ukraine, June 2019”.


ReferencesReferences

Alliance for Financial Inclusion. (2017). Financial Capability Barometer. Central Bank of Armenia.

AM Partners Consulting Company. (n.d.). Methodology of Measuring Financial Capabilities of Armenian Population. ROA Central Bank.

DAI Global LLC. (2019). Financial Literacy, Financial Inclusion, Financial Well-being in Ukraine. Kyiv: USAID Financial Sector Transformation Project.

EV Consulting CJSC. (2020). The Study of the Financial Capability of Population in Armenia 2019. Yerevan.

OECD. (n.d.). OECD/INFE 2020 International Survey of Adult Financial Literacy. Retrieved from www.oecd.org/financial/education/launchoftheoecdinfeglobalfinancialliteracysurveyreport.htm

Royal Monetary Authority of Bhutan. (2020). State of the Financial Inclusion 2020. Thimphu: Royal Monetary Authority of Bhutan.

Documents

Financial Capability Survey Report