Financial literacy key to stability and growth, CBC governor says

CBC governor Constantinos Herodotou on Friday addressed the “Digital Financial Literacy: the Way Forward” conference, held by the Central Bank of Cyprus (CBC).

The conference aimed to explore the multifaceted dimensions of digital financial literacy, acknowledging both the challenges and opportunities arising from the increasing use of digital technologies in our daily lives.

“Financial literacy allows people to understand and effectively manage their finances,” Herodotou emphasised.

“It enables budgeting, saving, proper investment, and responsible debt management, thereby protecting households from overindebtedness and improving their creditworthiness,” he added.

Highlighting the broader economic impact, Herodotou said that “financial literacy contributes to financial stability and sustainable growth”.

“If people possess satisfactory financial literacy, the country can better withstand economic crises with fewer sacrifices. Additionally, it fosters innovation and entrepreneurship,” he said.

The CBC has actively promoted and enhanced financial literacy, both domestically and internationally.

Through its membership in the Organisation for Economic Co-operation and Development (OECD) International Network on Financial Education since January 2023, Cyprus has leveraged global experiences and best practices to cultivate a financially informed population.

Moreover, the CBC spearheads the Cypriot Financial Literacy and Education Commission, established to implement the National Financial Literacy Promotion Strategy adopted by the Cabinet in June 2022.

In light of the OECD’s findings, Herodotou explained, Cyprus faces challenges in financial literacy, with scores lower than the OECD average.

Notably, Cyprus scored 56 per cent compared to the OECD’s average of 60 per cent in overall financial literacy and 44 per cent in digital financial literacy, highlighting the pressing need for action.

“The increasing trend of digital transactions underscores the importance of deepening understanding of digital financial tools to mitigate financial exclusion risks,” Herodotou noted.

“It allows people to conduct secure online transactions, enhances efficiency in personal financial management, and maintains competitiveness in an increasingly digital world,” he added.