Passage to Investor Education: There is growing recognition around the world that investor's awareness and education improves investor confidence which in turn helps to underpin the overall stability and reputation of financial services sector. The Securities and Exchange Commission of Pakistan (SECP) the regulator for the non-bank financial markets, including the capital markets and insurance companies has the statutory mandate to educate investorson financial products and services within its regulatory remit.
Pakistan's non-banking financial sector (NBF), excluding insurance is 4.9% of the total financial sector. Ideally our mutual funds, pension funds and insurance sectors should be booming, if we consider Pakistan's growing middle class and the potential savings that could be invested. However, the total number of retail portfolioinvestors is estimated to be around 325,000, which is indeed very low when compared to regional players such as India and Malaysia.
Why are we lagging behind? Ask an average middle class person in Pakistan about investments that they own, or whether they invest in mutual funds or carry insurance on their assets? You will be greeted by silence, as they have no knowledge of such things.Most people do not even have a bank account, and, those that do, end up leaving their savings in accounts that earn very low profits. In most cases, the account holder has zero-knowledge of alternative investment opportunities with better returns that may be available to him.
As many young people join the work force, it is essential for them to know the basics about managing personal finance without having to learn it the hard way. In this regard, some jurisdictions have already incorporated financial education into the school curriculum to equip the next generation with knowledge and skills that they need to become confident and informed investors. Further, while youth is often recognized as a priority target segment for investor education, the financial literacy is relevant to all segments of our population and at all levels. Planning to achieve financial goals is a lifetime endeavor. As we reach a new stage in life -be it going to schools, entering the job market, marriage, parenthood, etc we require the relevant new financial literacy competencies for making decisions to address key financial challenges during eachstage.
We cannot expect investors to make sound financial decisions or evaluate information being presented to them by sellers of investment and insurance products unless they have an understanding of what they are investing in, and its implications on their financial well-being. Investor education is the key to achieving these objectives and for protecting investors from falling prey to fraud by market manipulators.
SECP has developed its investor education strategy and work plans which gradually expand into new areas having broader and deeper educational programs and resources for the investors.A dedicated department, the Investor Education and International Relations Department has been established to holistically oversee and lead investor education initiatives across the sector regulated by SECP and also to dovetail the investor education strategy with the international standards on investor protection.
The SECP investor education initiative encompasses the financial products and services, ranging from non-banking and insurance products to money management, financial planning as well as retirement planning.
The key components of the Investor education plan include:
-- Offering a dedicated web portal which provides comprehensive, credible and impartial financial information, tools and education resources;
-- Reaching out to the general public with financial education messages through mass media campaigns;
-- Building sustainable and tailored outreach programs for different target groups;
-- Collaboration with stakeholders;
Engaging with international counterparts and networks to share best practices.
SECP in its drive to implement keyinvestor education program components noted above has launchedits investor education web portal under the brand of JamaPunji.At par with investor education portals of the world's most developed capital markets,the portal serves as a pivotal point for holistic financial education, aimingto better equip the potential and existing investor with skills and knowledge to make informed financial decisions that best suit their needs, and manage their money wisely through the provision of comprehensive, financial information, tools and education resources. Whether you are a prospective investor considering taking out an insurance policy, an investment professional, or a studentat a university,the portal offers a complete and comprehensive guide to various investment products sold in Pakistan. Supported by state of the art high speed internet access, the portal has access to real-timeinformation on incorporatedcompaniesand licensed entities regulated by SECP. This will allow investors to identify genuine sellers of investment products, and will help deter fraud by non-registered entities and unscrupulous persons.
Information is presented in a methodical and organized manner abouttopics such as:capital market; mutual funds; insurance products;retirement planning; Islamic financing; leasing companies and investment banks.A members' area has been developed with the aim of developing a data base of members with interest in investing and for sharing market related information in the future. This area offers additional features to encourage visitors to sign up by completing a member's profile. Members can opt for receiving alerts form SECP via email or SMS andcan access a stock trading simulator with real-time access to live KSE price quotes, risk profiler,scam meter, mutual funds and insurance demonstrator, quizzes,calculators, games, polls and surveys. To facilitate Pakistan's large mobile phone users, JamaPunjimay also be downloaded on smart phones, and is available on Facebook and Twitter at the following links:
SECP has established a strong foundation for improving the financial literacy and capability of the Pakistani investor, but this task cannot be achieved by the SECP alone. It must be based on a collaborative effort, harnessing the enthusiasm, goodwill and strengths of stakeholders from many different sectors including the government, the financial sector, the education sector, the community as well as the media. We must work together closely to help achieve our shared goal of raising investor education and awareness.