Financial Literacy: A Step for Clients towards Financial Inclusion

Introduction: Financial Education for Financial Inclusion
These are tumultuous and exciting times for microfinance, marked equally by the
stunning potential of the cell phone to change the face of financial services and disturbing
reports of suicides linked to over-indebtedness. Against this backdrop, a shift in the
industry is taking place, drawing our attention from the financial institution back to the
client. Indicators of a renewed concern for clients include research to quantify the
‘unbanked’, rallying calls for consumer protection, and efforts to better meet customer
needs with diversified products. A key driver of this change in focus is the now widely
embraced goal of ‘financial inclusion’. Governments of developed economies, in G20
Summit agreements, have recognized financial inclusion and consumer protection as
integral to achieving financial stability and integrity. Financial access has been
highlighted as a ‘key accelerator’ to meet the Millennium Development Goals. Key to
attaining this laudable goal is financial education (World Savings Bank Institute, 2010).
Financial inclusion is a multi-dimensional, pro-client concept, encompassing better
access, better products and services, and better use. Herein lies its challenge – without the
third element, use, the first two are not worth much. Technological innovations are
bringing both new customers, potentially including millions of unbanked cell phone
owners, and new service providers –a diverse array of retail outlets, telcoms and others –
into the market. Diversification of products and services has already resulted in rich, and

complex, choices for consumers, especially compared to the early days of one-size-fits-
all working capital loans. Yet, increased access and better choices do not automatically

translate into effective use. The path from uptake (i.e. opening an account) to usage is
still an uncharted course. Effective use is hampered by asymmetries of information and
power between financial institutions and poor consumers, an imbalance which grows as
customers are less experienced and the products they can choose are more sophisticated,

an imbalance which holds real potential for negative outcomes due to institutional abuses
or ill informed client decisions.

Financial education is an important tool to address this imbalance and help consumers
both accept and use the products to which they increasingly have access. Because it can
facilitate effective product use, financial education is critical to financial inclusion. It can
help clients to both to develop the skills to compare and select the best products for their
needs and empower them to exercise their rights and responsibilities in the consumer
protection equation. Properly designed, financial education is tailored to the client’s
specific context, helping them to understand how financial instruments, formal or
informal, can address their daily financial concerns, from the vagaries of daily cash flow
to risk management. Its power lies in its potential to be relevant to anyone and everyone,
from the person who contemplates moving savings from under the mattress to a
community savings group, to the saver who tries to compare account choices offered by
competing banks. As such it spans the informal and formal financial sectors, supporting
clients’ access to, and more importantly, use of, diverse financial services.
Current developments in microfinance are both exciting and potentially perilous. To take
advantage of the former and protect against the latter, those placing the client at the
center of their efforts are embracing financial education. This paper will situate financial
education in an evolving financial landscape, identify its stakeholders, and most
importantly, summarize experience to date and explore how that experience is shaping
the vision and agenda for its future.
Definitions
The literature often uses three terms – financial literacy, financial education, and financial
capability — whose overlap can cause confusion. They are, however, distinct pieces of a
puzzle, parts of the whole, or steps towards the goal of financial inclusion. Financial
literacy is associated with the consumer who has a responsibility to inform himself of the
products he purchases and to understand the contracts he signs. It incorporates

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knowledge, skills and attitudes. Financial education is a key tool to reach this multi-
dimensional goal. Financial capability, on the other hand, is about the context; it engages

the financial services sector in its responsibility to offer the right products to its various
target markets. Financial inclusion implies an alignment of supply and demand, where
financially literate consumers have opportunities to apply their knowledge in a
marketplace of appropriate product options. These three terms are further clarified below.
Financial literacy: Definitions for this term vary by source and context. Most originate
in developed countries where financial literacy has received far more attention than in the
developing world. However, the common foundation is the importance of having the
skills and knowledge to make informed financial decisions. The U.S. Government
Accountability Office (GAO) offers a broadly applicable definition for financial literacy
as:
“The ability to make informed judgments and to take effective actions regarding the
current and future use and management of money. It includes the ability to understand
financial choices, plan for the future, spend wisely, and manage the challenges associated
with life events such as a job loss, saving for retirement, or paying for a child’s
education.”
Of course, financial literacy can mean different things to different people; in developed
economies, being financially literate might require knowledge of tax codes, insurance
requirements, and credit cards, while for the ‘unbanked’ in the developing world,
financial literacy is more likely defined by basic concepts of safe and secure savings,
budgeting and wise borrowing.
The U.S.-based non-profit, Jump$tart, recognizes the dynamic, non-static nature of
financial literacy:

“Financial literacy is not an absolute state; it is a continuum
of abilities that is subject to variables such as age, family,
culture, and residence. Financial literacy refers to an

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evolving state of competency that enables each individual
to respond effectively to ever-changing personal and
economic circumstances.”

Challenges of money management are never static, nor are the solutions. For the poor, the
pressure of juggling money never abates as they deal with unpredictable and seasonal
incomes, and the financial pressures of life cycle events. We also argue that ‘confidence’
must be added to ‘knowledge and skills’ in defining the core elements necessary to
achieve financial literacy, as the poor often believe they are too poor to save or to have
control over their finances or plan for the future.
Financial education is the process of building knowledge, skills and attitudes to become
financially literate. It introduces people to good money management practices with
respect to earning, spending, saving, borrowing, and investing. The role of financial
education is to enable people to shift from reactive to proactive decision-making and
work towards fulfilling their financial goals. By broadening people’s understanding of
financial options and principles, financial education builds skills to use financial products
and services, and promotes attitudes and behaviours that support more effective use of
scarce financial resources. When linked to the financial inclusion agenda the implicit
argument is that financial education will motivate the learner to adopt available formal
financial services.
Thus, financial education is a tool to achieve financial literacy and more; financial
literacy is essential to both effective consumer protection and to our final definition –
financial capability.
Financial capability includes the ‘use factor’ – the ability and opportunity to use the
knowledge and skills implied in financial literacy. Financial capability is a broader
concept that necessarily links individual functioning to the entities of the financial
system. On the institutional side it assumes that financially literate individuals have
access to:

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• User-friendly financial service providers catering to the low-income consumer,
and;
• Appropriate products and services.
Thus building financial capability — the combination of knowledge, skills and attitudes
with the opportunities to apply them — requires input from multiple sources including
those that educate the consumer and those that sell the products. As a result, the
responsibility for wise decisions regarding financial strategies and tools does not lie
solely with the individual client. We would argue that building financial capabilities is
two directional: while consumers have a responsibility to inform themselves about the
products they are ‘purchasing’, financial service providers have a responsibility to
understand their market, and respond with a range of appropriate and affordable services,
including savings and credit accounts, payment services, insurance products and the
ability to send and receive remittance payments cheaply. In short, the financial institution
needs to meet the customer where they are, not solely on the institution’s terms. They
need to apply principles of transparency in a way that facilitates clients’ decision-making,
and verify assumptions about what clients understand and don’t understand about their
products.
In sum, financial capability is about bringing together informed clients with appropriate
products in the marketplace (Cohen, 2010). Financial education targets behavior change;
done well, it provides opportunities for clients to practice new knowledge and skills.
However, it is most effective when clients have real world opportunities to apply what
they have learned over time. This is financial capability.
Stakeholders
Embracing the related goals of financial capability and financial inclusion requires a
multi-stakeholder framework built around consumers, the financial services industry and
government. Financial education is the nexus linking their interests in these common
goals. Non-governmental and community-based organizations use it to promote
livelihoods and asset building for the poor, integrating it into a range of activities that

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includes extension services, health education, business-development training, or
mentoring. Financial institutions use it to enhance their community profile, increase
adoption and use of their products and ultimately, improve performance. Central bankers
and regulators embrace financial education to protect consumers from fraud and abuse
(Cohen, 2010).
To date, financial education programs have pursued three broad objectives that
correspond to overlapping, inter-related interests of these three stakeholders.

  1. Personal financial empowerment and improved welfare;
    These objectives target the consumer, the potential client who needs to know when and
    how to use appropriate financial services to save, borrow, invest and mitigate risk.
    Financial literacy varies significantly among the poor, especially in relation to a financial
    landscape that is rapidly changing. Financial diaries studies, as presented in Portfolios of
    the Poor (Collins et al, 2009) or in Cash-In, Cash out: Financial Transactions and Access
    to Finance in Malawi (Stuart et al, 2011), have demonstrated that most poor people are
    good financial managers in familiar environments where a majority of financial
    transactions occur either informally or involve money stored at home. However, with
    increased access to more service providers and more products, people confront options
    they don’t always understand. When their existing knowledge and competencies are not
    applicable to an ever changing financial landscape, people are limited in their ability to
    act.
  2. Product uptake or improved/increased use
    New accounts and increased account activity are obvious motivations for financial
    institutions to sponsor financial education. Taken in isolation, these goals admittedly blur
    the line between education and marketing. Yet, financial institutions have other reasons
    to support financial education such as meeting their social responsibilities and building
    client loyalty with popular services. Institutional efforts range from incorporating
    educational content into marketing materials to adding financial education delivery to the
    responsibilities of front-line staff.

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  1. Consumer protection and awareness;
    Consumer protection is a cornerstone of financial inclusion, leveling the playing field
    between suppliers and consumers of financial services (Alliance for Financial Inclusion,
    2010). While both have their respective roles and responsibilities, government is the
    ultimate third party protector, especially in the absence of effective consumer advocacy
    organizations. Public agencies such as central banks, superintendents of banks and policy
    makers must ensure the consumer voice is heard. In addition, government must provide
    the legal and enforcement muscle to supersede both financial institutions’ advantages of
    power and their inherent conflict of interest in protecting consumers (Can financial
    institutions be really committed to educating and empowering consumers to compare and
    choose products across competitors?). Governments can embrace financial education in
    form of public campaigns to broadcast key messages about consumer rights.
    Thus, financial education and the financial literacy it builds are a winning proposition at
    multiple levels, for multiple stakeholders. On an individual level, financial literacy helps
    households to use scarce resources more effectively, choose the financial products that
    best meet their needs and become pro-active decision makers. At the institutional level,
    informed consumers make better clients, lowering institutional risk and contributing to a
    stronger bottom line. At the market level, financially literate consumers are a key element
    in effective consumer protection; placing pressure on financial institutions for services
    that are both appropriately priced and transparent. (Nelson and Wambugu, 2008).
    With multiple stakeholders, financial education is beginning to fill an heretofore empty
    space in the movement towards financial inclusion. Section IV examines financial
    education experience in developing countries around the globe, with examples of
    programs from all three stakeholder groups described above that show how program
    objectives shape the type of financial education offered.

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Never too young to learn about

money

Aflatoun, an NGO headquartered in
the Netherlands, has led the
movement to make financial
education available to school-age
children. Active in 75 countries, it
has developed curriculum and trained
teachers in children centered
methodologies involving art, games,
and theater to make learning as
enjoyable as it is effective. In each of
these countries, Aflatoun works
through local partners, typically
child-focused NGOs. It has also had
some initial success in advocating for
the inclusion of financial education
in national school curriculum (e.g.
Egypt). Ministries of education are
an important frontier for financial
education; achieving financial
literacy will take at least a generation
and schools are an obvious channel
for generational change
(www.aflatoun.org).

Elements of Effective Financial Education

The compelling conceptual arguments supporting financial education aside, the most
exciting part of promoting this new service is the reaction of the learners. Across age
groups, genders, and geographies, people have been thrilled and grateful to experience
the power and optimism that comes with learning how to manage their money better. We
know we are onto something when poor people quickly seize the value of financial
education. Yet, financial education in developing countries is far too young and diverse
in its target group, content, and delivery methodologies to articulate best practices. In
fact, that may be a long time coming given its broad and evolving objectives, relevance
and reach. For example, when Microfinance Opportunities initiated its market research
and curriculum development as part of the Global Financial Education Program (GFEP)
funded by the Citi Foundation eight years ago, financial education was primarily focused
on personal money management. Today, the same goals are framed around a broader
agenda of financial inclusion. Therefore, we prefer to discuss emerging elements of
effective education, drawing on experience to date in an admittedly sparsely populated
space. Although the elements highlighted here reflect
conventional educational wisdom – e.g. knowing the target
group, assuring that content is relevant and incorporating
practical application – drawing these lessons from the
context of a changing financial landscape and the place of
financial education therein is new and illuminating.
Financial Education Has Many Audiences
As with any program, the target group determines financial
education objectives and content. While many basic
principles of money management are universal, financial
knowledge, experience and behaviors vary widely across
individuals, households and populations; therefore, programs
will look very different depending on who the learners are.

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Target groups for financial education can be defined by age, gender, employment status
or relationship to a specific financial product. Financial education targeted to youth is
more likely to focus on negotiating with parents about spending money, the value of
saving, and planning for the future than it is on investing. Migrant workers may need help
budgeting new income sources and managing expenses as they move through the various
stages of migration, from initial travel and settling expenses to sending remittances home
and eventual return. Some learners are brought together by interest in a specific product
like a home mortgage or insurance. In this field of limitless possibilities yielding
impressive variety in both what is taught and how, there is still much to learn about
which types of financial education are needed by whom, which methodologies are most
effective in changing knowledge, skills, attitudes and practices, and how financial
education can be combined with other opportunities to reinforce long-term behavior
change.

Effective Elements of Financial Education: Relevance, Use, and Quality

  1. Relevance – Know the target group
    The basic tenets of money management– save often, spend carefully, borrow cautiously
    and invest wisely — may be universal, but to be meaningful to a given audience, they
    must be nuanced to respond to the specific needs or stresses that group faces. For
    example, the value of saving is foundational to many of the lessons of money
    management. However, for someone operating outside the financial system, the relevant
    educational message may focus on the benefits of saving in a safe place. For someone
    who already saves, the relevant content may target the difference between a passbook
    Road Shows for Migrant Workers
    Overseas workers sent $16.4 billion to the Philippines last year, over 10% of that nation’s GDP.
    Recognizing that these nine million workers are important consumers of remittance services, the
    Bangko Sentral ng Pilipinas conducts its Financial Literacy Campaign through road shows in
    Singapore, Hong Kong and other countries, educating hundreds of Filipinos working abroad
    about financial planning, saving and investing (Alliance for Financial Inclusion, 2010).

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savings account and a certificate of deposit and how to use each to meet different savings
goals.
Ensuring the relevance of financial education necessitates understanding the financial
behaviors of the target audience. What are their sources of income? How do they spend
their money? What influences these expenditures? Who controls them? What beliefs or
cultural practices shape their financial decisions? What is the context and what are the
possibilities for changing behaviors that contribute to financial stress? Market research
has been used effectively to gather data that sheds light on these questions; findings have
been invaluable in informing the curriculum design of specific financial education
programs.
• Research on remittance senders and receivers in Ecuador revealed that sender and
receivers often pursue disparate goals with respect to remittance income.
Receivers come to depend upon and use remittance income as if it were
permanent. Failing to acknowledge its temporary nature, they relinquish other
income streams, spend remittances for daily consumption, don’t save and have
scant contingency plans for any interruption in the flow. Over-indebtedness as a
result of purchases of big ticket consumer items (e.g. appliances and electronics)
on credit is common. Meanwhile, the sender makes sacrifices to send money
intended to purchase land, invest in a business or accomplish other goals for the
return home. As a result of these findings, curriculum on managing remittances
included communication, goal setting and planning with senders and receivers.
• In the Dominican Republic, market research focusing on the financial
circumstances of adolescent girls revealed that they typically don’t save any of the
money received from parents and part-time employment. Researchers learned that
these girls’ biggest expense is weekly visits to the beauty salon. In the financial
education program that was designed for them, girls identified steps they could
take – like exchanging services among friends that could cut in half their trips to

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the beauty salons — to reduce these expenditures and have a little to save (Hopkins,
2007).
• In India, FINO provides technological and operational solutions that enable
financial institutions to serve low-income populations. Its key product is the
biometric smart card which can be used for opening and managing bank savings
account. However, to date, usage rates among accountholders are low (15%);
instead, most frequently save at home in small amounts and invest in gold/jewelry
as a hedge against emergencies. What explains these low rates of card usage?
Market research provided the following answers. With respect to the new smart
cards, clients:
• Do not trust that their money is secure
• Are not sure if the smart card is a debit or ATM card
• Do not know if it earns interest
• Perceive that the cards are tied to a government program
• Do understand that the agent or ‘bandhu’ is linked to bank
Market research also revealed that there are many contact points with the agent or
’bandhu’. Each one provides an opportunity or ‘teachable moment’ to build the financial
capabilities of the consumer. In this circumstance, the financial education product of
choice is a ‘flip book’ that guides both the bandhu and customer along a conversation
path (Microfinance Opportunities, 2010).
• For potential insurance clients, a significant misunderstanding lies in the need to
renew the policy if no claims were made during the policy year. Some clients
expect to get their premium refunded in the event of no claims. Curriculum to
impart information about insurance therefore targeted the concept of pooled risk,
starting with local mutual aid practices that operate on similar principles but may
be more familiar to potential clients.

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• Everywhere, the poor are vulnerable to unexpected events that unleash pressure to
find a lump sum of money, but vary how they prefer do this. For example, in
Vietnam, people often purchase livestock to sell in times of need, and do not view
selling assets as a strategy of desperation. In contrast, in Colombia, people would
resist selling an asset, preferring to borrow money to cope with unexpected
expenses (Sebstad et al, 2011).
Financial Diaries provide a new and novel form of market data that enable a deeper, more
nuanced understanding of the financial behaviors that are the focus of financial
education. They shed light on cash flow strategies, risk management practices, use of
multiple, largely informal financial instruments, and gender-based control of income and
expenses. Such data can be valuable in designing appropriate financial products. For
example, Financial Diaries research in Malawi made it clear that rural consumers require
wide, flexible access to financial products designed to provide access to lump-sums such
as bridge loans, flexible lines of credit or contractual savings products that require small
regular contributions (Stuart et al, 2011). It is a short leap from such products to the need
for financial education to help consumers decide which would be their best choice.
Effective financial education is relevant; it addresses issues of critical and immediate
importance to the learners in a way that acknowledges and incorporates their specific
financial realities. Experience to date has shown the value of investing in some form of
client-focused research to identify existing individual behavior and community practice;
this is the starting point for financial education, the aim of which is to move from existing
behaviors to desired behaviors, from passivity born of lack of confidence, information
and opportunity to pro-active, informed decisions.

  1. Find Teachable Moments

The ‘use’ factor is an element of effective financial education because when the client
applies new knowledge and skills, she increases her chances of retaining them. Therefore,
some of the best opportunities for financial education occur when the target group faces

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new financial situations or decisions. These are ‘teachable moments’; the learner might
be in transition from the familiar to the unfamiliar, (e.g. the widow who loses her assets
to her in-laws), or have an opportunity that will be
enhanced with relevant information and skills (e.g.
the student who joins an after-school savings club).
Identifying these ‘teachable moments’ for financial
education—when someone first opens a bank
account, transitions to mobile banking, or becomes
a recipient of a government cash transfer
program—makes the education relevant,
immediately useful and reinforces behavior changes
since people have an opportunity to apply what they
learn in the context of real life. Four examples are presented below:

 Technology is creating perhaps the most widespread teachable moment. Around
the world, cell phones are replacing landlines and substituting for bricks and
mortar bank branches. Yet, older customers, intimidated by the technology, give
their children access to their accounts and report theft or fraud. Young people, in
contrast, are quick to master the technology’s functionality, but understand little
about the management decisions that the keypad contains. New access to
convenient debit cards and ATMs presents challenges to those trying to control
their spending (Nelson 2010).
Despite their great potential, the introduction of electronic cards and mobile banking
without information, orientation, and education

presupposes knowledge and experience that many low-
income families do not have. This may explain why the

level of bank transactions by the previously unbanked
has not met expectations, with providers of cell phone
banking reporting active usage rates of less than 30%
over a 90 day period (CGAP, 2009). Through its

FINCA Mexico introduced a financial
education program to build clients
knowledge and confidence about its
pre paid card, and ultimately
branchless banking. FINCA’s
comprehensive financial education
program addresses the clients’ level of
technical knowledge and enhances
their trust in mobile banking and other
financial technologies. FINCA has
reached 10,500 people with prepaid
cards. All received financial
education training. (Microfinance
Opportunities and Genesis Analytics,
forthcoming.)

Financial education should be tailored
to the migrant worker’s position in the

migration cycle — recruitment, pre-
placement, during migration, post

migration. Young female migrants
typically sign on for repeated two-year
contracts. During the first 6-10 months
they pay off the loan to the recruitment
agency or broker. Yet, despite earning
a good salary during the remaining 14 –
18 months, they return home with no
money. Due to lack of migration
planning and family agreement on how
to use their remittance, young women
migrate multiple times. (Diaz, 2009)

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research of mobile banking in four countries, Microfinance Opportunities found the
reasons for low usage include mistrust of ‘faceless’ banking, confusion over the PIN, and
a lack of knowledge of banking functions, off and on the cell phone. To date use of cell
phone ‘banking’ is largely limited to money transfers and adding airtime. Financial
education can bridge the gap between product marketing and effective product use
(Cohen et al, 2008).
 The feminization of migration (for factory jobs, domestic work and the sex
industry) provides teachable moments as these women struggle with a host of new
financial opportunities and challenges. Despite exploitative working conditions,
young women desire factory work for the income it brings at a time in their life
when they are unencumbered by the roles and responsibilities of wives and
mothers. The opportunity to work for wages exposes them to social, financial and
educational experiences with positive outcomes — including delayed marriage,
increased mobility, strong peer networks of fellow workers seeking to
‘modernize’ and experience managing money — that result in more empowered,
capable young adults. However, such outcomes are often in conflict with family
expectations for the migrants’ income that is needed for dowry, siblings’
education or other family demands. Under pressure to send regular remittances,
migrants often have to borrow at high interest rates in order to survive in their
host country.
Designing financial education for migrant workers requires careful selection of target
groups and solid understanding of how each confronts different financial stresses. A
migrant worker who pays a broker to be smuggled into Thailand to work on a fishing
vessel faces different financial pressures, risks and opportunities compared to one who
migrates legally to Hong Kong to work as a garment factory worker or elderly care giver.
Despite their diversity, financial education can address a host of significant issues that
young migrant workers face, including:

  1. Family decision-making regarding the goals and timeframe of migration;

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  1. Analysis of migration costs and how to finance them;
  2. Balancing personal needs and goals with family pressure to remit income;
  3. Budgeting for the high costs of living in urban areas
  4. Managing fluctuations in income and expenses;
  5. Understanding financial products and how to take advantage of one’s options.
  6. Learning to avoid high risk methods for sending remittances (Diaz 2009).
     Teachable moments for youth can be found in school and out. Youth are eager to
    save but typically don’t believe it is possible; they don’t believe that saving small
    amounts will add up to anything, or that banks are interested in their small
    deposits ; and they don’t know how to resist the many temptations to spend.
    Financial education, along with the opportunity to save, can be a powerful
    combination in fostering confident young savers. Such opportunities can be
    created through after-school savings clubs, mobile banks that visit schools, special
    savings accounts or informal community-based savings groups for youth.

 Cash transfer programs offer teachable moments. They now exist in 45
countries and largely target women –as heads-of-household, caregivers, and
elderly pension recipients. Their core purpose is to raise the income of the poor
and protect vulnerable households. Conditional cash transfers (CCTs) use

incentives and program conditions to link immediate economic assistance to long-
term behavior changes (Nelson and Henderson, 2010). Those for whom access to

a regular cash payment is a new experience may need to learn to manage this new
Different approaches to help girls to save
The Nike Foundation has supported a multidisciplinary approach to promoting girls’
saving in the Dominican Republic, Mongolia, Burundi, Kenya and Uganda. In each
country, a consortium of MFIs or banks, schools and NGOS collaborated to design and
implement an integrated program combining financial education and savings
opportunities. Microfinance Opportunities provided technical assistance in financial
education for all teams, but in each location a slightly different approach was used.
Financial education was offered to girls either in school or by NGOs outside of school,
while a local bank offered a special savings account designed for them. However, in
Burundi, girls got access to financial education as members of CARE sponsored savings
groups which provided their vehicle for saving.

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resource – to balance competing demands of risk protection, investment and
consumption, as well as plan for longer term financial security and an “exit route”
once the CCT program ends. Increased use of mobile banking and debit cards as a
means for dispersing cash transfers as well as direct deposits in the new bank
accounts of these ‘unbanked’ will require training to ensure participants’ use of
not only the technology, but also the bank services to which it provides access.
New program opportunities for financial education are emerging as policymakers
explore the potential of CCTs to enhance economic inclusion through linkages to
bank accounts and opportunities for asset accumulation.

  1. Don’t make any assumptions
    The two elements of effective financial education discussed above – relevance and use –
    are also defining criteria of its quality. Yet, the quality of financial education also
    depends on good trainers who can facilitate two-way dialogue with learners and engaging
    them actively in the content. To do this, they need to embrace a pedagogy that is
    significantly different from the traditional lecture method that still dominates formal
    educational systems and relies on one-way communication whereby the teacher/expert
    delivers the content to the passive recipient. While curriculum is now available to help
    trainers navigate through more participatory approaches, most of it needs some
    adaptation to respond to specific learners abilities (e.g. literacy levels) and the local
    context (reflecting local currencies, common businesses, place names and actual products
    offered by local financial institutions, etc.)
    We have found that a good investment in the quality of financial education is to offer it to
    trainers themselves. Realizing its relevance to their own lives, trainers become motivated
    to share it with others. However, they have been challenged by the task of curriculum
    adaptation cited above, and we have learned by experience not to underestimate this part
    of the process.

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Quality education also requires attention to the mundane – logistics, location, schedule.
Getting these details wrong can easily sink a program. All aspects of an education
program must reflect the participants’ priorities.

Delivery Channels
The elements of effective financial education –relevance, quality and use — have been
presented largely in relationship to classroom, or in-person training. While valuable at
conveying new knowledge, skills and attitudes to small groups of people, this
dissemination channel confronts budgetary hurdles when the goal is to go to scale with
financial education. There is growing evidence to suggest that a mix of dissemination
methods — print, mass media and technology — is advantageous. In Mexico, a video on
managing remittance income and debt now plays in US consulates and the bank lobbies
Learning by doing
Free to Grow offers financial education to low-income employees of large companies in South
Africa. It uses metaphor, imagery, anecdotes and case examples to make abstract concepts easier to
understand. Its MoneySense program provides learners with the opportunity to practise real-world
applications through experiential learning. Participants’ are split into groups or “households” and
given “Free to Grow” money and picture cards of monthly expenses (e.g. transport, food, clothing,
entertainment etc.), and instructed to allocate money to each expense. Having done this, groups
often find that their money is over-allocated to certain expenses, leaving nothing for school fees,
after-school care and the like. Following this exercise, individuals are given budget sheets on
which to plan their actual monthly expenditures. (Microfinance Opportunities and Genesis
Analytics, forthcoming.)
Simulations are worth a thousand words
The MFO curriculum “Risk Management and Insurance” includes a simulation activity based on a
group of people who share or ‘pool’ their resources to create a hypothetical funeral fund.
Participants handle small objects that represent money (e.g. stones, bottle caps, buttons, etc.); they
simulate paying into fund monthly and withdrawing from it as needed. They see what happens to
their benefits when there are many funerals in members’ families, and discuss questions such as
“How is the group able to give more to a member than she paid in? What do you think happens to
your money if you do not have a death in your family during the year?” (Microfinance
Opportunities, 2008)

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of Bansefi, the country’s state savings bank. In the Philippines and Uganda, potential
insurance clients can read comic books that explain the benefits of insurance. In El
Salvador and Nicaragua a radio mini-series on the topics of saving, budgeting and debt
management targets female microentrepreneurs. A popular TV serial in Kenya has aired
episodes focused on money management, each of which is accompanied by a brochure
with more information. MFO has seen that its training modules, although originally
designed as training tools for face-to-face delivery, have time and again provided the
basic messages that are adapted to a wide array of dissemination channels.
These various channels can serve multiple program objectives, from raising awareness
across a broad socio-economic range, to imparting specific content to a smaller target
audience. Face-to-face, group based training is the most effective way to provide more
in-depth content that engages people with the topic to promote behavior change. Mass
media (eg. radio, TV or print) can broadcast simpler messages about a specific topic (e.g.
tips for saving regularly) or financial product (e.g. a savings account) to many more
people. Print lends itself to endless uses: financial education messages can be
incorporated into bank statements; brochures can be widely distributed (e.g. in banking
halls, taxi parks, grocery stores), and financial education campaigns can be mounted with
billboards, posters and newspaper advertisements. The two approaches –interactive
mastery of substantive content or massive outreach with ‘headliner’ messages – are not
mutually exclusive, but each offers advantages and disadvantages that merit
consideration, alone and together.

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Table 1: Comparing face-to-face training to delivery via mass media1
Type of Delivery
Channel

Advantages Disadvantages

Face‐to‐face training  Delivers detailed content
among peers who contribute
different perspectives, skills
and experiences
 Opportunities for engagement
with the material; participants
reflect on content, personalize
it, and take action. (e.g. put
money aside regularly)
 Easier to monitor quality and
evaluate outcomes of financial
education than through other
channels

 Requires trainers with technical
capacity and experience in
participatory training methods
 Need ready access to training
participants that can be
provided by diverse types of
organizations including
financial institutions

Mass media, Print,
Technology

 Potential to reach large
numbers of people
 Potential to reach ‘unbanked’
and others not affiliated with a
particular financial institution or
organized group
 Lower cost per person than
face‐to‐face training

 Difficult to incorporate
participatory component
 Limited depth of content
 Can require large up‐front
investment (e.g. TV, radio
program or video)
 Poses challenges to monitor
quality and evaluate outcomes

Delivering financial education messages through mass media be it radio, TV, video or
print, calls on specialized skill sets. Experience has shown that collaboration between
financial educators and media specialists can lead to excellent final products if the team
respects conventional wisdom and establishes processes for product development. This
involves careful selection of the messages that both support program objectives and are
relevant to the target group; use local expertise to develop storylines (e.g. for radio or TV
dramas) and adequately pilot test the material.

1
Table adapted from work of Danielle Hopkins and the staff of Microfinance Opportunities.

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Junior Achievement Nigeria uses existing school and community groups as a platform to reach
learners. JA Nigeria’s strategy for scaling up its existing program within schools is three fold: to
increase the number of students per class (up to a maximum number); to raise the frequency of
classes held in the established schools; and finally to add new locations.
Scale, Sustainability and Impact2
Financial education interventions often have differing approaches to scale. The
differences accord with each implementing organisations’ financial education objectives
and follow three main routes to reaching scale:
 National/Regional Consumer Education Campaigns – such initiatives benefit
from low costs per person and the ability to expose large numbers of the public to
key messages.
 Financial Service Providers – financial institutions, with access to their existing
clients, offer an important base for rapid scale-up of financial education. From a
client’s perspective, having simultaneous access to financial services and financial
education enables opportunities to exercise their learning, which is essential to the
adoption of new behaviours.
 School-based Programs –the use of pre-existing platforms to reach groups of
young people provides an opportunity to go to scale. Organizations like Alfatoun,
PEDN and Junior Achievement Nigeria work through schools, leverage their
networks, and use standardized content and delivery.

2
This section draws heavily from the forthcoming paper, “Global Study of Financial Education” written by
Microfinance Opportunities and Genesis Analysis and funded by The MasterCard Foundation.
Test materials!
In Uganda and the Philippines, MFO contracted local firms to design comic books about
insurance. Drawing on the content of MFO’s module Risk Management and Insurance: Protect
Your Family, each firm developed a storyline with realistic situations, recognizable characters
and accompanying drawings. During pilot tests, participants related well to these features, with
one exception. In Uganda, participants said that they would not trust the plump insurance agent
in the illustrations because his heavy weight indicated that he was “eating” the profits from his
work, and likely exploiting his clients for his own gain. The Ugandan design firm replaced the
illustration of the short, plump insurance agent with a tall, lean agent.

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Using a partnership model, SPEED Ghana
facilitated an extensive financial education
initiative. The partners, including
international donors, the Bank of Ghana, the
Ghana MicroFinance Institutions Network
(GHAMFIN) and the Ministry of Finance and
Economic Planning (MoFEP), leveraged
financial support, infrastructure, and human
capacity to deliver quality financial education
across the country. With time, there was
convergence –as MFIs, government and
public advocates began to convey the same
financial education messages.

Faulu Kenya has recently embedded
financial education in its business
model. The Bank sees financial
education as a way to assist their
clients to use Faulu services – which
now include savings and transactional
products — more appropriately and
wisely.

What factors facilitate scale?
Further to the three routes to scale discussed
above, a few key factors promote or influence
effective upward-scaling.
 Partnerships and Networks:
Experience suggests that stakeholder
involvement is fundamental to scaling
up. It may also improve efficiencies in
financial education programs, as roles
and responsibilities can be delegated to
partners based on their comparative advantages. Beyond the benefits of
networking and sharing information, partnerships between financial education
providers and financial service providers can ensure participants will have the
opportunity to apply new behaviours to accessing products and services.
 Use of mass media and technology: As discussed above, mass media and
technology are becoming increasingly popular channels for wide dissemination of
financial education content. The initial high costs of program development are
offset by repeated use and substantial outreach. More specifically radio programs,
especially when they are offered in the vernacular, can reach multiple and
dispersed end users who are difficult to reach with traditional workshops,
television or on-line formats. Moreover, as mobile banking expands throughout
the world, we can expect to see mobile phone applications harnessed to support
financial education goals.

 Institutionalization: The consensus among
organizations that have embraced financial
education to date is that it should be an integral
component of an organization’s regular
interaction with its community (such as a
client’s relationship with the MFI/bank).

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Scale can also be achieved by diverse institutions adopting the financial education
agenda. In Mongolia, XAC Bank began its financial education activities with a program
focused only on adolescent girls. Today its program serves girls and boys, while the
initiative has spread from the bank to non-financial institutions (Girl Guides, a TV series,
Ministry of Education) and to delivery beyond the capital to rural areas.

What are the costs of financial education?
Generally the costs of implementation can be broken down into two main categories:

  1. Product design and development (i.e. of financial education content, curriculum,
    etc.);
  2. Dissemination (e.g. training, learning events, campaigns, radio programs, etc.).
    The costs of financial education, particularly for organizations that incorporate financial
    education into a broader program, are difficult to quantify. Table 2 outlines the estimated
    cost per person based on available information. Ideally the total spent in each category
    should be divided by the number of people reached to arrive at the unit cost (i.e. cost per
    person receiving financial education). In practice however, this calculation is difficult;
    expenses specific to financial education can be challenging to isolate, or in the case of
    media campaigns, numbers of people reached are broad estimates.

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Finlit Foundation, a new
organization in Uganda, sees target
market analysis, program review, and
impact evaluation as needed to ensure
the long-term relevance and
sustainability of their activities and
organization. Finlit’s constant
surveying and market analysis has
helped to make sure that the topics
addressed by its program are always
appropriate. Close attention to its
market has resulted in a doubling of
participation during Finlit’s Annual
Financial Literacy Week.
Table 2: People Reached by Organisation and Cost per Person

Path to Scale Organisation No. Reached Cost Per
Client

Financial Service Provider

Opportunity
International Bank of
Malawi

230,000 US$ 1.98

School Based Programs

Private Education
Development Network
(Uganda)

N.A. US$ 4.00

Personal Development & Training

Free to Grow
(South Africa)

52,000 US$ 500

To lower costs, organisations have used a range of strategies. Some have simplified the
financial education materials they use; OIBM advocates the decentralization of delivery.
In the future, technology based strategies will certainly enable a decrease in operating
costs.

How do financial education initiatives define sustainability?
Sustainability is defined both by funding and quality. Although the majority of
organizations implementing FE initiatives
currently rely on donor support, long term
funding models are possible given that many
organisations see financial education as either
key to their business (MFIs/banks) or as core to
their mandate (industry associations). Three
funding models with inherent sustainability are:

  1. Profit-driven products or services (e.g.
    Free to Grow sells financial education
    training sessions);
  2. Financial education is a value added product that the business subsidizes (e.g.
    OIBM, Faulu, XacBank);

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  1. Financial education as a vehicle to influence the market (e.g., AMFIU, SPEED
    Ghana)
    Although all three models can lead to long term sustainability, the evidence to date is
    limited. What is clear is that financial institutions overcome their initial scepticism of
    financial education with growing evidence of increased product uptake or an improved
    image of the institution. Faulu (Kenya) and OIBM (Malawi)) now embrace financial
    education as a service that adds value by boosting their existing businesses, increasing
    customer awareness and loyalty, and promoting increased client use of financial products.
    Ultimately long-term sustainability, and the ability to demonstrate value, will depend on
    the effectiveness of a program. As discussed earlier in this paper, effective programs are
    relevant, practical and of high quality; achieving such programs begins at the inception
    phase, with information on potential participants’ current financial behaviours and
    desired behaviours gathered from market research, workshops, stakeholders’ forums and
    informal discussions. Further, programs should be constantly reviewed and revised to
    ensure that the materials and curricula meet the changing requirements of the audience.
    Sustainable programs are those designed around strong funding models, serving not only
    the needs of the participants, but ultimately adding value to all stakeholders. Achieving
    this means continuous commitment to learning, building capacity of staff and
    organizations, and nurturing partnerships.

What do we know about Impact – What improves financial education uptake?
Implementers of financial education have attributed several changes in client behavior to
their training. SPEED Ghana notes an increase in the number of bank accounts; AMFIU
(Uganda) and OIBM (Malawi) attribute an increase in savers as well as changes in self
esteem directly to financial education efforts.
A review of pre and post tests taken by participants in financial education training at two
MFIs in Bolivia (CRECER and Pro Mujer) and one in Sri Lanka (SEEDS) indicated
positive change in knowledge about managing debt (ability to calculate one’s debt and

27
identify causes of over-indebtedness and capacity. (Clients of CRECER jumped from
23% to 40% while those of Pro Mujer climbed from 45 percent to 79 percent.).
Clients of the three institutions also showed improvements in their savings behaviors.
CRECER and Pro Mujer clients –post-post test– both put more of their earnings into
savings (31 to 47 percent for CRECER clients and 40 to 57 percent for Pro Mujer clients)
and the number of SEEDS clients who indicated they saved more money in the current
quarter compared to last quarter jumped by 16 percent (Gray et al, 2009).

While these outcomes are promising, many other factors could be influencing them. (See
Table 3). For example, the increase in number of savers reported by AMFIU and OIBM
could have been affected by aggressive marketing and product promotion efforts. In
Bolivia and Sri Lanka, clients report that contextual factors such as inflation and rising
food prices prevented them from saving regularly, even though they clearly understood
the benefits of doing so. The same held true for managing their debt as Gray et al explain
in their 2009 study:
 When clients from all three institutions were interviewed in FGDs about the
challenges of debt management, all three cohorts indicated that the food and fuel
crises that their countries were experiencing during this time period significantly
inhibited their abilities to control their debt simply because everything was much
more expensive and some were having to take out loans for basic needs such as
food. They all appeared to understand and appreciate the concept of managing
one’s debt, but some had difficulty putting it into practice (Gray et al, 2009).

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Table 3: Impact Measurement following Financial Education

Emerging evidence from financial education programs does point to changing behavior.
Sometimes, as noted, context mitigates against results. Furthermore, behavior changes
emerge over time and none of the impact studies to date have spanned a period of time
long enough to capture the anticipated changes.
Future Agenda for Financial education
The future of financial education is here today. The rapid evolution of stakeholders and
the institutional landscape blurs the distinction between present and future. From an
empty space a decade ago, financial education is surfacing on every agenda, and that
points to exciting times ahead. A few hallmark changes within our sights are discussed
below.

Consumers
Financial education in developing country contexts was originally conceived of and
introduced to the financial community as a service to its clients. Yet, because managing
money is a skill that is in high demand and short supply, financial education is now and
will continue to be embraced far beyond the financial services industry. Programs in
Organisation Objective Indicators

AMFIU

Consumer Protection and
Awareness Initiative

69.6% increase in number of
respondents holding savings accounts
66.2% increase in the number of people
reporting it is possible to save

OIBM Product Uptake/Improved

product Use

From 40,000 savers in 2005 to 70,000 in
2007

Free to Grow

Personal Skills &
Development for Improved
Livelihoods

54% increase in the number of
participants who reported saving
96% of participants reporting that their
financial situation has improved

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health, agriculture, women’s empowerment and many others will integrate basic financial
management in their mix of services for the poor because the financial stability it
supports is critical to their goals. Corporate employees, factory workers, union members,
and farm workers are likely consumers of financial education in the future.
Service providers
The bottom of the pyramid is increasingly perceived as a new market. To sell products in
this market, commercial financial institutions are embracing financial education as part of
their business proposition. But beyond the financial industry, new technologies are
enabling different actors to offer financial transactions to low-income markets. Telcoms,
grocery chains, and superstores like Walmart and are moving into technology-enabled
financial services. However, this market is not just about the number of people it holds;
to be effective in their outreach, these new players will need more than convenient ways
for the poor to spend their scarce resources, including financial education.
The diversity of consumers and providers will support emerging efforts to deliver
financial education messages through multiple channels including cell phones, radios,
TV, and social marketing tools. New ways to stage and reinforce themes will be
developed to foster continuous learning.
Supporters
To date, donors have largely supported financial education’s research and development

phase. Now, as discussed above, it is being adopted by diverse commercial and not-for-
profit entities. The third leg of financial education’s support is government. Over time,

financial education will become a public good. Attention is moving beyond the
implementation of small-scale initiatives to the development of national financial-literacy
strategies that straddle financial and social policies and incorporate public and private
stakeholders. Governments are beginning to look at integrating financial education into
cash-transfer programs. Ministries of Education will gradually incorporate it into their
national school curricula.

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Government is also the key to effective consumer protection. In this rapidly evolving
landscape that will engage thousands who have never used financial services with an
array of entities that have never before provided them, the need for consumer protection

is mounting. Government engagement can lend legal weight to transparency and truth-in-
advertising. As consumer protection gains traction, so too will financial education as an

important tool to enable consumers to carry out their roles and responsibilities in the
consumer protection equation We have made the case that consumers’ access to services
must be accompanied access to information in order for them to make the best choices for
themselves. However, informed consumers are important for another reason: they can
make demands on institutions, exerting pressure for good customer service, appropriate
and transparent pricing and clear contracts.
While the dynamic nature of financial literacy and financial capability make it difficult to
lend specificity to their future, we are encouraged by the concrete successes of other
campaigns to change behavior. In the U.S., campaigns against littering and smoking have
had a remarkable impact, but one that took a generation to achieve. It is possible to
envisage building financial capability as a multifaceted campaign to promote better
money management that is active over many years and across a broad swath of the
population.

Conclusion
Fifteen years ago, ‘financial inclusion’ would likely have referred to an institutional issue
such as portfolio growth, mirroring a common question “How many clients do you
have?” Today the term is more centered on clients, encompassing both access (the
institutional responsibility) and use — clients’ ability to choose and use the services
available to them. It implies financial capability. Financial education is essential to both
of these overlapping concepts. Yet, fifteen years ago, few in the developing world had
ever heard of financial education. Today, it is coming to your TV; your bank will send

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text messages reminding you to save; local newspapers run weekly financial advice
columns; governments are mandating that financial institutions publish transparent
product prices. The return of the consumer that these developments indicate is welcome.
So too, are the ways to build their capacity to manage money that have not yet been
invented but will be at our doorsteps next week.

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