shows that financially literate clients make better financial decisions and maintain a better overall financial well-being (Cole and Fernando 2008). Recent research linking financial education to behavior changes among low-income microfinance clients in Bolivia and Sri Lanka provides insights into these contradictory impact-related observations. Two years after receiving financial education, clients increased their knowledge of loan products and debt capacity. Positive changes in savings behaviors included reducing expenses as well as recognizing the value of saving three times the amount of monthly income for emergency purposes. Those given budgeting training identified the primary function and different parts of a budget and were able to work within their own budgets. However, putting debt-management and savings behaviors into practice during the food and financial crises that affected these countries was a challenge. The new savings behaviors translated into reduced vulnerability (Gray et al. 2010). To assess the outcomes of financial education, researchers must look beyond indicators of behavior change. They must recognize that financial behaviors are influenced by the context in which people live—both inside and outside the household—and thus are ever changing. According to Gray et al. (2010), the five elements of effective financial education are
• quality and frequency of education, • relevance of the education to the target population, • opportunity to use the education,
• context in which people can exercise their new financial behaviors, and
• appropriateness of the financial products offered. Developing a financial education agenda
Since 2002, Microfinance Opportunities (MFO) has sought to put financial education on the agenda of microfinance institutions and other development organizations seeking to improve the financial lives of the poor. To this end, MFO partnered with Freedom from Hunger to develop a global financial-education curriculum that is targeted at those just above and below the poverty line in developing countries. Developed in partnership with nearly 20 microfinance service providers, the curriculum currently addresses ten themes. The core topics are budgeting, saving, managing debt, negotiating financial transactions, and using bank services. Each theme includes (1) a content note that provides a topic overview, (2) a trainer’s guide with step-by-step instructions for conducting each learning session, and (3) a “training of trainers” manual to prepare financial-education trainers. The trainer’s guide, the cornerstone of the curriculum, has
proven itself a valued reference tool. The curriculum itself is flexible and readily adaptable to longer or shorter learning activities, different contexts, and target populations, including people who are illiterate (Nelson and Wambugu 2008). The base curriculum has been expanded to encompass a number of specialized modules focused
on particular financial products (including insurance, remittances, and housing loans), specific target groups (for example, adolescent girls) and consumer protection. By leveraging partnerships and using scalable delivery channels, Microfinance Opportunities is achieving significant levels of outreach; in less than three years, more than 500,000 consumers have received direct training. This figure does not include the enormous outreach achieved through the viral spread and adaptations of the MFO curriculum using mass media. For example, Makutano Junction, a televised series in East Africa, has incorporated the key messages into several episodes. Its viewers are in the millions.
Where do we go from here?
Financial education is beginning to get the visibility and interest it deserves. Attention is moving beyond the implementation of small- scale initiatives to the development of national financial-literacy strategies that straddle financial and social policies. Integration of financial education into cash-transfer programs and branchless banking are other emerging programmatic areas. Measuring how and when financial education translates into financial-behavior change remains difficult, but, among learners, it is valued and has emerged as a key—although often overlooked—component of economic empowerment.
Some see the challenge of scalability as an obstacle to a meaningful impact of financial education. It need not depend on stakeholders’ objectives for financial education. Everyone can benefit from financial education: the banked, unbanked, or underbanked. Technology offers just one avenue to send key messages to large numbers of people; its spread therefore must not be restricted to users of formal financial services. Building financial capabilities among the low-income population is a win– win situation for the financial sector because it creates better- informed consumers. Financial education need not be a stand-alone activity. It is very effective when combined with other development interventions aimed at reducing vulnerability and food insecurity and expanding opportunities for the poor. n
See more information at www.microfinanceopportunities. org.
For further reading: S. Cole and N. Fernando, “Assessing the Importance of Financial Literacy,” ADB Finance for the Poor Vol. 9 (No. 3): 2008; B. Gray, J. Sebstad, M. Cohen, and K. Stack “Can Financial Education Change Behavior?: Les- sons from Bolivia and Sri Lanka,” Working Paper 4 (Micro- finance Opportunities, Washington, D.C.: 2010); C. Nelson and A. Wambugu, Financial Education in Kenya: Scoping Exercise Report (Financial Sector Deepening Kenya, Nairobi, Kenya: 2008); A. Klincic, “Case Study of Opportunity Bank of Malawi” (Microfinance Opportunities, Washington, D.C.: Forthcoming); R. Pande, E. Field, and S. Jayachandran, Busi- ness Training and MFI Client Behavior: Findings from a Ran- domised Impact Evaluation in Ahmedabad, Gujarat (Institute for Financial Management and Research (IFMR) Centre for Micro Finance, Chennai, India: 2009).
Monique Cohen (
moniquec@mfopps.org) is the president of Microfinance Opportunities.
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Supported by the CGIAR
www.ifpri.org
sustainable solutions for ending hunger and poverty Supported by the CGIAR
www.worldbank.org Copyright © 2010 International Food Policy Research Institute and the World Bank. All rights reserved. Contact
ifpri-copyright@cgiar.org or
pubrights@worldbank.org for permission to republish.
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