Financial Capability Framework. Douglas Pearce, Aurora Ferrari Financial Inclusion Practice, The World Bank

Transcription

1 Financial Capability Framework Douglas Pearce, Aurora Ferrari Financial Inclusion Practice, The World Bank

2 Agenda 1. What is financial capability? 2. Why does financial capability matter? 3. How is Russia supporting financial capability work? 4. A financial capability framework 5. Int l Standards for financial capability and World Bank Implementation Support

3 What is Financial Capability? 'Financial capability encompasses the knowledge (literacy), attitudes, skills, and behavior of consumers with regard to understanding, selecting and making use of financial services, and the ability to access financial services that fit their needs. For financial capability to be meaningful, clear and understandable information about those financial services needs to be available, with protection against fraud, abuse and misconduct.' Attitudes, Behavior Knowledge needs to be applied through actions. Linked to perception of financial institutions, products Access to Financial Services Knowledge & Actions are only effective if suitable financial services are available Understanding, Skills Financial Literacy, linked to Financial Education Financial Capability Awareness, Informationavailability Dependent on Disclosure, Business Practices, Transparency

4 Why is Financial Capability important? Financial capability contributes to financial sector stability, financial inclusion, and to efficiency Access to financial services is expanding, with new forms of delivery such as mobile phones, e-wallets, agents If financial consumers are not capable and protected, then increased access to financial services can be harmful (eg through indebtedness, mis-selling) and lead to instability (through institutional failures, lack of consumer confidence) Financially capable consumers, on the other hand, are more likely to use and benefit from financial services, resulting in economic benefits (increased incomes, competitiveness, resilience, efficiency) Middle income country regulators are strengthening financial capability and consumer protection However low income countries lag behind 80% 70% 60% 50% 40% 30% 20% 10% 0% Share of countries introducing reforms in % 68% 33% 18% 17% 15% Low-income Middle-income High-income Consumer Protection Financial Literacy Source: Financial Access 2010 The consequences of a lackof financial capability and consumer protection can be significant for stability and inclusion, as illustrated through: US Sub-prime Crisis UK PPI Scandal Microcredit repayment crisis: India, Morocco...

5 Russia support to Financial Capability (including through Russian Financial Literacy & Education Trust Fund) National Strategies Programs in Schools Programs for Groups and Topics: pensions, women Global Stocktaking of National Programs and Strategies Development of Financial Capability Measurement Instrument Definition of Financial Capability New National Survey instrument Guidance on Use of Surveys Interactive Web Based Toolkit Program Impact Evaluations Impact Evaluation Toolkit and Additions to Evidence Base Knowledge Dissemination and Capacity Building Workshops Website Regional Conferences 5

6 Financial Capability Framework(including consumer protection) Capable and protected financial consumers contribute to stability, inclusion, and efficiency Financial Capability Consumer Protection Financial Education, Literacy, Awareness Financial Products that fit consumer needs & awareness Regulatory Framework, Supervision, Enforcement Financial Industry standards, codes of conduct

7 Applying the Financial Capability Framework: toolkit Financial Education/Literacy Action Plan Comprehensive set of measures to enhance financial education, literacy; public sector/private sector/civil society roles Financial Policy and Legal Reforms Regulatory & Supervisory Framework for Consumer Protection; Complaints & redress system Financial Inclusion Strategy Targets & commitments: financial products accessible to all, designed and marketed to fit consumer needs and capability OUTCOMES Financially literate & capable consumers Increased uptake of financial services, financial inclusion Lower risk of instability and consumer indebtedness Positive impacts on incomes, employment, growth Institutional Development Consumer Associations; Financial Industry Associations; Judicial & extra-judicial mechanisms Measurement & Monitoring Financial Capability Measurement Tool; Financial Capability Surveys; Models & Regulator Peer Learning Consumer Awareness Price transparency (effective interest rate, websites); Disclosure requirements; Awareness campaigns

8 International Standards, World Bank Implementation Support FINANCIAL CAPABILITY FRAMEWORK Financial Capability Consumer Protection Financial Education, Literacy, Awareness Financial Products that fit consumer needs & awareness / Financial Inclusion Regulatory Framework, Supervision, Enforcement Financial Industry standards, codes of conduct PRINCIPLES, STANDARDS OECD/INFE High Level Principles on National Strategies for Financial Education G20 Principles for Innovative Financial Inclusion G20 High Level Principles for Financial Consumer Protection WORLD BANK IMPLEMENTATION SUPPORT: GUIDANCE, TOOLKITS, CAPACITY-BUILDING Russia Fin lliteracy & Education Trust Fund: Impact Studies, Measurement Tools Financial Literacy Surveys, Action Plans, Technical Assistance Reference Framework for Financial Inclusion Strategies $3.7bn active portfolio in Financial Inclusion; technical assistance in >35 countries Consumer Protection diagnostics (>16 countries) covering regulatory framework, institutional reforms, market conduct, consumer awareness Technical Assistance for Action Plans, Reforms; Capacity-building and funding for regulators, industry associations etc

9 Thank you! Aurora Ferrari Financial Inclusion Practice, The World Bank