Financial Education Innovations and Impact. April 28, 2015 Guy Stuart, Ph.D. Executive Director, Microfinance Opportunities

Transcription

1 Financial Education Innovations and Impact April 28, 2015 Guy Stuart, Ph.D. Executive Director, Microfinance Opportunities

2 INTRODUCTION

3 Key Questions 1. What problems can financial education address? 2. What challenges exist for financial education?

4 Examples of Impact Attitudes Self-Efficacy Knowledge and Skills Know how to save Understand the uses of credit Awareness of different types of financial products Ability to understand terms and conditions of products Ability to make interest rate calculations Know how to put together a budget Know how to track income and expenses Behavior Save more Borrow less Use more financial products Choose cheaper products Shop around for loans and borrow from cheapest lender Follow a budget Track income and expenses

5 The Challenge: A Capability Gap The Financial Capability Gap is large and likely to grow Recipients of Financial Capability Training Received Training: 100 Million Consumers Need Training: 500 Million Consumers Lack of capability directly impacts consumers ability to access and benefit from financial services 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 37% 63% Mobile Money Subscribers Inactive Active

6 Costs to Scale

7 WHAT WE KNOW ABOUT IMPACT

8 Overview Financial literacy predicts financial behavior One study of studies showed that financial education had limited impact on literacy and behavior (Fernandes and others, 2013) Limited number of studies deliberately evaluating FE impact More recent study of studies by World Bank researchers found that FE does have an impact on literacy and some behaviors (Miller and others, 2014) Highlighted saving and record-keeping

9 Financial Education in Schools Classroom education can result in improved knowledge and behavior, if done right Bank of Italy study of effect of financial education on school children showed positive increases in knowledge (2008 to 2012) Federal reserve study of states variations in provision of financial education in high schools showed positive impact on credit scores World Bank study in 868 high schools in Brazil showed improved knowledge and increased savings

10 Financial Education out of School Out-of-school youth and adults harder to reach and more expensive Trade off: depth, breadth, and cost As a result, there have been many innovations in delivering FE to adults

11 INNOVATIONS AND IMPACT

12 Common Characteristics Timely Just-in-time content Reinforcement Relevant Simple Intuitive design Rules of thumb and other methods Interactive, at three levels: With the content With peers With an educator

13 Recent Innovations Text messages Embedded education Online education

14 TEXT MESSAGES

15 Innovations for Poverty Action Studies Savings reminders experiment (Karlan et al., 2014) Bolivia, Peru, Philippines Messages that mention both savings goals and financial incentives are particularly effective Loan repayment experiment (Karlan and Zinman, 2012) Text messages did not help with repayment rates except when the name of the loan officer was mentioned Rules of thumb for business accounting experiment (Drexler et al., 2011)

16 Juntos 2-way, automated SMS conversations Partners with banks & MNOs offering financial services to the mass market & low income Colombia: a bank offering a mobile savings account to the newly banked, the Juntos group had 50% higher savings balances and a 33% higher active client rate compared to the control

17 EMBEDDED EDUCATION

18 MFO Embedded Consumer Education: Zambia

19 Results from Zambia

20 South Africa Soap Opera Call to Action

21 ONLINE EDUCATION

22 Online Education Benefits Scalable Interactive at all three levels Always available and self-paced Challenges We still don t know what works Access for low-income and marginalized populations

23 Revolution Credit

24 Revolution Credit s Impact

25 FINAL THOUGHTS

26 FE is a Gateway to a Client-Centered Approach

27 Innovations and Impact Timely Just-in-time content Reinforcement Relevant Simple Intuitive design Rules of thumb and other methods Interactive, at three levels: With the content With peers With an educator

28 Guy Stuart, PhD Julie Lee