Financial Literacy as non-financial service?

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Permalink Reply by Safietou Thiam on July 8, 2011 at 12:10pm

I really agree with you. how can you give someone a car without teaching them how to drive? I think that many people in poor country are afraid of formal financial services because they don't know about financial literacy. The fact is that this lack of literacy on financial services, reduces acces and increase poverty. We would advise to learn more about the ''what and how'' financial services in order to have better result for poverty reduction

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Permalink Reply by Muhammad Awais on July 14, 2011 at 5:26am

 

Even if the client enters in the "formal financial system" first time but the client already has the experience in dealing with finance. Definitly financial literacy adds value but we need to be sure what gaps we are trying to meet. Financial literacy in general is not effective in most cases. And clients are least interested in it.    

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Permalink Reply by Bobbi Gray on July 15, 2011 at 1:01pm

I think Muhammad's point is important and why some financial education doesn't work well. I think one of the challenges is also our differing definitions for what financial education or literacy education is. When someone joins an organization, they are likely getting "consumer education" --for example, how to follow the rules of the organization, how to ensure you'll repay ontime and remain in good standing, how to use a particular savings product, etc. This is different from creating strategies to make better use of your money--which I might consider "financial education".  I think Muhammad's point is important--we have to know what people want/need to learn. So for example, when we've done financial education, there is generally an appreciation for saving money among clients. You don't really have to convince them that saving money is a good thing. What people most want to learn is how to create strategies to save money when they feel there are so many demands for their money. What strikes me is how many people are usually appreciative of mandatory savings (such that might exist for village banking) because it forces them to save  --but then they do benefit when the loan cycle closes and now they have a lump sum of money. So, financial education on savings in general might not be that helpful --but the right savings products that create discipline for savings might be better. Also, on debt management financial education---clients usually get this as "consumer education' when they take out a loan. They learn what their responsibilities are to repayment and are encouraged to not take out more than they can repay..so they are somewhat "trained" on how to avoid overindebtedness per standards of the organization providing the credit. However, when we've done assessments on debt management education, what people often want to learn is how to get out of debt once they are there. So, if you're training people on how to avoid overindebtedness and they are already carrying too much debt, it would be more relevant to work with them on strategies on how to get out of debt because it will be a relevant topic for them. But that takes an organization being very responsive to client needs. I don't know if all organizations provide "consumer education" like they should whereby clients are educated on how specific products work, but I would differentiate this somewhat with financial education which is more about developing strategies to get the most performance out of your money.

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