71405 Finance & PSD Impact MAY 2012 The Lessons from DECFP Impact Evaluations ISSUE 18 Our latest impact note provides the first of several new impact evaluations on financial literacy being financed by the Russian Trust Fund for financial literacy. The Impact of Financial Literacy Training for Migrants at Destination John Gibson, David McKenzie and Bilal Zia Lowering the cost of sending remittances has become a major goal of These groups were recruited through policy efforts in migration, and an area the churches, cultural festivals and snowball World Bank has worked on across the globe. sampling. Two main channels for lowering these costs The training consisted of a 2 hour are regulatory reforms to promote session plus handouts and written material competition and the introduction of new which focused on covering: the reasons products; and efforts to increase the people remit; different components of a disclosure of costs of remitting money remittance cost including the exchange rate through websites. premium; strategies for reducing this cost However, the success of such including bundling transactions into fewer policies depends on the ability of migrants larger transactions and comparing costs to understand how to use the different using the www.sendmoneypacific.org methods available for remitting, and on their website; explaining new remittance understanding of the costs implied by each products; and, for the Pacific Island sample, method. Existing evidence suggests also comparing the costs of different forms migrants often lack knowledge in these of credit. areas, suggesting scope for financial literacy efforts to change their behavior. Experiments with Migrants in New Zealand and Australia We conducted a field experiment to measure the impact of financial literacy training about remittances on three groups of migrants in New Zealand and Australia:  349 Pacific Island migrants in New Zealand who remit frequently and had relatively low baseline financial knowledge  352 East Asian migrants in New Zealand who remit less frequently and had relatively high baseline education and financial knowledge  209 Sri Lankan migrants in Australia A new website allowed comparison of costs who remitted relatively frequently and across different methods of sending money. had relatively high baseline financial knowledge. Do you have a project you want evaluated? DECRG-FP researchers are always looking for opportunities to work with colleagues in the Bank and IFC. If you would like to ask our experts for advice or to collaborate on an evaluation, contact us care of the Impact editor, David McKenzie (dmckenzie@worldbank.org) or on take-up of the new cheapest Follow-up Surveys products. Three follow-up surveys were  There are some modest changes in conducted at monthly intervals after use of credit among the Pacific training, along with a final survey six months after training. Attrition rates were Island sample, who set up ROSCAs very high for the Sri Lankan sample (45% of to avoid the high costs of payday the treatment group attrited after one loans. month), so the results are most reliable for the Pacific Island and East Asian migrants. Policy Implications The training was fairly cheap to Results deliver, with the main costs averaging  The training led to large increases approximately $15-25 per attendee. The in specific financial knowledge that training did have some impacts on knowledge and behavior, but did not lead to was taught during the course – financial benefits over the period we migrants were 12-16 percentage measured. points more likely to know it is When we asked participants why cheaper to send one large transfer they were not using the cheapest product, than two smaller ones; and 10-52 convenience was often the reason given. percentage points more likely to One reason convenience may win out could be that the amounts saved through better know the cheapest method of financial literacy may be too trivial to remitting. warrant action – the annual saving from  Knowledge gains were highest for switching to the cheapest product may at the Pacific Island sample, who had most be $23-46. The scope for changes in the lowest initial levels of financial outcomes may therefore be much larger if literacy. the focus is more on savings and budgeting behavior and getting migrants and their  Migrants changed some financial families to use the money they have more behaviors in response to this new effectively, rather than just savings on knowledge: they were more likely to transactions costs. Stay tuned for an impact use different sources of information note which looks at this type of training in to compare the costs of remitting; Indonesia. and the training made them less Meanwhile, governments trying to likely to switch to new remittance lower the cost of remittances appear to need to do more than just supply better methods that provide little benefit information and improve financial literacy – from switching. targeting barriers to the entry of new  However, the training had no providers and barriers to access of financial effect on either the frequency of services on the receiving country side may remitting or the amount remitted, also be needed. For further reading see: John Gibson, David McKenzie and Bilal Zia “The impact of financial literacy training for migrants�, World Bank Policy Research Working Paper no. 6073. Recent impact notes are available on our website: http://econ.worldbank.org/programs/finance/impact