Financial Education Programs and Strategies January 2014 Approaches and Available Resources INTRODUCTION reported mixed or no evidence 1 . Despite lack of conclusive evidence on impact, policy makers continue to The global financial crisis highlighted the importance embrace financial education programs as potentially of financial literacy and capability, because the lack worthwhile policy instruments. of consumer knowledge played a role in the genesis of the crisis. To become more active and confident Box 1. Definitions: Financial Education, participants in the financial sector, consumers need Literacy, and Capability awareness, understanding, and knowledge about various types of rapidly evolving financial products and services Financial education is a tool for increasing and associated risks, such as fraud and over- consumer financial literacy. According to OECD 2 , financial education is the process by which financial indebtedness. As the variety and complexity of financial consumers and investors improve their understanding products and services increases, the importance of the of financial products and concepts and, through financial capabilities of consumers becomes even more information, instruction and objective advice, develop significant for the smooth functioning of financial markets. skills and confidence to become more aware of financial risks and opportunities to make informed choices, know where to go for help, and take other Targeted financial education programs are designed effective actions to improve their financial well-being. and implemented as tools to increase consumers’ financial literacy and capability. This is done with the Financial literacy represents the level of aptitude in understanding personal finance. It often refers to expectation that such programs will facilitate better awareness and knowledge of key financial concepts informed decisions about using and managing financial required for managing personal finances and is services and risks, and thus mitigate potential negative generally used as a narrower term than financial effects. An increasing number of countries have financial capability. education strategies in place or have included financial Financial capability is the ability of consumers to education and awareness measures prominently within use the acquired financial literacy to make better financial inclusion, literacy, or sector strategies. In recent informed decisions about managing their finances. years, numerous countries have developed and According to the World Bank definition, it is the internal capacity to act in one’s best financial interest, implemented a broad range of financial education given socioeconomic and environmental conditions. programs. These initiatives ranged from financial literacy Financial capability encompasses the knowledge campaigns to more structured seminars and workshops, (literacy), attitudes, skills, and behaviors of and targeted various segments of the population with consumers regarding understanding, selecting, and using financial services and the ability to access diverse delivery channels such as formal educational financial services that fit their needs3. curricula or educational entertainment relying on popular soap operas to reach target audiences. The body of information available to guide the design However, the jury is still out on the impact and cost and implementation of financial education policies effectiveness of financial education because of and initiatives is increasing. OECD has developed mixed results of a number of recent impact Principles and Good Practices on Financial Education evaluations and studies. At the same time, given the and Awareness (2005) and established the International recorded positive impact of tailored interventions in some Network for Financial Education (INFE), which cases and at least in the short term, proponents of subsequently resulted in the development of numerous financial education would argue that what is really at knowledge papers, including “High Level Principles on issue is the quality of design of such programs. The National Strategies for Financial Education,” “Evaluation World Bank, with funding from the Russia Financial Literacy and Education Trust Fund, recently conducted a broad set of evaluations and studies. Some of those 1 For an overview of completed and ongoing evaluations see Annex 2 of this brief. studies found evidence of effectiveness, while others 2 “Recommendation on Principles and Good Practices for Financial Education and Awareness,” OECD, 2005. 3 http://responsiblefinance.worldbank.org/. Financial Education Programs and Strategies: Approaches and Available Resources | 1 of Financial Education Programs,” and “Principles on Notwithstanding the importance of financial education, Financial Education and Awareness” (all featured on the literacy, and capability, complementary measures - such International Gateway for Financial Education website 4). as consumer protection and sound prudential regulation - The World Bank has been actively involved in measuring are needed to ensure the development of an inclusive financial capability and the effectiveness of financial and also stable financial sector. education, under the Russian Financial Literacy and Education Trust Fund5, and providing wider policy advice ESSENTIAL STEPS IN ADDRESSING and implementation support to client governments in the FINANCIAL CAPABILITY GAPS area of responsible finance6. In general, there have been two approaches to Baseline Financial Capability Survey implement financial education programs: ad hoc To assess levels of financial awareness and targeted interventions aimed at addressing specific knowledge, and perceptions and attitudes financial education gaps and more comprehensive concerning financial services and money, a approaches through financial education or literacy nationally representative financial capability survey strategies that aim to address a number of priorities. is recommended to serve both as a diagnostic and Both approaches may be appropriate, depending on the monitoring instrument. Ensuring an accurate local context. Some countries may opt to start with understanding of the state of financial capability and targeted interventions first, based on which they may deficiencies that need to be addressed enables financial take a more comprehensive approach via financial education programs to be designed appropriately so that education strategies (or as a component of a broader they can be more effective in meeting policy priorities. financial inclusion or literacy strategy), while others take Such survey can also provide valuable information for a more strategic approach from the outset. Whatever the regulators and policymakers on implementing broader approach, financial education programs have a higher financial inclusion and financial sector policies. For likelihood of greater positive impact if such programs are example, it could provide insights on trust and confidence based on reliable diagnostic tools and focused on clearly to financial institutions and regulators, as well as defined and sequenced priorities aimed at precisely awareness of particular financial services or regulations. addressing identified financial capability gaps. A follow-up survey should be carried out after three to five years to measure changes in the levels of financial The purpose of this brief is to synthesize available knowledge and capabilities, which can inform policy and resources and complement existing knowledge priority adjustments. The impact of specific programs or about financial education with a practical approach, policies should also be monitored through impact primarily for countries that choose to develop evaluation and monitoring frameworks. financial education strategies as the initial step to address financial education needs. At the same time, Box 2. Essential areas that should be covered those that chose more targeted interventions may also by financial capability survey benefit from some of the program level recommendations. In this regard, this brief outlines The assessment of financial capability would essential operational steps and the sequencing of such benefit from questions that cover the following steps aimed at maximizing the benefits of financial essential financial capability areas. These include the following: i) basic numeracy skills and education initiatives. The proposed approach includes understanding of basic financial concepts (e.g., how the following steps, which will be elaborated upon in inflation affects savings); ii) day-to-day money more detail in this brief: management (e.g., planning income against expenditure and prioritizing spending on essentials);  Baseline financial capability survey to properly iii) ability to plan for future needs (e.g., making provisions for planned or unexpected expenses and diagnose the demand side gaps; retirement); iv) ability to choose between financial  Mapping of existing financial education initiatives to products (e.g., checking terms and conditions, determine the supply of standing programs; shopping around, and not borrowing more than one  Development and implementation of a financial can afford); v) key motivations (e.g., impulsiveness, achievement and time orientation and risk education strategy (or a component of a broader preferences). financial sector strategy) based on a previous demand-and-supply-side analysis and utilizing pilot programs prior to a full-scale rollout, with impact assessment integrated from the outset. 4 http://www.financial-education.org. For summary of principles, see Annex 1 of this brief. 5 http://www.finlitedu.org/. 6 http://responsiblefinance.worldbank.org/. Financial Education Programs and Strategies: Approaches and Available Resources | 2 Box 3. The World Bank Financial Capability If resources are not available for full-fledged financial Survey Methodology capability surveys and separate tailored survey work, questions can be added to other surveys. A set of The World Bank has developed and tested the targeted financial capability questions can be added to financial capability survey methodology 7 that is other planned survey work, for example, to a financial publicly available and could be adjusted to the inclusion household survey (such as FinScope 10) or to a needs of any country. In this regard, from a practical more general household survey. However, this is a point of view, governments may opt for adopting this existing survey methodology and tailor it to country second best option, because it would limit the scope for specific circumstances, as opposed to funding the questions and therefore also the value of the findings. development of survey methodology from scratch. In addition, utilizing the World Bank survey could also Box 4. Financial Capability “Plus” Efforts provide a degree of comparability with peer countries where the same methodology was used. Alternative The process of assessing financial capability gaps instruments are also available, and more details can be and developing strategies could also reveal found in the recently completed World Bank review of findings that could have practical implications for financial capability and literacy measurement wider government policy. This could result in a rich instruments Making Sense of Financial Capability set of recommendations that could also introduce Surveys around the World 8 as well as the Russia Trust broader measures that complement the priorities Fund Website 9 outlining both OECD and World Bank highlighted in the strategy and could be addressed with methodology for measuring financial capability. other tools such as consumer protection regulations. The World Bank also implemented an extensive For example, a recent financial capability survey qualitative research program, to identify the key in Tajikistan 11 found that consumers did not components of financial capability which are widely report complaints or other conflicts with specifically relevant in low- and middle-income financial service providers, and that around a settings. Based on the results of this empirical third of those who did not encounter any conflicts research, the World Bank developed a questionnaire would not do anything even if they faced such a that has been extensively tested to ensure that all conflict. According to survey findings, while the low questions are well understood and meaningful across level of self-reported conflicts may relate to low levels income and education levels. So far, this instrument of financial inclusion, it may also be related to has been used in fifteen countries (Armenia, concerns of potential adverse reactions from financial Azerbaijan, Bosnia and Herzegovina, Bulgaria, providers and limited awareness and understanding Colombia, Lebanon, Mexico, Mongolia, Nigeria, of terms and conditions of financial contracts, and Romania, Russia, Tajikistan, Turkey, Uruguay, and financial consumer rights. This may also point to a West Bank/Gaza) and is currently applied in four lack of consumer confidence in formal redressing additional countries (Malawi, Mozambique, Morocco, mechanisms or lack of knowledge about such support and the Philippines). Due to the extensive development services that could be addressed with targeted work of the questionnaire, its high relevance for low- financial consumer protection policies. and middle-income environments and the benefit of being able to make cross country comparisons, this Similarly, the survey in Mongolia 12 determined instrument may be very useful for assessments of that vast segments of the population were not financial capability. equipped with the proper knowledge to benefit from the planned distribution of shares after the privatization of a state mining company. When Specific financial education policies and measures asked if they would prefer to receive shares or cash can be informed by more tailored diagnostic work. For in the next round of shares distribution program, 39 example, school-based financial education initiatives or percent indicated their preference to receive shares. Less than 20 percent of those opting for shares were investor education programs could be based on separate aware of services offered by brokerage houses, and surveys and focus groups to properly gauge baseline roughly only one third of those knew about the capability of school children and existing investors services provided by the Mongolian Stock Exchange, respectively. Another option would be to consider adding a although such knowledge is essential to be able to trade shares and properly benefit from this program. booster sample to the financial capability survey (which While on the one hand the survey highlighted a otherwise would not provide specific insights to this specific gap in consumer knowledge, it also provided segment of population), specifically focusing on school- valuable information to the government about aged children for example. considering various alternatives, such as offering tailored financial education programs for consumers opting for shares, and/or distributing only cash. 10 FinScope, a FinMark Trust initiative, is a nationally representative study of 7 consumers’ perceptions of financial services and issues based on a sample that Financial Capability Surveys Around the World: Why Financial Capability is Important and How Surveys Can Help. covers the entire adult population and explores consumers’ usage of informal as http://responsiblefinance.worldbank.org/~/media/GIAWB/FL/Documents/Publicati well as formal products. http://www.finscope.co.za/pages/default.aspx. 11 ons/Why-financial-capability-is-important.pdf “Paving the Road to Better Financial Decision Making in Tajikistan,” 2013. 8 http://responsiblefinance.worldbank.org/~/media/GIAWB/FL/Documents/Misc/Fi http://responsiblefinance.worldbank.org. 12 nancial-Capability-Review.pdf. “Paving the Road to Better Financial Decision Making in Mongolia,” 9 http://www.finlitedu.org/measurement/. (forthcoming). Financial Education Programs and Strategies: Approaches and Available Resources | 3 Mapping Existing Financial Education program impacts and lessons learned, if any, should be Initiatives compiled to inform the policymakers of opportunities and risks involved. An important aspect of diagnostic work is mapping existing financial education programs. It is important Development and Implementation of a to conduct a review of all standing initiatives so that the subsequent strategy and future programs could be Financial Education Strategy informed by existing experiences, benefit from lessons The development of a national financial education learned, avoid duplication, and potentially rely on strategy can be used to identify and set national successful programs and delivery channels. The priorities and build a wider consensus about the mapping exercise is also one of the essential steps importance of this topic. Such a document can set the identified by OECD/INFE (See Annex 1). strategic direction and principles for development and implementation of financial education programs (e.g., Box 5. Essential areas for the mapping of types, sequencing, and monitoring and evaluation) and existing financial education initiatives align them with other initiatives and related reforms (e.g., financial consumer protection), minimizing gaps and  Implementing institutions (e.g., banks, NGOs, overlaps and resulting in better coordination of diverse and donors) stakeholders and their resources toward improving  Baseline evaluation work (e.g., surveys and focus financial capabilities. The strategy should be groups) complemented with an implementation action plan that  Methodology, program design, and scope sets out sequenced actions and institutional roles and  Target audience, outreach, and segmentation (e.g., urban, rural, age, and gender) responsibilities to make the strategy operational.  Budget and implementation timeline  Geographic coverage In addition to the OECD/INFE Principles for  Delivery channels and their effectiveness (e.g., Strategies for Financial Education 13 , which offer media, public events and seminars) guidance in the process of developing a strategy,  Conducted impact assessments this brief highlights the essential elements of financial education strategies and their importance in more detail. They include the following: i) leadership and The mapping process should cover public, private, and inclusion of variety of stakeholders; ii) setting priorities; non-profit initiatives and their effectiveness to the iii) design of financial education programs; iv) extent this is feasible. This process should attempt to implementation based on pilots with impact assessments include a description of all essential aspects of such from the outset; and v) funding sources. programs, as in Box 5. Initiatives could include any attempt by financial institutions (excluding marketing campaigns), Leadership and Inclusion of Variety of governments, donors, international organizations, and NGOs to tackle any aspect of financial awareness and Stakeholders education. Once the general stock-taking is complete, the The development of the strategy should have a focus can remain on more structured programs, while any strong institutional champion and include a variety marketing campaigns (those done for the benefit of financial of stakeholders. The development of the strategy and institution) can be excluded. One way to distinguish the priority-setting process requires a wide consultation marketing campaigns is the extent to which the material process including stakeholders from public, private, and focuses on specific branded products and product attributes non-profit sectors. In terms of institutional roles, the that relate to one provider vs. knowledge or behaviors that leadership should rest with an institution of good stature are relevant across or irrespective of financial institutions. and an institutional mandate for the financial sector. This The baseline evaluation work, program methodology, could include the country’s central bank, finance ministry, structure, design, scope, specific activities, geographic or financial sector regulator 14 . In addition, there should coverage, implementation timeline, and budget are some of also be a role for other stakeholders, for example, the the relevant aspects that should be recorded to the extent ministry in charge of education could be involved they are available. Furthermore, the choice of delivery regarding the development of curricula and piloting of channels such as awareness campaigns, workshops and school-based programs, and financial services sector seminars, public events, printed and digital publications, (e.g., professional associations, banks, microfinance newspapers, radio, and television should be recorded and institutions, and consumer bodies) could contribute to the their effectiveness in different settings (e.g., urban vs. rural) development and delivery of specific financial education and in reaching target audiences evaluated. The definition 13 and selection of a target audience and how each chosen 14 See Annex 1. For example the World Bank’s Good Practices for Financial Consumer market segment responds to different approaches are also Protection suggest these institutions for leading the development of financial literacy programs (see para 33, p. 8). elements worth exploring. Finally, a review of existing http://responsiblefinance.worldbank.org/~/media/GIAWB/FL/Documents/Misc/Go od-practices-for-financial-consumer-protection.pdf Financial Education Programs and Strategies: Approaches and Available Resources | 4 programs. While the proposed strategy would include all Setting Priorities programs under one roof, the implementation of different The strategy should outline a set of essential activities can be delegated to different authorities in line priorities. It is very important to set focused national with their mandates and expertise (i.e., government, priorities to ensure that strategic gaps are tackled with private sector, and NGOs). This approach would ensure sufficient resources. The priorities may vary from country improved coordination and outreach because it would to country depending on the results of financial capability minimize fragmentation. surveys, other diagnostic tools, and government priorities. Countries in which the credit sector dominates Box 6. Definition of a National Strategy for the financial landscape (e.g. banking and microfinance) Financial Education, List of Current National may want to focus on programs aimed at improving Strategies Worldwide, and Cited Challenges 15 knowledge and capabilities related to products and services in those sectors, as opposed to developing According to the OECD, National Strategy (NS) for programs focusing on emerging capital markets, for Financial Education is defined as “a nationally example. While priorities may end up being different, coordinated approach to financial education which consists of an adapted framework or program that (i) they could be set based on a number of criteria, such as recognizes the importance of financial education and demand or necessity (e.g., children, youth, and adults), defines its meaning and scope at the national level in goals (e.g., fostering access to finance through formal relation to identified national needs and gaps; (ii) institutions), desired outcomes (e.g., financially literate involves the cooperation of different stakeholders and the identification of a national leader or coordinating young adults and credit consumers), and costs and body/council; (iii) establishes a roadmap to achieve resource availabilities. specific and predetermined objectives within a set period of time; and (iv) provides guidance to be Design of Financial Education Programs applied by individual programs to efficiently and appropriately contribute to the national strategy.” As noted, the design of new financial education programs should incorporate findings of the impact As of February 2012, the OECD counted 36 assessments of already implemented initiatives countries that either considered, designed, or fully implemented a NS: (including those in other countries). While program  Fifteen countries have implemented their NSs: impact may be different in various countries, relying on Australia (2011), Brazil (2010), Czech Republic the previous experiences should reduce the risks when (2010), Ghana (2009), India (2006/2010), designing new programs. For example, recent evidence Ireland (2009), Japan (2005), Malaysia (2003), from Mexico demonstrated that take-up of voluntary the Netherlands (2008), New Zealand (2008, 2010), Portugal (2011), Slovenia (2011), Spain financial education programs is typically extremely low 16, (2008), the United Kingdom (2003), and the while other evaluations demonstrate the effectiveness of United States (2006, 2011). utilizing teachable moments (i.e., milestone events) as an  Twenty-one countries have either considered or effective mean of reaching adults with financial designed their NSs but have yet to implement education. For more details on recently completed and them: Canada, Colombia, Estonia, Indonesia, Kenya, Latvia, Lebanon, Malawi, Mexico, Peru, ongoing impact evaluations of financial education Poland, Romania, Serbia, South Africa, Sweden, programs, see Annex 2. Tanzania, Turkey, Uganda, Russia, Thailand, and Zambia. Programs should rely on both traditional and innovative delivery channels, depending on the Countries that have neither considered nor planned an NS mentioned a range of challenges: target audience and circumstances. Delivery channels 1. Agreeing on definitions and common objectives, may range from more traditional means such as particularly when defining the main purpose and classroom-type workshops and seminars, publications, content of the NS and the relationship between school-based programs for children and young adults to financial literacy and financial inclusion. 2. Buy-in and commitment, when it comes to integrating messages in entertaining ways via radio, coordinating with different parties and making television, and even mobile phones. For example, adults, sure they are all committed over time, especially unlike children, have more rigid preferences that are in light of the long-term nature of an NS. more difficult to change, and may be less susceptible to 3. Competing policy priorities, because various learning from classroom-based training that they may government bodies have to compete for visibility and political backing for their own priorities. find disinteresting. In this sense, it is important to 4. Resources and budgetary issues consider a wider range of non-traditional financial 5. Federal structure capability enhancing interventions that do not rely on formal education channels, such as entertainment 15 Grifoni, A. & Messy F.-A. (2012), “Current Status of National Strategies for 16 Miriam Bruhn, Gabriel Lara Ibarra, and David McKenzie, “ Why is Voluntary Financial Education: A Comparative Analysis and Re levant Practices,” OECD Working Papers on Finance, Insurance and Private Pensions, No. 16, OECD Financial Education so Unpopular? Experimental Evidence from Mexico,” World Publishing. Bank Policy Research Working Paper 6439, May 2013. Financial Education Programs and Strategies: Approaches and Available Resources | 5 education or integrating educational messages in popular Evidence shows that dramas, narratives, and stories TV or radio shows in an entertaining fashion 17 , comic are effective ways to communicate. A short-term books, and so forth. behavioral change can be induced via temporary interventions utilizing non-traditional channels such as Box 7. Brazil Strategy and Initial Program movies, which do not specifically focus on addressing Impacts knowledge gaps but rather rely on emotional stimuli 19 . However, one limited or isolated intervention, regardless  Leadership: The development of National Strategy of the delivery channel, may only have a limited impact; for Financial Education in Brazil was coordinated by this is why the repetition and reinforcement of messages the Brazilian Securities and Exchange Commission is important and why using non-traditional methods can and the established working group also included be useful. In addition, given the rapid spread of other financial services regulators (e.g., the Central Bank, pension, and private insurance regulators) and technology, especially with highly accessible mobile the private sector as auxiliary members. The phones, this could be an opportunity to increase the implementation of the strategy is conducted by a outreach and effectiveness of programs. For example, committee known as COREMEC to create a public- the Polish Financial Supervision Authority developed a private partnership that can fund and implement the financial education program. Brazil is an example of a personal budget application available free-of-charge to country in which a decision was made to start with a mobile phone users, designed to help monitor and targeted high school financial education program first analyze personal spending. To the extent possible, an and then proceed with a more meaningful national effort should be made to take advantage and rely on strategy process. existing successful programs.  Goal: The goal of the strategy was to develop personal finance skills and to help citizens to make well-informed choices and to improve their financial Both private and public sectors should play a role in well-being. the design and delivery of financial education  Content: The strategy included: i) targets (age programs. Some believe that financial service providers groups, educational levels, income levels, are best placed to provide financial awareness and professions, and regions); ii) priority goals (the growth education to potential consumers, while others focus more of the market, financial inclusion, and investor protection); iii) priority areas (developing personal on traditional school-based and classroom education, finance skills, stimulating savings, broadening the use largely provided through the public sector. In reality, and of financial institutions, improving the quality of credit as illustrated previously, there is a wide range of relations, and mortgages and home-owner loans); iv) approaches and delivery mechanisms that should be educational tools (Internet pages, lectures, publications, courses, seminars, meetings, toll-free considered and roles for all stakeholders. When it comes lines, and campaigns); v) funding (funding sources to the role of the private sector, it should be ensured that and institutions that offer support; vi) roles of the the issue of potential conflict of interest is properly participants (governmental agencies, private sector, recognized, because financial institutions may encourage and civil society); vii) governance (coordination policy makers to employ financial education as a way to mechanisms); viii) an explanation of how the national strategy is integrated into federal planning; and ix) reduce or limit more effective consumer protection monitoring and evaluation (evaluation tools and regulations 20 . In this context, it is worth repeating that methods and performance indicators) financial education is a complement to other measures  Impact Assessment and Findings18: A large scale such as financial consumer protection regulation. study in Brazil tested the impact of financial education on high school students. This was only one of the financial education programs (the strategy included Implementation Based on Pilots with Impact more initiatives) and it was a multi-year, resource- Assessments from the Outset intensive effort. The financial education materials The implementation of financial education programs focused on a broad range of themes, from budgeting to savings and general financial management. The should rely on pilots prior to full-scale roll out. study included nearly 900 schools and 26,000 Implementation of all activities on small scales first, only students and found that: i) the programs led to scaling up to full-scale implementation based on improved financial proficiency scores for students as evaluations (via surveys, pilot tests, and randomized well as an increase in measured savings; ii) complementary workshops for parents led to even control trials), is recommended. This approach would higher savings for students; and iii) financial enhance effectiveness and safeguard resources. For education for students also led to improved financial example, though Pakistan does not have a financial proficiency for parents through a “trickle-up” effect. education strategy, it commenced with targeted financial education programs that involve small scale piloting, evaluation, and only subsequently a roll out. 17 See summary of evaluation results of and entertainment education program in 19 See para 10 in Annex 2, b). South Africa in Annex 2, b), para. 8. 20 18 Lauren. Willis, “The Financial Education Fallacy,” American Economic Review: M. Bruhn, L. De Souza Leão, A. Legovini., Marchetti, and B. Zia, “Financial Education and Behavior Formation: Large Scale Experimental Evidence from Papers and Proceedings 2011, 101:3, 429–434. Brazil,” World Bank Working Papers (2013). http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.3.429. Financial Education Programs and Strategies: Approaches and Available Resources | 6 Impact evaluation mechanisms should be integrated from the outset. The World Bank has developed an Acknowledgments operational toolkit 21 for evaluating financial capability programs that could be used to support evaluations of This knowledge brief was prepared by Andrej existing initiatives. Drawing on experiences of different Popovic (Senior Financial Sector Specialist) from the World Bank’s Financial Inclusion and Infrastructure types of evaluations, this toolkit is a practical guide for Practice. Research support was provided by Sarah comprehensive evaluation programs aimed at enhancing Fathallah (Analyst). financial capabilities in low- to middle-income countries. OECD has developed Principles for Evaluation of Peer review comments were received from Siegfried Financial Education programs (See Annex 1), as well as Zottel, Samuel Maimbo, and Margaret Miller (all an evaluation methodology22. World Bank) and Shaun Mundy (Independent Consultant). Douglas Pearce (Practice Manager) Box 8. Impact of Innovative Delivery of provided inputs and valuable overall guidance. Financial Education in South Africa  Context: As a part of the project aimed to pilot entertainment education to improve management of personal finances in South Africa, a financial capability storyline focused on debt management was developed and integrated into a popular South African soap opera Scandal!. Subsequently, a study23 was conducted evaluating the effects of financial literacy messages on low-income households delivered via this soap opera.  Findings: i) the study found that viewers who watched the storyline related to financial literacy showed significant improvements in financial knowledge and behavior, including a greater likelihood to borrow from formal sources, reduced gambling, and reduced likelihood to enter into hire-purchase (installment plan) agreements; ii) messages delivered through the main characters in the show were generally more memorable than messages (such as one around the National Debt Mediation Helpline-NDMA) delivered by external characters, which had only short-term effects. As a result, the call volume to the NDMA hotline increased significantly after these episodes aired. Funding Sources The cost of implementation can be substantial for many countries and alternative sources of funding are available. As an illustration, the costs of implementation of Zambian Financial Education Strategy were estimated at around $15 million. A strategy may need to outline the potential sources of funding outside of the state and how fundraising could be approached. For example, the authorities could commit to secure certain percentage, financial institutions could bear some of the costs especially related to their programs (providing that such programs are not marketing initiatives), and the strategy could essentially serve as the proposal for donor funding. While the mechanisms will vary in different countries, depending on context and strategies, it is important to ensure that funding will be secured by the time of implementation. 21 http://www.finlitedu.org/evaluation/wb/. 22 http://www.finlitedu.org/evaluation/oecd/. 23 G. Berg and B. Zia., “Harnessing Emotional Connections to Improve Financial Decisions: Evaluating the Impact of Financial Education in Mainstream Media,” Policy Research Working Paper Series 6407 (2013), World Bank. Financial Education Programs and Strategies: Approaches and Available Resources | 7 ANNEX I a) Summary of OECD/INFE Principles on National Strategies for Financial Education24 1. Preparation of the National Strategy: Defining its Scope and Purpose through Assessment, Mapping, and Consultation  The preparatory phase should map: (i) any existing financial education endeavors, (ii) relevant literature and research, and (iii) relevant international practices.  An assessment of population needs should be completed, preferably based on a national evaluation of financial literacy.  A consultation and coordination mechanism between various NS stakeholders (and potentially the general public) should be initiated.  Communication of the preparatory phase results should be made alongside the official announcement of the NS launch. 2. Governance Mechanisms and the Role of Main Stakeholders in the National Strategy  The NS should be initiated, developed, and monitored by a credible and unbiased authority with financial education expertise (and preferably dedicated mandate) and appropriate resources and enforcement powers.  The NS should involve a cross-sectional coordination between interested stakeholders, in a flexible manner, to allow for changing circumstances and renegotiations. Stakeholders should include public authorities, private sector and financial service providers, as well as other civil society and international stakeholders. 3. Roadmap of the National Strategy: Key Priorities, Target Audiences, Impact Assessment, and Resources  The NS should clearly define realistic and measurable objectives, specify a detailed roadmap for intermediate outputs, and include a timeframe for the achievement of these targets.  The NS roadmap should recommend introducing financial education as early as possible, preferably in school curricula.  The NS should identify target audiences with a focus on specific vulnerable groups in the population.  The NS should specify its assessment methods, preferably national financial literacy surveys conducted regularly.  The NS should have specific financial and in-kind resources to allow for its implementation, provided by at least involvement of each of the main stakeholders. A combination of public and private resources should be considered and the use of private sector contributions encouraged. 4. Implementation of the National Strategy: Delivery Mechanisms and Evaluation of Programs  The NS should indicate delivery methods and tools based on good practices and ongoing research. These should include (i) the use of a wide range of dissemination channels adapted to the circumstances of the targeted groups, (ii) the promotion of financial education on a regular basis to communities, (iii) the training of the financial education providers, and (iv) the development and implementation of tailored regulation, quality standards and code of conduct.  The NS should promote the monitoring and evaluation of its individual programs. b) Summary of OECD Principles for the Evaluation of Financial Education Programs25 1. Evaluation: an Essential Element of financial Education Programs  New programs should be evaluated.  Existing programs should be evaluated as much as possible. 2. Budget for Evaluation  A budget should be set for evaluation.  The amount of money dedicated to evaluation should be proportionate to the program cost. 3. External Evaluations: Adding Credibility, Skills and Independence  The use of independent evaluators should be promoted whenever possible. 4. Appropriate Evaluation Design  Evaluation design should consider the pr ogram’s goals, size and length, target audience, and delivery channels.  Evaluation design should focus on assessing if the program has met its objectives.  The evaluation of small scale programs should take into account budgetary constraints. 24 OECD/INFE, “High-Level Principles on National Strategies for Financial Education,” 2013 . 25 INFE, “High-Level Principles for the Evaluation of Financial Education Programmes,”2012. Financial Education Programs and Strategies: Approaches and Available Resources | 8  A full range of options should be considered to evaluate large programs.  For programs targeting the entire population, evaluation design should prioritize the use of national data.  Evaluations should specify whether programs have had any impact on knowledge, skills, behaviors or attitudes. Priority should be given to evaluation designs that can prove causal relationships between these impacts and financial education. 5. Reporting  The reporting of evaluation findings should be encouraged by policy makers.  Evaluations should be unbiased in order to allow for people to learn from programs’ successes and failures. c) Summary of OECD Principles and Good Practices for Financial Education and Awareness26 1. Principles  Financial education can be defined as “the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being.”  Financial capacity building should be promoted.  Financial education programs should focus on high priority issues that stem from national circumstances.  Financial education should be considered in the administrative and regulatory framework as a tool promoting economic growth, stability, and confidence. The promotion of financial education should substitute regulation.  Financial institutions should be encouraged in providing advice and promoting financial awareness.  Other measures to take when observing deficiencies are consumer protection and financial institution regulation.  Financial education programs should meet the needs of their target audience, and should be designed as a continuous process throughout their lifetime. 2. Good Practices: Public Action for Financial Education  National campaigns should be promoted to increase general public awareness.  Financial education should start at school as early as possible.  Financial education should be incorporated into state welfare assistance programs.  Websites providing relevant and user-friendly financial information to the public should be set up.  International cooperation around financial education should be encouraged. 3. Good Practices: Role of Financial Institutions in Financial Education  Providing specific information to clients on financial service should be required from financial institutions.  Financial institutions should distinguish between financial education and “commercial” financial advice and should verify that information provided to their clients is well understood.  Financial institutions should provide information at various levels, and should not use small print and obscure language.  Financial education provided by financial institutions should be frequently and independently evaluated.  Financial institutions’ staff should be trained on financial education. 4. Good Practices: Financial Education for Retirement Savings  Financial institutions should provide financial education on retirement savings and income management to individuals in private personal pension plans.  Financial education on contributions and benefit schemes should be provided to employees for occupational schemes. 5. Good Practices: Financial Education Programs  Programs that help consumers understand the benefits and risks of different types of financial services should be encouraged. More research on behavioral economics should be promoted.  The design of methodologies to evaluate existing financial education programs should be encouraged.  Programs that develop guidelines on study content and accomplishment level should be promoted.  The use of all available media to disseminate financial education should be encouraged.  Programs creating specific modules targeting different population segments should be promoted.  Training of educators should be encouraged in the case of classroom-related financial education programs. 26 OECD, “Recommendation on Principles and Good Practices for Financial Education and Awareness,” 2005. Financial Education Programs and Strategies: Approaches and Available Resources | 9 ANNEX II a) Summary of Complete and Ongoing Financial Education Studies27 Evidence of Country Focus Target Group Intervention Type Effectiveness Australia and New Remittances, credit, and Migrant workers Seminar Mixed results Zealand financial product selection Budgeting, savings, and Brazil general financial High school students Classroom training Yes management Online stock market Brazil Stock market investment Stock market users - simulator Dominican Republic Financial management CCT beneficiaries CCTs and seminars - Budgeting, savings, and Low-income India general financial Seminar Mixed results households management Savings, budgeting, Low-income Seminar, counseling, India - financial product selection households SMS reminders Long-term planning, and Rural small-scale India and Kenya Comic books Mixed results weather insurance farmers Classroom training, Financial management, Kenya School children comic books, and radio No and savings shows Financial management, Agricultural wage Labeled banking account, Malawi - and savings earners and farmers Behavioral economics Savings, retirement, and Mexico Credit card customers Seminar Mixed results use of credit Low-income credit Disclosure formats, SMS Mexico Savings, and credit Yes* customers and phone counseling Savings, use of banking Existing and new Nigeria Marketing campaign Mixed results services bank users Low-income Nigeria Savings, credit households and small Movie Mixed results* business owners Savings, remittances, Members of burial South Africa budgeting, and financial societies, Women’s Seminar Yes* product selection development groups Low-income South Africa Debt management Soap opera Yes households Low-income Uganda General financial education Seminars Mixed results households Vocational and business Small business Uganda Seminars Mixed results* training owners Nigeria Microsavings Entrepreneurs Movie Yes *Preliminary results only Ongoing Evaluations are presented in italic font 27 “Financial literacy and education in low- and middle-income countries: measurement and effectiveness,” Robert Holzman, Florentina Mulaj, and Valeria Perotti, (forthcoming), World Bank. Financial Education Programs and Strategies: Approaches and Available Resources | 10 b) More Detailed Summary of the Result of Recently Completed Evaluations of Financial Education programs28 1. Australia and New Zealand - This study examined the effects of a two-hour financial education seminar on migrant workers in Australia and New Zealand, particularly on their remittance-sending behavior. The seminar focused on remittances, credit, and financial product selection.  Findings: i) the study did show that the training increased workers knowledge of remittance pricing and the likelihood to seek out additional information; ii) the intervention did not lead to significant shifts in frequency or levels of remittances sent, or reduce the cost of sending remittances for study participants.  Source: Gibson, J., McKenzie, D. & Zia, B. (2012), The Impact of Financial Literacy Training for Migrants, Policy Research Working Paper Series 6073, World Bank. 2. Brazil - This large scale study in Brazil tested the impact of financial education on high school students. The financial education materials focused on a broad range of themes, from budgeting to savings and general financial management. The study included nearly 900 schools and 26,000 students.  Findings: i) the study found improved financial proficiency scores for students as well as an increase in measured savings; ii) complementary workshops for parents led to even higher savings for students; iii) financial education for students also led to improved financial proficiency for parents through a "trickle-up" effect.  Source: Bruhn, M., De Souza Leão, L., Legovini, A., Marchetti, R., & Zia, B. (2013), Financial Education and Behavior Formation: Large Scale Experimental Evidence from Brazil, World Bank Working Papers. 3. India - This study measured the effects of a two-day financial literacy training, covering the role of formal banking, cash management, and responsible borrowing, spending, and savings for branchless banking customers.  Findings: i) Participants changed savings behaviors as well as attitudes around financial management; ii) however, measured levels of financial literacy did not improve.  Source: Sarr, L., Sadhu, S. & Fiala, N. (2012), Bringing the Bank to the Doorstep: Does Financial Education Influence Savings Behavior among the Poor? Evidence from a Randomized Financial Literacy Program in India, Working Paper, Institute for Financial Management and Research, Centre for Micro Finance. 4. India and Kenya - This study examined the effects of financial literacy training and targeted discount vouchers in encouraging farmers in rural India and Kenya to take up index-based weather insurance. The study covered approximately 14 villages and used comic books as a delivery mechanism of financial education.  Findings: i) the study found that both the vouchers and financial literacy training increased take-up of the index- based drought insurance; ii) the study also found that while the vouchers only had effects on direct recipients, the financial literacy materials, delivered through a comic book, had positive spillover effects, meaning that even neighbors who did not receive the financial education were more likely to take up drought insurance.  Source: Gine, X., Karlan, D., & Ngatia, M. (2013), Social Networks, Financial Literacy and Index Insurance. 5. Kenya - This study focused on the effect of financial literacy training for Kenyan youth and the method of delivery comparing classroom training, comic books, and radio shows. The study involved 220 high schools.  Findings: i) the study showed little effect on participants' levels of financial education as well as little effect on stated behavior or actual behavior (when given real resources to allocate at the end of the study); ii) the study did show some increased likelihood in participants' interest in starting a business in the future.  Source: Holzmann, R., Mulaj, F., & Perotti, V. (forthcoming), Financial Literacy and Education in Low- and Middle-Income Countries: Measurement and Effectiveness, World Bank. 6. Mexico - This study examined the impact of a four-hour financial literacy training on savings and borrowing behavior for credit card customers in Mexico. It involved approximately 40,000 consumers, and the seminar focused on savings, retirement, credit cards, and responsible use of credit.  Findings: i) the study showed a significant increase in financial knowledge and an increase in savings for study participants; ii) however, data showed that the impact on savings was relatively short-term; iii) study showed no impact on credit card usage, retirement savings, or borrowing.  Source: Holzmann, R., Mulaj, F. & Perotti, V. (forthcoming), Financial Literacy and Education in Low- and Middle-Income Countries: Measurement and Effectiveness, World Bank. 7. Nigeria - This study examined the impact of a national marketing campaign launched to encourage savings, and publicized through advertisements with celebrity endorsements. The campaign involved an incentive element in which customers who open a savings account and maintain a certain amount of money in the account for 90 days receive lottery prizes.  Findings: i) the study found that there was improvement in savings behavior and usage of other financial 28 Available in the forthcoming Report “Financial Literacy and Education in Low- and Middle-Income Countries: Measurement and Effectiveness” by Robert Holzman, Florentina Mulaj, and Valeria Perotti, World Bank. The study focused on Nigeria and featured in paragraph 10 will be available in the forthcoming report “The Nollywood Nudge: An Entertaining Approach to Saving” by Di Maro, V., Coville, A., Zottel, S., and Dunsch, F. The World Bank. Both reports will be available at www.finlitedu.org. The reference for conclusions in paragraph 11 is listed in the footnote 29. Financial Education Programs and Strategies: Approaches and Available Resources | 11 products; ii) however, there was no evidence that the program led to long-term changes after elimination of the incentive element.  Source: Holzmann, R., Mulaj, F., & Perotti, V. (forthcoming), Financial Literacy and Education in Low- and Middle-Income Countries: Measurement and Effectiveness, World Bank. 8. South Africa - This study measured the effects of a financial literacy message delivered through mass media, in this case a soap opera called “Scandal!” in South Africa, on low -income households. The main focus on the financial literacy messages was around debt management.  Findings: i) the study found that viewers who watched the storyline related to financial literacy showed significant improvements in financial knowledge and behavior, including greater likelihood to borrow from formal sources, reduced gambling, and reduced likelihood to enter into hire-purchase (installment plan) agreements; ii) messages delivered through the main characters in the show were generally more memorable than messages (such as one around the National Debt Mediation Helpline-NDMA) delivered by external characters which had only short-term effects. As a result, the call volume to the NDMA hotline increased significantly after these episodes aired.  Source: Berg, G. & Zia, B. (2013), Harnessing Emotional Connections to Improve Financial Decisions: Evaluating the Impact of Financial Education in Mainstream Media, Policy Research Working Paper Series 6407, World Bank. 9. Uganda - This study examined the effect of an eight-week financial education module on low-income households' financial attitudes and behaviors in Uganda. The training syllabus covered a range of general financial education topics, including budgeting, saving, loan management and negotiation, debt management, and bank services.  Findings: i) the study showed that the training led to increased knowledge, skills and attitudes around financial literacy, but that these did not always translate into direct behavioral change; ii) there was some evidence that the training led to increased savings, either inside the home or through a savings group or Savings and Credit Cooperative Organization (SACCO), however this finding may be due to differing levels of engagement with those groups prior to receiving the training; iii) the study showed that savings groups and SACCOs may have a role to play in "nudging" members towards making better financial decisions.  Source: Stuart, G. (2012), Uganda Financial Education Impact Project, Microfinance Opportunities. 10. Nigeria - This study tested the effectiveness of using The Story of Gold, a Nollywood film promoting safe savings to motivate entrepreneurs to open microsavings accounts. It also tested the importance of linking emotional stimulus to financial messages in order to influence short-term savings decisions, and whether this had any longer-lasting impacts.  Findings: The study found that that entrepreneurs watching The Story of Gold were 5 percentage points more likely to open a savings account than those in placebo screenings, and this effect was mostly driven by male business owners. However, in the longer run, only moderate changes in attitudes and perceptions were found, while savings and borrowing behavior was unchanged four months after the screening.  Source: Di Maro, V., Coville, A., Zottel, S., and Dunsch, F., (forthcoming), “The Nollywood Nudge: An entertaining Approach to Saving,” World Bank. 11. According to a recent meta-analysis29 of the relationship of financial literacy and of financial education to financial behaviors in 168 papers covering 201 prior studies, the authors concluded that interventions to improve financial literacy explain only 0.1% of the variance in financial behaviors studied, with weaker effects in low-income samples. 29 “Financial Literacy, Financial Education and Downstream Financial Behaviors,” Daniel Fernandes, John G. Lynch, Jr., Richard G. Netemeyer, forthcoming in Management Science. Financial Education Programs and Strategies: Approaches and Available Resources | 12