Recently, Jaya Burathoki, Save the Children Project Manager in Nepal, blogged about the highlights from the Citi – FT Financial Education Summit in Jakarta. She raised interesting takeaways, such as the strategy that different governments in East Asia are using in the formulation of their financial education programs, the broader scope that financial education acquires when linked with financial access, and the urgent call for data to perform program evaluations.
Having said this, I wanted to bring up some perspectives from the II Economic and Financial Education Workshop in Medellin, Colombia, which took place in July 2011, and contrast them with some of the main points Jaya addressed.
Financial Education is not just about education anymore.
While there was a general consensus at the Citi-FT Summit that granting access to financial products and services is a key component of a financial capability program, this message was not widely acknowledged during the workshop in Medellin. Most discussed strategies and programs aimed at changing knowledge, attitudes, skills and behaviors through financial education or financial literacy - but little was said about the need to connect those programs with increased access to financial products and services. Dubis Correal, a representative from the US Department of Treasury, was among the few who mentioned the concept of financial capability and emphasized that financial education is more effective when tied to a financial product.
Nevertheless, the Colombian government has prioritized increasing financial access for the unbanked population. The latest Financial Inclusion Report from Asobancaria (Colombian Association of Banks) states that by June 2011, 62.7% of the adult population in Colombia had at least one financial product, 2 percentage points more than 2010 statistics. However, it seems that the connection between financial education and financial access has not yet beencompletely understood. Although not discussed during the conference, it is important to acknowledge the risks of increased financial access, especially for low-income people, when a supportive financial education/consumer protection program does not accompany such growth. Potential risks include over indebtedness and/or predatory lending.
More Governments are Getting Involved in Financial Education for Youth.
Similar to East Asia and Australia, in Latin America and Spain different country governments and national institutions are taking varied approaches to promoting financial education for its populations, including children and youth. The Spanish plan for financial education focuses on interactive tools such as websites (www.finanzasparatodos.es and www.gepeese.es), which contain activities and special selections of games that are visually attractive and engaging. In Mexico, Condusef (National Commission for the Protection and Defense of Financial Services Users) developed eight different initiatives to target different audiences and age groups, among them the National Financial Education Week, a magazine called “Protect your Money,” and a financial education guide for primary school. In Colombia, several institutions are developing the economic and financial education strategy, including the Central Bank, the Ministry of Finance, the Ministry of Education, the Superintendencia Financiera (Financial Regulator), Fogafin (Financial Guarantees Fund), Fogacoop (Guarantees Fund for Cooperative Organizations) and the Autorregulador del Mercado de Valores (Stock Market Regulator). Though still in the development process, this strategy matches those of other countries such as Brazil and arguably Indonesia and Australia, who plan to incorporate it into the existing school curriculums. Still, the question remains: which of these strategies will render the best results in terms of developing financial capabilities that are appropriate for each type of society and their specific needs?
Data, Data and More Data.
There seems to be a worldwide call on the need for data to help inform the impact of financial education programs at all levels. Even though, as stated in the Citi-FT Summit, there isn’t an agreed upon international methodology for evaluation, OECD’s International Network on Financial Education (INFE) has been working to develop methodologies around the measurement and evaluation of financial literacy, both for youth and adults. INFE has developed a summary of existing evaluation evidence as well as a critique of current evaluation practice and guides for designing and implementing robust financial education evaluations, which could be adapted for the evaluation of locally developed financial education programs.As a general best practice, the guide suggests that external evaluators conduct the assessment of the programs in order to guarantee credibility and independence of the results.
Who is Responsible for Financial Education?
A common view throughout the workshop was that effective financial education needs to be a multi-stakeholder effort that includes the Government, consumer bodies, financial institutions, the media and NGOs. However, most agreed that the Central Government should lead the formulation and implementation of a national strategy with active participation from the Ministry of Education and the Ministry of Finance. Several speakers also raised an interesting point: the development of financial literacy programs shall not be left solely to the financial sector. The corporate mission of financial institutions is to sell financial products and services, so there is a high risk of crossing the line between the implementation of financial education programs and marketing, a practice so-called “hidden marketing.” There could be a serious conflict of interests, which would compromise the objectivity of a certain financial education program. Thus, conference participants called for financial institutions to be involved in the formulation of financial literacy programs, but through partnerships with organizations - such as NGOs - which have experience and institutional capacity for developing and implementing them.
The above thoughts provide a snapshot of both the similar and different perspectives that several regions across the world are adopting with regards to financial capability/education programming. Although financial education interventions need to be tailored to specific contexts, practitioners should continue to obtain cross-country lessons and apply best practices, to the extent possible, to the growing financial capability field. This will ultimately boost the economic and social possibilities of youth, which is our central aim.
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Alejandra Montes