Q&A : Financial Literacy – Who’s Responsibility?

Microfinance Focus, October 14, 2010 (Colombo) : An interactive Q&A session with many hands, questions and points raised, most unfortunate to be curbed by time constraints. An insightful session facilitated by Paula Bennett, Director of Corporate Citizenship, Citi Asia Pacific.

Question: Regarding financial literacy, they are non-financial services. Do you have to partner with other companies or even international organisations to carry it out? I am from Bangladesh and our government is beginning to put an interest cap to MFIs in the country so we are finding it financially difficult to get international help. Our portfolio-at-risk is going up, due to multiple lending, so what can we do?

Valerie: Regarding the teaching materials that we have used in Cambodia and Vietnam, it is not a large file and can be sent to email easily and I will be glad to share it with you. We are still tracking the progress of and benefits of financial literacy in our research and so it is too early to respond to you about whether financial education can reduce multiple lending and other risks.

Samadanie: In SANASA, we have utilised volunteer labour. We are privileged to have a large number of people who are willing to do the teaching work for free to promote financial literacy; hence we did not incorporate that into cost. There are organisations and partnerships you can forge to do the financial education for the MFI while letting the MFIs just focus on credit.

Paula: Not everyone knows that financial literacy materials are available. Do search Global Financial Education Programme for the website. The site indicates the large amount of modules that are available, as well as the many different languages available where materials have been translated. So there is material out there.

Benita: As to when an MFI should start doing financial literacy, it is when SHGs are formed, that is the ideal time to teach them how to manage their income expenditure.

Question: You mentioned responsibility of MFIs, parents, but I think the public education system should also be responsible. I would like to ask the panel if anyone has any experience in improving financial literacy through public education.

Paula: Those countries that introduce financial literacy into school curriculum tend to be the more developed countries like Australia and Singapore. In India, they do not have it in the public education. The school system is definitely one area. Within the school system, teachers often do not understand nor have the capacity to teach finance. Schools do not have specialists in this area.

Question: I am definitely sure that financial literacy will have positive results. To Benita, what % of interest rate will you add on to fund the financial literacy programmes?

Benita: We have the SHG federation to address these issues. According to the structure, the member joins with a one-time members fee. We have not gone to examine the expanded cost. Right now, we are claiming cost/grant from India’s NABARD (National Bank for Agriculture and Rural Development). Hence, the cost for financial literacy is not taken from the MFI.

Question: We have been testing different models of financial literacy. Of course the cost is an issue, but another major challenge is the delivery mechanism. I see that you are training your existing staff that is involved in credit, to also deliver trainings on financial education. We also let our loan officers play “double” roles, however, we noticed that their credit portfolio started to suffer. We noticed that if they focused on education they could not focus on credit so it was not a scalable model. We moved to specialised educators but also had a problem of how to retain the educators.

Also, how do you deal with illiterate women in India? No matter how pictorial your teaching material is, I think that when teaching about how to deal with finances, it is difficult to depict with pictures.

Lastly, how do you market your financial education programme? Many people come to our MFI for credit and they do not want to hear about training. How do you motivate and market your education programme?

Valerie: I think there has not been a problem for loan officers to also juggle the role of trainers of financial literacy. Perhaps, the trainers first need the financial education themselves, before they can teach others well.

Benita: In house, we are also facing the same challenges. We are using training material from Making Cents (made by YMCA NSW and Citigroup). About the problem of literacy in India, we are introducing this education programme to clients who have been with us for 3-4 years, and they know the basics of managing finance and it is much easier to teach them.

Comment from audience: I want to share some experience from Vietnam, we have launched a new savings programme and as you know, savings services is costly to MFIs and time consuming for field officers. The key success of setting up savings products and making it profitable is to deal with volumes (of savings). In the perspective of a client, they are reluctant to come for training because it involves cost and time. So we trained the head of the group instead. So that the head can talk and train the other members when they meet up wherever they are. So they learn bit by bit at a time. They cannot learn for the whole day. We started savings services in 2009, but from 2010, we changed our method/system from training the loan officer to training the head of the group and now savings is booming. We have 20 million in savings and 2 million customers.

Comment from the audience: Thank you for the panel’s concise presentations. In South Korea’s context, the government has put in 1.6 million dollars for 10 years but most of the money comes from private sectors like banks and security companies and international organisations. So the low class people in Korea thought it was money aid for them to spend. So how to educate them to change the mindset and increase responsibility?

Paula: This is another issue altogether than probably involves more than financial literacy.

Comment from the audience: In terms of information accessibility, we have talked about women, children but I’m from Handicap International. I’d like to raise the flag for the disabled, and I’d like to work with MFIs. Where do disabilities organisations come in microfinance? I hope women with hearing impairments be supported to access information about financial literacy.

*more hands raised for questions and comments*

Paula : We have run out of time. We also have the Financial Education Summit in Sydney coming up. The event allows people in Asia and all over the world to find out who’s doing what and find opportunities to work together. With that, I urge you to consider your own financial literacy level and implement it into your MFIs.

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