Financial Education:

The Next
Training Frontier

You may not have read it in the headlines, but one of the most ambitious campaigns to bring financial education to millions of microentrepreneurs in developing countries is under way, with funding from the world’s largest financial services company.

The Financial Education for the Poor Project, financed by Citigroup’s corporate foundation and run by the U.S. non-profits Microfinance Opportunities and Freedom from Hunger, started this year to recruit and prepare master trainers at 60 microfinance institutions around the world. The goal is to form a global network of financial educators who will help more than 2 million people acquire essential concepts and skills to manage money and credit. Many of the people who will receive training are barely literate, and all of them are either poor or almost poor.

Over 2006 and 2007 the project will disseminate its curriculum, currently published in Spanish and English, consisting of modules on budgeting, saving, managing debt, understanding banks and financial negotiation. In Peru, COPEME will co-host the first regional training-of-trainers workshop, drawing participants from 10 institutions in Peru, Bolivia, Colombia, Chile, Dominican Republic, Ecuador and Mexico. Other TOT workshops are planned for India, Eastern Europe and the Middle East. The nascent network will expand, with opportunities to share adaptations to the curriculum as well as new materials they may develop.

Timely and Pertinent

Financial literacy is not a new idea. In rich countries, it is an integral part of civic education. These nations have sophisticated banking systems that encourage people to take advantage of their services. Savings accounts, credit cards, business loans and mortgages are so common that they are almost taken for granted. In contrast, few of these services are available to low-income households in developing countries. Poor families, who are always struggling to stay one step ahead of the next crisis, are particularly in need of fi nancial services that can help them accumulate assets. Basic fi nancial education can increase their capacity to save more, spend less, borrow wisely and manage their debt with discipline. More experienced clients can learn to effectively use more advanced fi nancial products and services, from money transfers to insurance.

The Financial Education for the Poor Project started with a focus on microentrepreneurs and clients of microfi nance programs. For this group, fi nancial education is more relevant now than ever before.

In the context of microenterprise development, financial education is a precursor to the more common business skills training. It is broader in scope and useful to a wider range of learners—indeed, to anyone who makes decisions about money and finances. Many women bear responsibility for household cash management, oftentimes in unstable circumstances. Financial education can prepare them to anticipate lifecycle needs and deal with unexpected emergencies without assuming unnecessary debt. For youth, fi nancial literacy can reduce their vulnerability to risks associated with the transition to adulthood and enhance their money management skills as they enter the world of work.

As the microfinance industry matures, providers are proliferating (banks, finance companies, consumer lenders, NGOs, self-help groups, village banks, etc.) and offering a growing array of products and services with diverse features, benefi ts, costs and obligations. Clients who are not familiar with banking products risk mismanaging them once they gain access to them. To benefi t from this expanded range of options, the poor need to understand how products differ, how to calculate and compare their costs and how to determine what they can afford.

Developing a curriculum

The limited experience in developing countries with fi nancial education dictated a comprehensive design with three major components for the Financial Education for the Poor Project:

• Market research to assess people’s current fi nancial strategies
• Curriculum design
• Framework for outcome measurement.

To implement these three components, the project followed a bottomup approach involving seven partners around the globe1: While each organization set different objectives for its engagement in this program, all followed the same process. Microfi nance Opportunities and Freedom from Hunger used these fi ndings to develop a generic, fi eld-based curriculum:

Market Research. Faced with a relatively blank slate, new market research was vital to answering the questions about what to teach (content) and how to teach it (delivery of content). The fi ndings informed designers about existing client behaviors, knowledge, skills and attitudes. Across three continents, consistent demand was identifi ed for fi ve broad themes that were ultimately developed into fi ve distinct training modules:

• Budgeting: Use Money Wisely
• Debt Management: Handle With Care
• Savings: You Can Do It!
• Bank Services: Know Your Options
• Financial Negotiations: Communicate With Confidence

Curriculum Design. Beyond providing information, the project seeks to change behavior: to enable people to transition from reactive to proactive fi nancial decisionmaking. To achieve sustained behavior change, the curriculum content addresses a combination of knowledge, skills and attitudes. It is built on a learner-centered approach based on the premise that adults acquire knowledge more effec tively when they can relate the content to what they already know. To change their financial behaviors, adults must have an opportunity to reflect on new content, relate it to their personal situations, practice using it and determine how they can apply it.

Measuring Outcomes. Outcome assessment is an integral part of the curriculum. It is an important tool for understanding the extent to which a financial education program is meeting its objectives at both the client and institutional levels. The outcome assessment component focuses on:

• Client level changes in knowledge, skills, attitudes and behaviors
• Client level changes in financial well-being
• Institutional level changes in financial performance.

Financial educators can use this measurement framework with two goals in mind: to improve the program and to prove its impact. Understanding how learners are responding to the material will help trainers improve the content and delivery of their training, tailor it to particular target groups, and keep programs accountable to learners. Positive results can also be used to justify support for financial education programs. Organizations face many questions and options as they consider how to use financial education. How should it be offered? Who should participate? Who will pay for it?

ProMujer, a Bolivian MFI offering integrated services (credit, health and education) to thousands of poor women in the Andes, has championed financial education and is grappling with these issues. Its standard training program consists of mandatory 30-minute educational sessions that are part of clients’ monthly meetings. At each gathering, clients choose the class they will attend that day from three or four topics offered simultaneously. To gauge client interest in and assess the impact of financial education, ProMujer first offered it as a separate course outside the normal curriculum. This course met for three hours a day for one week. Clients, who pay a small fee for course material, have so far been very satisfied with the training.

However, these results pertain to a small group of 60 clients who participated in the first two financial education courses (two classes of 30 women each). To extend the service to all of its clients, ProMujer has also incorporated financial education into curriculum offerings with shorter, stand-alone sessions that have reached approximately 40,000 clients.

This training is financed by the organization through a combination of earned income and grants. As with any educational offering, financial services providers have several financing options. Training firms may charge a fee for service; banks may expense it against their marketing or public relations accounts; not-for-profits may seek grant funding.

Next Steps

Beyond the basic financial literacy, the project is working on new curricula with new partners. Many themes are emerging as changes occur in the economy, workplace, labor force and banking technology. For example, remittances play a very significant role in the lives of millions of low-income households, offering a new arena for financial service providers. Financial education will be key to helping clients understand and use such new services effectively.

Once people acquire financial literacy, it cannot be taken away. A one-time course can have life-long rewards. For microfinance institutions, financial education is an additional service that will attract and retain clients, eventually translating into a stronger bottom line. Ultimately, financial education is a win-win investment for both clients and financial service providers.