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Public Disclosure Authorized
TECHNICAL NOTE
Building a Financial
Education Approach
Public Disclosure Authorized
A Starting Point for Financial Sector Authorities
FINANCIAL INCLUSION SUPPORT FRAMEWORK
JUNE 2021
Public Disclosure Authorized
Public Disclosure AuthorizedFINANCE, COMPETITIVENESS &
INNOVATION GLOBAL PRACTICE
TECHNICAL NOTE
Building a Financial
Education Approach
A Starting Point for Financial Sector Authorities
FINANCIAL INCLUSION SUPPORT FRAMEWORK
JUNE 2021© 2021 International Bank for Reconstruction and Development / The World Bank Group 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org DISCLAIMER This work is a product of the staff of The World Bank Group. The World Bank Group refers to the member institutions of the World Bank Group: The World Bank (Interna- tional Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilateral Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. We encourage use for educational and non-commercial purposes. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Directors or Executive Directors of the respective institutions of the World Bank Group or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. RIGHTS AND PERMISSIONS The material in this work is subject to copyright. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. Since the World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Pub- lisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@ worldbank.org.
CONTENTS
Acknowledgments v
Acronyms vi
EXECUTIVE SUMMARY 1
1 INTRODUCTION 6
2 WHEN TO INTERVENE WITH FINANCIAL EDUCATION: CONSIDERATIONS
FOR FINANCIAL SECTOR AUTHORITIES 10
2.1 The Relationship between Consumer Protection and Financial Education 10
2.2 Financial Sector Authorities Have a Key Role to Play in Financial Education 11
2.3 The Central Focus of an Authority’s Financial education Approach Should Be Helping 13
Consumers to Mitigate Core Financial Risks
3 HOW CAN FINANCIAL SECTOR AUTHORITIES BUILD AN IMPACTFUL APPROACH 15
3.1 Assess Landscape. 15
3.2 Prioritize Goals 19
3.3 Build and Implement a Financial Education Framework 20
4 MAKING FINANCIAL EDUCATION MORE EFFECTIVE: TOOLS, CHANNELS AND 28
BEST PRACTICES
4.1 Use Evidence 28
4.2 Leverage Behavioral Designs 30
4.3 Address the Needs of Women and Vulnerable Populations 31
4.4 Know the Individuals and Families to Be Served 34
4.5 Use a Wide Range of Tools and Channels 34
4.6 Learn by Doing 35
APPENDIX A: A Deep Dive into the Central Bank of Brazil’s Approach to Encouraging FSPs to Provide 36
Financial Education
APPENDIX B: Financial-Literacy Core Competencies 38
Boxes:
Box 1: Comparing Financial Literacy, Financial Education, and Financial Capability 7
Box 2: Understanding the Evidence on Financial Education and Capability 7
Box 3: What Is a National Financial Education Strategy? 8
iiiiv Building a Financial Education Approach: A Starting Point for Financial Sector Authorities
Box 4: Collecting Demand-Side Data for Financial Capability 9
Box 5: Implications of COVID-19 on Financial Education 12
Box 6: Lack of Financial Awareness Contributed to Overindebtedness among Kenyans Using Digital Credit 14
Box 7: Using Financial Education to Reduce Incidents of ATM Fraud in Pakistan 15
Box 8: Assessments by the World Bank’s Project Greenback 2.0 to Improve the Financial Capability of Remitters 17
in Bosnia and Herzegovina
Box 9: Elevating the Collective Consumer Voice for Financial Education 17
Box 10: Understanding the Customer Journey and Experience within Digital Finance 18
Box 11: Mapping Financial Education in Mexico as Part of the World Bank’s Financial Inclusion Global Initiative 19
Box 12: Embedding Financial Education into India’s Maternal Health Cash-Transfer Program 20
Box 13: Prioritizing Financial Literacy Could Have Avoided the Mortgage Loan Repayment Crisis in Kyrgyzstan 21
Box 14: Leveraging Financial Education to Increase Chile’s Pension Contributions 22
Box 15: Embedding Tablet-Based Financial education Programming into Colombia’s Conditional Cash-Transfer Program 22
Box 16: Embedding Financial Education into School Curriculums: The Case of Brazil 23
Box 17: Central Bank of Brazil’s Approach to Encouraging FSPs to Provide Financial Education 24
Box 18: Providing Business Tools to Understand Terms, Conditions, and Privacy Policies in the United Kingdom 25
Box 19: Hong Kong’s Chin Family Financial education Platform 27
Box 20: Piloting Agent Text Message Campaigns in Indonesia 27
Box 21: Canada’s Financial-Literacy Database 29
Box 22: Nudging Youth to Develop Savings Habits: Experimental Evidence Using SMS Messages— 30
Colombia Case Study
Box 23: Using Digital Games and Simulations to Promote Financial Capability in Singapore 31
Box 24: Australia’s 10thousandgirl Regional Women’s Financial-Literacy Roadshow 32
Tables and Figures:
Table 1: Overview of Rigorous Financial Education Impact and Meta-Analysis 7
Table 2: Examples of Web-Based Financial Education Tools Provided by Authorities 26
Table 3: Best Practices and Resources to Help Authorities Design Effective Interventions 29
Table 4: Financial education Content for Underserved Customers: Considerations to Improve Financial 33
Capability for Digital Financial Services
Table 5: Examples of Financial Education Platforms 35
Figure ES-1: Assessing Core Financial Education Gaps and Opportunities 3
Figure ES-2: General Framework for a Financial Education Approach 4
Figure 1: Assessing Core Financial Education Gaps and Opportunities 16
Figure 2: General Framework for a Financial Education Approach 21ACKNOWLEDGMENTS
This report is a product of the Financial Inclusion, Infrastructure, and Access Unit in the World Bank Group’s
Finance, Competitiveness, and Innovation Global Practice.
This report was prepared by Helen Gradstein (Financial Sector Specialist), Saba Abbas (Financial Sector Con-
sultant), and Olga Tomilova (Financial Sector Consultant). Key contributions were also provided by Guy Stuart
(Microfinance Opportunities).
The team would also like to thank the Department for Financial Citizenship Promotion at the Central Bank of Brazil
for contributions and inputs.
The team is grateful to peer reviewers Oya Pinar Ardic Alper (Senior Financial Sector Specialist, World Bank
Group), Eric Duflos (Senior Financial Sector Specialist, Consultative Group to Assist the Poor), and Douglas Randall
(Financial Sector Specialist, World Bank Group).
The team thanks Charles Hagner for editorial assistance and Naylor Design, Inc., for design and layout assistance.
Mahesh Uttamchandani (Practice Manager), Margaret Miller (Lead Financial Sector Specialist), Sheirin Iravantchi
(Senior Financial Sector Specialist) and Oya Pinar Ardic Alper (Senior Financial Sector Specialist) provided overall
guidance to the team.
This report draws heavily from technical guidance, research, and insights developed through the Financial Inclu-
sion Support Framework (FISF) program to provide concrete guidance to FISF policy makers. This report was
made possible by the generous support of the Ministry of Foreign Affairs of the Kingdom of the Netherlands and
the Bill and Melinda Gates Foundation.
vLIST OF ACRONYMS
ATM automated-teller machine
BCB Central Bank of Brazil
FSP financial service provider
M&E monitoring and evaluation
NFES national financial education strategy
PIN personal identification number
viEXECUTIVE SUMMARY
Financial capability is the capacity to act in one’s financial Not surprisingly, many financial sector authorities (who
interest, given socioeconomic and environmental con- are often tasked with championing an NFES) have also
ditions. Financially capable individuals who make good faced challenges playing an effective role in the financial
financial decisions and interact effectively with financial education space.
service providers (FSPs) are more likely to achieve their
financial goals and therefore improve their households’ For many, the strategy-development or data-collection
welfare.1 The expectation is that financial education pro- process has been overly cumbersome—leading to less
grams, when effectively designed and delivered, can be successful outcomes—and directed time, energy, and
implemented as tools to increase consumers’ financial resources away from more effective policy tools. Others
capability. opted to design and implement a broad range of financial
education campaigns directly but were met with varying
While the importance of financial capability has been (if not minimal) levels of success. Executing education pro-
studied empirically, questions remain about program grams directly, particularly conventional financial educa-
effectiveness, whether and how effectively these skills can tion,4 is an ambitious task for financial sector authorities.
be taught to consumers, and if financial education pro- They often lack the reach, infrastructure, resources, and
grams lead to sustained behavioral changes that improve personnel to implement large-scale education programs
one’s financial wellness and inclusion. When studied cost-effectively.
analytically, the results of financial education have been
mixed.2 (See box 2.) Financial education can also be more expensive5 and less
impactful than legal and regulatory reforms that fall more
A robust body of evidence shows that, on average, squarely under the regulatory periphery of a financial
conventional approaches to financial education (that is, sector authority. Evidence6 points to financial education
financial-literacy events, training sessions, seminars, work- underperforming when compared to key facts state-
shops, and classroom-based lectures) are mostly unsuc- ments7 or other risk-based supervisory tools.
cessful in sustaining behavioral change.3
That said, several new financial education methods have
Despite the uncertain impacts of financial education, been rigorously tested in recent years and yielded positive
policy makers embraced financial education as a policy results.8 Emerging evidence suggests that key behavioral
instrument. Roughly 100 countries have put in place tools and practices, such as simplifying financial education
formal or national financial education strategies (NFESs) into concrete, actionable steps, personalizing education,
whose overarching aim is to improve levels of financial providing short, timely messages, and making education
capability nationwide.
12 Building a Financial Education Approach: A Starting Point for Financial Sector Authorities
convenient and easy to access, have successfully changed The Relationship between Consumer Protection
consumer knowledge, decision-making, and financial and Financial Education
behaviors.
Financial education, when effective, can reinforce shared
objectives to achieve a responsible, financially inclusive
The objective of this report is to help guide financial sec-
sector and help support consumer protection and pruden-
tor authorities to build a more effective approach to finan-
tial supervisory regimes. Financial education interventions
cial education. The report synthesizes available resources
take a bottom-up approach and focus on improving the
and complements existing knowledge about financial
capability of the consumer, whereas consumer-protection
education. It also explores the appropriate role for finan-
interventions focus on improving and making responsible
cial sector authorities within financial education and out-
the practices of providers. The expectation is that financial
lines a practical approach for financial sector authorities
education can support consumer-protection objectives by
who choose to develop financial education agendas or
helping ensure that consumers are financially capable
strategies. Lastly, the report provides an overview of the
when provided with appropriate products and services
best tools and practices to improve the effectiveness of
delivered by responsible FSPs.
financial education initiatives.
That said, it is important to state the caveat up front that
Financial Sector Authorities Have a Key Role to financial education cannot substitute for consumer-pro-
Play in Financial Education tection and sound prudential regulation, which is critical
to ensure the development of an inclusive and stable
The expansion of digital financial services highlights the
financial sector.
importance of financial capability, as consumers need to
navigate a rapidly evolving financial sector. Digital finance
The rapid expansion of digital finance poses a range of
poses traditional risks,9 such as fraud or overindebted-
new risks as well as new manifestations of existing risks to
ness, and it heightens new risks to consumers, such as
consumers,10 putting many policy makers in developing
those that arise from the use of alternative data or algo-
countries in a tough position: they are working to tackle
rithmic scoring models. Consumers—including more vul-
new challenges posed by digital finance and COVID-19
nerable and less literate consumers—are often required to
while also simultaneously implementing baseline consum-
learn quickly how to access and use digital products and
er-protection and supervision frameworks.
services appropriately, protect their personal information,
reduce vulnerability to fraud, govern data, understand
Although financial education can help consumers mit-
consent and confidentiality, and navigate a digital finan-
igate risk and navigate an evolving financial sector,
cial landscape.
financial education should not take precedence over or
divert resources away from establishing a robust consum-
Helping consumers mitigate core financial risks should
er-protection and prudential regulatory regime, which is
be the central focus of an authority’s financial educa-
essential to the core mandate for many financial sector
tion approach. When delivered effectively, financial edu-
authorities.
cation can help consumers acquire these necessary skills
to make financially sound decisions. Helping consumers
mitigate core financial risks also has direct implications on How Financial sector Authorities Can Build an
financial well-being, inclusion, and stability. Effective Financial Education Approach
Focusing on addressing the inherent risks posed to con-
Narrowing the scope to addressing immediate financial
sumers can help authorities prioritize educational inter-
risks posed to consumers helps financial sector authori-
ventions and optimize their comparative advantages
ties remain more targeted and have greater impact. This
by ensuring that the activities fall within the regulatory
report does not intend to discourage broader financial
scope of their institution and are appropriate, given their
education activities altogether but argues that broader
resources and mandate. In this regard, building an effec-
endeavors, given the uncertainty of their impact, should
tive approach requires the following essential operational
be considered (if ever) only after authorities have ade-
steps (which are further detailed below and throughout
quately helped consumers mitigate core financial risks,
the report):
should time and resources permit.
STEP 1: Assess the landscape
STEP 2: Prioritize goals
STEP 3: Build an effective frameworkBuilding a Financial Education Approach: A Starting Point for Financial Sector Authorities 3
STEP 1: Assess the Landscape STEP 2: Identify and Prioritize Areas of Consumer
Risk
In addition to taking stock of best practices and gathering
insights from related stakeholders, such as market-con- A comprehensive assessment (see step 1) will identify
duct and consumer-protection supervisors, financial sector immediate needs from the perspective of different types
authorities should also conduct an assessment to identify of consumers as well as core gaps across different prod-
if consumers nationwide are receiving enough information uct lines during key interactions between consumers and
(i) to access and use their products and services appropri- their FSPs or financial programs. Financial sector authori-
ately, (ii) to prevent and mitigate risks during uptake and ties should be able to detect emerging areas of consumer
usage, (iii) to troubleshoot issues through available con- risks that warrant priority as well as core education gaps
sumer-protection mechanisms, and (iv) to know their rights. and needs of different consumer profiles. In addition, the
assessment should also shed light on opportunity areas
The assessments should focus on points of interaction where core financial education messages can be inte-
between consumers, FSPs, and government financial grated to help consumers navigate their financial lives.
programs (that is, cash transfers, agricultural lending, and Depending on the number of core risk areas and needs
so forth) to assess the existing information, education, identified, it may be difficult to tackle all areas at once.
and training provided and to identify gaps in consumers’ Financial sector authorities should consider how best to
knowledge and capabilities relating to accessing, using, prioritize their goals by assessing trade-offs between low-
and mitigating risks appropriately. To do so, assessments er-hanging fruits (that is, for example, integrating a few
should gather the perspectives of consumers, FSPs, gov- core messages into a cash-transfer program), their capac-
ernment institutions that provide financial services at scale ity and resources, and existing consumer risks with great-
(that is, cash-transfer programs, remittance programs, and est implications on inclusion/stability.
so on), and other related financial sector authorities and
stakeholders.
STEP 3: Build an Effective Framework
Assessments can be conducted through a variety of Focusing on addressing core financial risks to consumers
means, including desk research, mapping exercises, cus- and keeping assessment recommendations and findings
tomer journey mapping, consumer profiling, stakeholder in mind, financial sector authorities can begin to identify
interviews, phone surveys, coordinating with supervisors key action areas to build an effective framework. In suc-
to analyze regulatory reports or complaints, and so forth. cessful frameworks, financial sector authorities are gener-
Ideally, the assessment should shed light on key financial ally required to take action in the following three areas:
education gaps within the market as well as opportuni-
➤ Partnerships with key institutions to embed finan-
ties where additional education and information can be
cial education into existing financial programs.
embedded to address these gaps.
Financial sector authorities should build partnerships
FIGURE ES-1: Assessing Core Financial Education Gaps and Opportunities
Assess Core Financial Education Gaps and Identify Opportunities
Do government-supported financial
Access and Use Financial
programs ensure recipients can:
Products and Services
Mitigate financial risk
Troubleshoot issues
Know their rights
and complain
Do financial service provders
help their customers:
Can consumers capably:4 Building a Financial Education Approach: A Starting Point for Financial Sector Authorities
to support key institutions to embed financial educa- Making Financial Education More Effective: Tools,
tion into programs offering financial services at scale Channels, and Best Practices
(that is, cash-transfer programs, agricultural lending
Across every action, choosing the right tool and delivery
programs, and so on). Priority partners are often other
channel is a critical step to ensure that financial education
government institutions (that is, the ministry of agricul-
interventions are appropriate for their target audience.
ture, ministry for social protection, and so forth), and
A wide variety of financial education tools and delivery
financial sector authorities can play a key role in help-
channels (that is, SMS messages and nudges, instructions
ing them integrate financial education into the design
at an ATM, consumer training at bank branches, and so
of their large-scale financial-service program.
on) can be used to advance consumer capabilities and
➤ Guidance to regulated entities. Financial sector address the needs of specific population groups. Review-
authorities are well placed to provide guidance to ing effective financial education tools and delivery chan-
FSPs (generally nonbinding) that can help encourage nels can help authorities understand which tools may best
providers to integrate financial education holistically11 apply within a particular financial education intervention
into their day-to-day operations and interactions with to meet the needs of consumers.
consumers.
The report synthesizes the growing body of literature on
➤ Financial education tools offered to the public.
this topic to help financial sector authorities guide the
Financial sector authorities often play a role develop-
design and implementation of successful financial educa-
ing a set of publicly available resources (generally web
tion policies and initiatives. Implications on gender, vul-
based) provided to consumers and practitioners.12 The
nerable populations, and digital finance are embedded
resources focus on addressing those core educational
throughout the chapter. Drawing from existing resources,
needs under their remit and mandate that have impli-
a high-level summary of good practices, principles, and
cations on inclusion and stability. This often requires
guidance around financial education can be summarized
coordination with stakeholders beyond government
by the six following principles:
institutions and FSPs, including with nongovernmen-
tal organizations, industry associations, and consumer • Use evidence. Build initiatives based on the priorities,
associations, both to support integration of priorities findings, and recommendations of assessments that
into their existing financial education activities and to identified the educational needs of consumers and
elevate the collective consumer voice to define edu- particularly the mitigation of core risks. When using
cational needs. digital financial services, addressing new manifesta-
tions of both existing risks and new risks to consum-
➤ Cross-cutting monitoring and evaluation (M&E). A
ers, particularly vulnerable consumers, should remain
practical M&E framework that tracks progress, mon-
a core focus.
itors resource allocation, helps pilot new initiatives,
and, to the extent feasible, measures impacts, is a
cross-cutting principle to apply across all three finan-
cial education action areas.
FIGURE ES-2: General Framework for a Financial Education Approach
PARTNERSHIP GUIDANCE CONSUMER TOOLS
MONITORING AND EVALUATIONBuilding a Financial Education Approach: A Starting Point for Financial Sector Authorities 5
• Leverage behavioral designs. Financial education is • Know the individuals and families to be served.
more meaningful when activities incorporate behav- Financial education should be client focused and
ioral designs, such as targeting “teachable moments” reflect the demographics, cultural and financial con-
(that is, a time when an individual is about to make text, and learning needs and preferences of the target
an important financial decision); leveraging nudges, population. Education must be relevant in the con-
reminders, and default options; and periodically rein- text of their financial lives and help inform consumers
forcing messages, among other behavioral tools. about financial decisions that can be realized in the
short or medium term.
• Address the needs of women and vulnerable pop-
ulations. The development of sensitive, localized, and • Use a wide range of tools and channels. Nontra-
culturally appropriate financial education initiatives ditional channels (that is, chatbots, SMS messages,
should be a major consideration when developing tablets, phone applications, and so on), informed by
financial education for women and other vulnerable empirical behavioral research, can also help ensure
groups (that is, indigenous populations, less literate that learning is being put into action.
groups, the elderly, and so forth). This includes ensur-
• Learn by doing. Practicing helps consumers master
ing female leadership and the representation of other
their financial knowledge and skills. This is particularly
vulnerable groups within the financial education space
important for digital finance, as it improves familiarity
(and financial sector more broadly), collecting ade-
and confidence when conducting a digital transac-
quate data to inform decisions, and addressing the dif-
tion. Incorporating simulations (that is, simulating a
fering needs of women and other vulnerable groups,
transaction on an ATM or a mobile phone) helps con-
whose risks may be heightened due to social or soci-
sumers practice using new technologies and testing
etal constraints.
key functions.
NOTES
1. World Bank Group, Financial Capability Surveys around the World (2013).
2. Table 1 contains a consolidated list of rigorous evaluations and meta-analyses that assess the impact of financial education.
3. Table 1 contains a consolidated list of rigorous evaluations and meta-analyses that assess the impact of financial education.
4. Daniel Fernandes, John G, Lynch, and Richard G. Netemeyer, “Financial Literacy, Financial Education, and Downstream Financial
Behaviors,” Management Science, August 2014.
5. World Bank Group, Financial Education Programs and Strategies (2014).
6. Tim Kaiser and Lucas Menkhoff, Does Financial Education Impact Financial Literacy and Financial Behavior, and If So, When?
(Deutsches Institut für Wirtschaftsforschung, 2016).
7. A Key Fact Statement summarizes total cost, fees and charges, and key terms and conditions in a clear, simple format.
8. Innovations for Poverty Action, Beyond the Classroom: Evidence on New Directions in Financial Education (2017).
9. See World Bank, Consumer Risks in Fintech.
10. World Bank, Consumer Risks in Fintech—New Manifestations of Consumer Risks and Emerging Regulatory Approaches (2021).
11. Important to note that financial education provided by FSPs should avoid any potential conflict of interest, such as marketing
and advertisement of specific financial products presented as financial education
12. Resources are often provided to practitioners of financial education or to entities who are well equipped to integrate or offer
financial education as part of their programming.1
1. EVIDENCE ON FINANCIAL consumers’ financial wellness and inclusion. When studied
analytically,15 conventional financial education approaches
EDUCATION AND CAPABILITY
(that is, financial-literacy events, training sessions, sem-
inars, workshops, and classroom-based lectures) have
Financial Capability Is Important . . .
achieved mixed results at best.16 Studies suggest17 that
Financial capability is the capacity to act in one’s financial conventional approaches are expensive, resource inten-
interest, given socioeconomic and environmental condi- sive, and not always effective in providing for sustained
tions. It encompasses the knowledge, attitudes, skills, and behavior change and improved financial outcomes.18
behaviors of consumers with regards to managing their
resources and understanding, selecting, and making use In many cases, flaws in the design and delivery of such
of financial services that fit their needs. financial education activities resulted in less impactful
results.19 For instance, the education may not have been
It assumes that a consumer is capable of effectively nav- relevant for recipients or didn’t address recipients’ imme-
igating the financial marketplace to their benefit, which diate financial needs. Education may not have been deliv-
increasingly also means managing digital financial ser- ered in time to aid short-term financial decision-making.
vices. For instance, individuals who make good financial Financial education generally involves numbers, which
decisions and interact effectively with FSPs can be con- requires a basic level of numeracy or literacy. Providing
sidered financially capable and more likely to achieve financial education to more vulnerable or less literate
their financial goals and therefore improve their house- populations will be a challenge if recipients do not have
holds’ welfare.13 access to strong educational systems or core infrastruc-
tures. Financial education may also involve future projec-
The expectation is that financial education programs, tions—which can be hard to consider for recipients who
when designed and delivered effectively, can be imple- are food or resource insecure, particularly if short-term
mented as tools to increase consumers’ financial capa- needs are not fully met. The education may not have been
bility. When provided effectively, financial education will within the context of products and services accessible in
help consumers make better choices and improve their their daily lives, and so forth.
financial health, allowing them to save, borrow, and invest
more safely. This may not only promote responsible con-
Despite Uncertainty, Financial Sector Authorities
sumer behavior but also advance broader financial inclu-
Embrace Financial Education . . .
sion while helping to ensure stability and the effective
functioning of the financial markets. Despite the uncertain impacts of financial education, most
policy makers and financial sector authorities around the
world have embraced financial education as policy instru-
. . . but Many Conventional Financial Education
ments. Roughly 100 countries have put in place formal or
Programs Have Been Ineffective.
national financial education strategies whose overarching
While the importance of financial capability has been aim is to improve levels of financial capability nationwide.
studied empirically, questions remain about program Government-led financial education strategies are often
effectiveness,14 whether and how these skills can be effec- championed by financial sector authorities whose man-
tively taught to consumers, and if financial education pro- date includes improving the financial well-being of indi-
grams lead to sustained behavioral changes that improve viduals or enterprises in their jurisdiction.
6Building a Financial Education Approach: A Starting Point for Financial Sector Authorities 7
BOX 1
Comparing Financial Literacy, Financial Education, Financial Capability and
Financial Well-Being.
The terms financial literacy, financial education, required for managing personal finances and is gen-
financial capability, and financial well-being are inter- erally used more narrowly than financial capability.
related and often used interchangeably, but they rep-
resent unique concepts. This note uses the following Financial capability is the capacity to act in one’s
definitions: best financial interest, given one’s socioeconomic
and environmental conditions. It encompasses the
Financial education is a tool for increasing consumer knowledge (literacy), attitudes, skills, and behaviors
financial literacy. According to the Organisation for of consumers regarding managing their resources
Economic Co-operation and Development, financial and understanding, selecting, and making use of
education is the process by which financial consumers financial services that fit their needs.
and investors improve their understanding of finan-
cial products and concepts and, through information, Financial well-being is closely related to financial
instruction, and objective advice, develop skills and capability, and a consensus20 is emerging that finan-
confidence to become more aware of financial risks cial well-being is the ultimate measure of success for
and opportunities to make informed choices, know financial education efforts. Financial well-being is
where to go for help, and take other effective actions loosely defined21 as a state of being wherein a con-
to improve their financial well-being. sumer has control over day-to-day, month-to-month
finances, has the capacity to absorb a financial shock,
Financial literacy represents the level of aptitude is on track to meet financial goals, and has the finan-
in understanding personal finance. It often refers to cial freedom to make the choices that allow them to
awareness and knowledge of key financial concepts enjoy life.
BOX 2
Understanding the Evidence on Financial Education and Capability
A growing number of studies show that, on aver- behavioral insights and technology-based delivery
age, conventional approaches to financial education have shown a lot of promise. Table 1 synthesizes a
have not been successful either in imparting lasting select set of emerging evidence and meta-analyses
knowledge or in changing people’s financial behav- to make sense of results and draw insights into how
ior. That said, results have also been mixed, and financial education practitioners and policy makers
newer methods of financial education that leverage can move froward.
TABLE 1: Overview of Rigorous Financial Education Impact and Meta-Analysis
SOURCE RESOURCE
World Bank Financial Education Programs and Strategies
Can You Help Someone Become Financially Capable?: A Meta-Analysis of the Literature
Does Financial Education Impact Financial Literacy and Financial Behavior, and If So,
When?
CFI22 A Fourth Era: Balancing Behavioral Interventions with Quality Education
IPA23 Beyond the Classroom: Evidence on New Directions in Financial Education
Management Financial Literacy, Financial Education, and Downstream Financial Behaviors
Science
GFLEC24 Financial Education Affects Financial Knowledge and Downstream Behaviors8 Building a Financial Education Approach: A Starting Point for Financial Sector Authorities
BOX 3
What Is a National Financial Education Strategy?
National financial education strategies (NFESs) gen- An NFES25 generally sets forth a strategic direction
erally set a strategic direction for policy, education, for the development and implementation of finan-
practice, research, and coordination to further goals cial education programs, aligns them with other
of individuals/enterprises in a jurisdiction to make initiatives and related reforms, and improves coor-
informed financial decisions. dination between a diverse set of stakeholders and
their resources so as to improve financial capabilities.
Most commonly, financial sector authorities tend to Most commonly, the strategy includes an implemen-
take a leading role in the development and imple- tation action plan that sets out sequenced actions
mentation of such a strategy. These authorities often and institutional roles and responsibilities to make
include ministries of finance, financial regulators, cen- the strategy operational.
tral banks, security and exchange commissions, and
financial consumer protection institutions, among To implement the agenda, financial sector authorities
other authorities. generally coordinate with related entities and imple-
menting institutions, including government institu-
tions (that is, ministries of communication, education,
labor, housing, agriculture, and so forth) as well as
public and private-sector players.
. . . and Many Have Faced Challenges Trying to When ineffective, financial education is often more expen-
Play an Effective Role in Financial Education. sive28 and less successful than legal and regulatory reforms
that fall more squarely under the regulatory periphery of a
Not surprisingly, many financial sector authorities (who are
financial sector authority. For instance, evidence29 points
often tasked with championing an NFES) faced challenges
to financial education underperforming when compared
playing an effective role in the financial education space.
to key facts statements or other risk-based supervisory
tools. Financial sector authorities are equipped with legal
For many, the strategy-development or data-collection
powers and tools to address related policy agendas, such
process had been overly cumbersome—leading to less
as financial consumer protection, and can do so at scale.
successful outcomes—and directed time, energy, and
This is not always the case for financial education.
resources away from more effective policy tools. Broad
financial education strategies and complex M&E systems
can be difficult for policy makers to implement, particu- That Said, Alternative, Well-Designed Approaches
larly as many financial education activities and outcomes to Financial Education Do Hold Promise.
may be less tangible than, for instance, establishing an
Although a robust body of evidence shows that, on aver-
infrastructure or opening an account. Sometimes the
age, conventional approaches to financial education are
development of the agenda itself kept authorities from
not always successful, several new methods have been
focusing on more effective policy tools or caused fatigue,
rigorously tested in recent years and yielded positive
making it difficult to identify opportunities and implement
results.
targeted education initiatives for those who need it most.
For example, a rigorous evaluation30 in the Dominican
Other authorities opted to design and implement a
Republic tested the impact of Banco ADOPEM offer-
broad range of financial education campaigns directly
ing its microenterprise clients a simple and practical
but were met with varying (if not minimal) levels of suc-
“rule-of-thumb” training for financial decision-making
cess.26 Executing education programs directly, particularly
as compared to conventional accounting training. The
conventional financial education,27 is an ambitious task
“rule-of-thumb” training included lessons such as storing
for financial sector authorities—they often lack the reach,
business and personal cash in different drawers to keep
infrastructure, resources, and personnel to implement
large-scale education programs cost-effectively.Building a Financial Education Approach: A Starting Point for Financial Sector Authorities 9
BOX 4
Collecting Demand-Side Data for Financial Capability
Demand-side surveying of individuals, households, lected) as part of broader financial inclusion surveys.
and firms helps collect data needed to measure prog- Large financial capability surveys can sometimes
ress in financial capability and inclusion and to inform duplicate indicators available within other financial
policies. Surveying provides insights on a popula- inclusion surveys. Also, a smaller set of financial
tion’s level of financial capability, uptake and usage of capability indicators can provide adequate informa-
financial services, the distribution of financial services tion to policy makers as compared to broader sets
across key consumer segments (for example, women, of indicators required to measure financial inclusion.
rural residents), and the relationship between finan-
cial behaviors and other factors (for example, poverty, Integrating a few select financial capability indi-
employment, and so on). cators into existing, relevant, and established sur-
veys of financial inclusion can be a more effective
As part of many financial education strategies or ini- method of sustainably collecting relevant financial
tiatives, authorities have opted to collect demand- capability data.
side financial capability data through stand-alone
household surveys (such as those conducted by con- For example, the National Bank of Ethiopia inte-
tracted third parties). grated a financial inclusion module within the Ethi-
opian Socio-Economic Survey, conducted by the
However, this can be costly and resource intensive Ethiopian Central Statistics Agency,31 to gain access
and not sustainable for some policymakers in the to a reliable, country-owned financial inclusion data
long term. In addition, measuring financial capability set every two years. The financial inclusion module
is a more streamlined activity than, for instance, mea- evolved to include a small set of key indicators of
suring financial inclusion. Many relevant indicators of financial capability to complement Ethiopia’s upcom-
financial capability are often collected (or can be col- ing NFES and fulfills their measurement needs.
accounts separate. Clients who were offered the rule-of- video modules, simulations, and games to teach financial
thumb training were 8–25 percent more likely to engage skills and concepts. LISTA users had more informal sav-
in the various healthy business practices that were taught, ings, were more likely to have a savings goal, and had
a significant difference from those who received no train- greater trust in banks. (See box 15.)
ing at all. Meanwhile, the practices of clients who were
offered the conventional accounting training did not sig- In Brazil, the Central Bank of Brazil coordinated with the
nificantly improve along most dimensions. Ministry of Education to offer financial education as part
of its school curriculum. The efforts were found to have
A rigorous evaluation32 of Chile’s Superintendencia de a positive impact not only on students, but also on their
Pensiones’ financial education initiative, which installed parents. (See box 16.)
computer kiosks in several social service offices, found
that a personalized pension simulation experience sig- According to Innovations for Poverty Action, emerging
nificantly increased the probability that users would make evidence on these successful approaches suggests that
voluntary contributions to their pension and increased the simplifying financial education into concrete, actionable
amount they contributed compared to the generic expe- steps, personalizing education, providing short, timely
rience. (See box 14.) messages, and making it convenient and easy to access
can help make programs more effective at changing con-
The Government of Colombia offered cash-transfer bene- sumer knowledge, decision-making, and financial behav-
ficiaries a tablet-based application called LISTA that used iors than conventional methods.10 Building a Financial Education Approach: A Starting Point for Financial Sector Authorities
The Objective of This Report Is to Help Guide 2. SCOPE OF FINANCIAL
Financial Sector Authorities Build a Successful EDUCATION: CONSIDERATIONS
Approach to Financial Education.
FOR FINANCIAL SECTOR
In general, it is difficult to draw broad conclusions on the AUTHORITIES
efficacy of financial education since no single method of
delivering financial education exists. Financial education 2.1 The Relationship between Consumer
initiatives vary considerably in design, delivery, and con- Protection and Financial Education
tent, making it difficult to generalize the impact of finan-
cial education. Consumer-protection regimes promote responsible finan-
cial practices and work to establish and enforce rules on
This report will explore the role of financial sector author- the market behavior of FSPs. Such regimes ensure that
ities in financial education. Financial sector authorities are consumers are given clear and comprehensive informa-
often tasked with implementing an NFES or approach but tion, are protected from unfair and abusive practices, and
have also faced challenges during implementation. At the can easily access dispute-resolution channels to resolve
same time, they hold a unique comparative advantage as conflicts with their FSPs, and that FSPs have adequate
a regulator, supervisor, or other financial sector authority. transparency and disclosure protocols in place. Many
consumer-protection, market-conduct, and supervisory
The objective of this report is to help guide financial authorities also introduce customer-centric approaches to
sector authorities to build a more impactful approach to regulation that require providers to employ customer-cen-
financial education. It also explores the appropriate role tric strategies, report on customer outcomes, govern
for financial sector authorities within financial education financial products better, and adequately assess custom-
and outlines a more effective, practical approach for coun- ers to meet needs appropriately.33
tries choosing to develop financial education agendas or
strategies. The aim of this report is to answer the following Financial education interventions take a bottom-up
common questions posed by financial sector authorities approach and focus on improving the capability of the
regarding financial education: consumer. When effective, financial education interven-
tions help empower consumers—particularly more vul-
i. Should financial sector authorities intervene with nerable and less literate consumers—by ensuring that
financial education? they have the capability to make informed financial deci-
ii. How can financial sector authorities provide financial sions, access and use products and services appropri-
education effectively? ately, exercise rights, meet obligations, and are aware
of available resources and redress mechanisms in the
iii. What tools and practices can be used to ensure case of complaints. The expectation is that financial edu-
impact? cation can support consumer-protection objectives by
helping ensure that consumers are financially capable
In addition, the report synthesizes available resources, when provided with appropriate products and services,
complements existing knowledge about financial edu- delivered by responsible FSPs. It can thereby reinforce
cation, and provides an overview of the best tools and shared objectives to achieve a responsible, financially
practices to improve the effectiveness of financial educa- inclusive sector.
tion initiatives. The report draws from growing evidence
regarding what makes financial education efforts success- Sometimes, the boundaries between financial educa-
ful and integrates good practices throughout the report. tion and consumer-protection activities can intersect or
be unclear. For instance, both financial education and
While the report focuses on financial sector authorities, consumer-protection activities work to ensure that finan-
given their common role facilitating the implementation cial customers have adequate resources to understand
of national financial education agendas, lessons and tools key facts, disclosure documents, and available protec-
can be applied more broadly to other financial education tions. Financial consumer-protection regimes will often
practitioners, including other government authorities, issue requirements for FSPs to make available disclosure
nongovernmental organizations, schools, or private-sec- documents and standardized key facts statements34 and
tor players. sometimes take extra steps to encourage FSPs ensure
their consumers understand key information. This may
include, for instance, providing resources for FSPs to
train their staff to read disclosure documents aloud andBuilding a Financial Education Approach: A Starting Point for Financial Sector Authorities 11
answer related questions, particularly for vulnerable con- within the financial sector and vis-à-vis regulated entities,
sumers with literacy limitations. Videos or other training and they can employ financial education to reinforce
materials have also been used in some markets. Finan- shared consumer-protection objectives.
cial education initiatives are conducted in a similar vein,
and often encourage or provide resources to FSPs to The expansion of digital financial services also highlights
ensure that consumers are equipped with enough finan- the importance of financial capability, as consumers need
cial education to form a sound estimate of their financial to navigate a rapidly evolving financial sector. Finan-
situation, understand the implications and benefits of cial inclusion has progressed considerably over the last
new products and services, and be financially capable to decade,40 and digital financial services have played a piv-
make good decisions about a particular product, service, otal role in bringing about the expansion of financial ser-
or provider. vices to women,41 the poor, and underserved individuals
and enterprises at scale.
That said, the rapid expansion of digital finance is posing
a range of new risks and new manifestations of existing Despite its benefits, the rapid digitization of the financial
risks to consumers,35 and the COVID-19 pandemic has sector is also heightening traditional risks42 as well as new
also increased the incidence of financial fraud,36 misinfor- risks to consumers. Faster opportunities for payments,
mation,37 and credit risks.38 Many policy makers in devel- credit, and insurance—often combined with retail/impulse
oping countries are placed in a tough position: they are purchases—can lead, for instance, to credit-related risks
working to tackle new challenges posed by digital finance such as overindebtedness,43 fraud-related risks (that is, via
and COVID-19 while also simultaneously implementing agents, stolen PINs, and identity fraud), data-related risks
baseline consumer-protection and supervision frame- (that is, privacy issues, consent to data sharing), transpar-
works. Currently, financial sector authorities around the ency risks (that is, vulnerability to providers’ unscrupulous
world are not only identifying and understanding these financial behaviors), and recourse-related risks, among
new consumer risks but also considering what regulatory other risks such as those that arise from the use of alterna-
measures are available to address them. tive data or algorithmic scoring models.
It is important to state the caveat up front that financial Consumers are often required to learn quickly how to
education cannot substitute for consumer protection access and use digital products and services appropri-
and sound prudential regulation, which is critical to ately, protect their personal information, reduce their vul-
ensure the development of an inclusive and stable finan- nerability to fraud, govern data, understand consent and
cial sector. Although financial education can potentially confidentiality, and navigate a digital financial landscape.
help consumers mitigate risk and navigate an evolv-
ing financial sector, financial sector authorities—given Many international surveys44 demonstrate that individuals’
the uncertainty around the impacts of financial educa- financial capabilities in dealing with formal financial ser-
tion—should consider trade-offs39 between allocating vices and digital finance often fall short in many ways—
resources toward financial education as compared to whether it is the inability to understand how to open and
consumer protection. use a new transaction or mobile-money account, how to
keep a PIN safe, how interest rates are calculated, or the
If policy makers need to consider how to allocate lim- inability to make an informed decision when borrowing
ited resources, focusing on establishing a robust con- money. The COVID-19 pandemic has also demonstrated
sumer-protection regime should take precedence over how threats to consumers can increase in times of crisis
financial education, since financial sector authorities are and economic stress.45 (See box 5.)
well equipped with the legal powers and tools to address
financial consumer protection and can do so at scale— Underserved and newly banked consumers in particular,
and this is not always the case with financial education. who lack experience with the regulated financial sector,
may be more vulnerable to financial risks. Since the under-
served often have less formal education and lower financial
2.2 Financial Sector Authorities Have a Key Role capabilities,46 they may be more susceptible to high-pres-
to Play in Financial Education sure sales tactics, excessive and hidden fees and charges,
Financial education can help consumers mitigate core expensive predatory lending, nontransparent terms and
financial risks, particularly risks posed by entities whose conditions, inadequate disclosures, and discrimination.
regulation generally falls within the remit of a financial Overall, it can be difficult for them to understand the full
sector authority. Authorities can leverage their compara- implications of their product and service or how to access
tive advantage to integrate financial education effectively and use a product and service appropriately.12 Building a Financial Education Approach: A Starting Point for Financial Sector Authorities
Vulnerabilities faced by the unbanked and underbanked The skills have direct implications on consumer confi-
can lead consumers to take products that are ill suited dence, financial well-being, inclusion, and stability.
to their needs, resulting in overindebtedness and finan-
cial stress, rather than the benefits of financial inclusion. Therefore, it is important for financial sector authorities to
In addition, a lack of awareness of financial products and develop an effective approach to financial education. In
perceived ineligibility/self-exclusion are leading reasons some cases, this may include a strategy or action plan; in
for financial exclusion.47 Sixteen percent of unbanked others, it may include M&E frameworks. But in all cases,
adults48 globally cited distrust of the financial system as a financial sector authority’s approach to financial educa-
a major barrier. tion needs to remain targeted and effective. This means
that an authority’s approach should prioritize helping con-
Improving financial capability can help consumers miti- sumers mitigate core financial risks and focus on practical
gate financial risks. When delivered effectively, financial interventions that leverage the comparative advantage of
education can be integrated across the financial sector to a financial sector authority. These considerations are fur-
help consumers acquire the skills required to make finan- ther explored in section 2.3.
cially sound decisions and mitigate core financial risks.
BOX 5
Implications of COVID-19 on Financial Education
The ongoing COVID-19 pandemic has disrupted the economic As consumers rapidly make the transition to digital finan-
security of millions of families and affected everyday life across cial services and vulnerable population groups fall back into
the globe. The World Bank estimates that between 143 million poverty, the COVID-19 pandemic is highlighting how risks
and 163 million people will fall back into poverty in 2021.49 Vul- to already vulnerable consumers can grow in time of crises.
nerable and socioeconomically disadvantaged groups have For instance, the COVID-19 pandemic has heightened risks
been affected most, and women in particular have been left around scams,61 fraud,62 credit risks such as nonperforming
behind. Throughout the pandemic, women disproportionately loans,63 and exploitation.64
reported decreases in income50 and overall job losses51 and
were less likely to know about or access public support.52 Throughout the pandemic, and to aide recovery, financial edu-
cation will be crucial to ensure that consumers are knowledge-
At the same time, the COVID-19 pandemic has accelerated able about their rights, can make good financial decisions, and
the adoption of digital financial services around the world. understand the range of financial products available to support
More than 100 countries worldwide scaled up their social their livelihoods. Financial education can support these efforts.
assistance programs53 to provide direct financial relief to the
poor via bank accounts or mobile wallets.54 Governments For instance, financial education can help build consumer capa-
often expanded their reach by including technology-based bilities, so consumers are capable of effectively using the digital
processes,55 such as online registration systems, automatic financial services available to them and can avoid frauds such
data verification, beneficiary-enrollment sessions to open dig- as phishing, hacking attacks, unauthorized use of data, and dis-
ital accounts, and transferring payments directly through basic criminatory treatment. Financial education can also be used to
bank accounts or e-wallets. More consumers are now using help consumers understand their rights and borrow responsibly.
digital financial services,56 since the availability of cash-based Overindebtedness fueled by easily accessible online products
services has gone down and the costs of cash-based services was a cause for concern even before the pandemic and is likely
have increased.57 In addition, COVID-19 has driven digital ID to exacerbate as consumers face financial difficulties born out
adoption.58 Low-income countries in particular have pushed of the economic downturn. In this milieu, it is pertinent to edu-
to simplify electronic know-your-customer regulations59 and cate consumers in a way that affects their borrowing behaviors,
requirements for customer due diligence, which are gener- and to promote awareness of consumer rights to reschedule
ally more inclusive for less literate consumer groups. In some debt, delay payments, and take advantage of other forbearance
countries,60 on-the-spot photographs and thumbprints can required to get through emergencies.
now be used to open accounts.You can also read
