, , ,

ENSURING THE EFFECTIVENESS OF FINANCIAL LITERACY PROGRAMS

Financial literacy is a complex topic that varies with regional and demographic contexts.

Financial literacy is a complex topic that varies with regional and demographic contexts. Before putting on financial literacy training it is important to study the level of financial literacy across different groups. Targeted financial education is most important. Programs that are targeted to the needs of specific groups are more likely to be effective than cookie-cutter financial education programs. A deep understanding of the financial institutions and needs of the people will be helpful for every part of implementing training.

Implementing financial education at “teachable moments” when participants can apply what is learned in the training can also reinforce behaviors. These moments include signing up for insurance or taking out a loan, right after learning how to do so.

The delivery of the training depends on the content, the duration, and the channel of delivery. 

The delivery of the training depends on the content, the duration, and the channel of delivery.

In order to conduct good financial literacy training, organizations should be intentional about the enrollment process, the training itself, and the support offered after the training. 

Encouraging sign-up and attendance are difficult in developing countries due to time poverty, perceived lack of usefulness of the training, and other systemic barriers. 

There are certain groups that face larger barriers to attendance. Women are less likely to attend training when previous research shows that women may benefit more from attending training due to the self-awareness of their financial literacy levels as well as their vulnerability to financial shocks.

Similarly, those who live in rural areas are less likely to attend training when they are a population more exposed to risk. Women, those who live in rural areas, and those who have lower education levels may be both under-targeted by programs as well as face additional barriers to attending. 

Enrollment should target the people who are the most disadvantaged and can benefit the most from the program. Additionally, leveraging peer groups has been shown as an effective way to encourage attendance, especially from marginalized communities. 

The delivery of the training depends on the content, the duration, and the channel of delivery. There are four different types of content that training usually covers: financial service use, day-to-day cash flows, planning for the future, and promoting enabling behavior. 

The most effective financial literacy interventions have taught a mix of these topics in a way that is simple to apply, relevant to the participant’s needs, and paired with another intervention. There is mixed evidence on the exact window of time that a financial literacy program should last. However, it is clear that financial literacy training experiences diminishing marginal returns. The longer the intervention the more impactful it will be, but at a certain point, the impact does level off. 

Financial literacy training improves financial knowledge but has a lower impact on financial behaviors,

Financial literacy training improves financial knowledge but has a lower impact on financial behaviors.

Financial literacy programs have been delivered in four different channels: formal financial education, edutainment, training for business owners, and government cash transfers. Amongst the different types of delivery, in-person training has been more impactful while edutainment has shown short-term success. 

For any channel, a good intervention encourages participants to practice and incentivizes good behavior. Financial literacy training improves financial knowledge but has a lower impact on financial behaviors, especially behaviors which are subject to external shocks. Changing behaviors involves barriers beyond a lack of knowledge and long-term impact is difficult to sustain during times of hardship. 

However, it is important for programs to achieve long-term impact as big financial decision points may happen long after training is completed. Some interventions use peer communities as a way to increase behavior change as well as an accountability measure. It has also been shown that repeated exposure to the message of the training can increase knowledge retention while the repetition of behavior can help it become a habit. 

 

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *