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> Posted by Elisabeth Rhyne, Managing Director, CFI

At CFI we often talk about financial health as if it is a crisp, free-standing concept. Moreover, by connecting financial health to financial inclusion we imply – and hope – that we can affect financial health by offering the right kind of financial services and/or developing a person’s financial capabilities. However, while there is truth to this view, it is sometimes easy to overestimate the power of financial services. We need to think about how both financial and economic factors intertwine to create outcomes. If we compartmentalize financial actions, we ignore the very powerful economic factors that influence financial health.

As defined by the Center for Financial Services Innovation (CFSI) – and embraced by us at CFI – three elements must all be present to declare a person, family or microenterprise to be financially healthy:

  • Balanced day-to-day money management – outflows balanced with incomes over time.
  • Protection from shocks – ability to draw down, borrow or call upon resources to lessen the blow when bad things happen.
  • Pursuit of goals – ability to accumulate resources for medium to long-term purposes, whether personal or productive.

In speaking with low income people around the world, we find that many people intuitively define financial health in these terms, and nearly everyone tries to pursue financial health in their own lives. But achieving these three elements is not just a financial task. It requires both economic and financial actions. (It also hinges on personal choices and capabilities, but we will set these aside for now.)

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> Posted by Jeffrey Riecke, Senior Specialist, CFI

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If you’re based in the United States, you’ve likely heard about how student loan debt is problematic and has been for years. The growing volume of student debt that has become more and more the norm is so high, its effects can be overwhelming. But how bad is it? Is it just a matter of students needing to hunker down (a little longer) and pay their dues (a little more)?

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> Posted by Allyse McGrath, Specialist, CFI

How financially healthy are you? Financial health is a relatively new term in the financial inclusion community, and aims to provide a model for assessing how well one’s daily financial systems enable a person or household to build resilience to shocks and pursue opportunities and dreams. Last month, CFI in collaboration with The Center for Financial Services Innovation (CFSI) and Dalberg’s Design Impact Group (DIG) launched the results of a year-long study into how to adapt CFSI’s U.S.-based financial health framework to a developing country, BoP context. The study found that the concept of financial health can be applied to lower-income people in emerging markets, though the indicators and measures of financial health in this context were different. We encourage you to check out the full report, Beyond Financial Inclusion: Financial Health as a Global Framework, to learn more about our financial health framework for the developing world.

We also encourage you to engage with your own financial health in order to get a better grasp on the concept. To better understand the concept ourselves, CFI and Accion staff (building on the work of our year-long study and on the U.S. Financial Health Framework of CFSI) recently participated in an organization-wide financial health survey. Over 120 Accionistas took the survey and received assessments of their financial health. After reviewing the responses, we have uncovered some interesting insights into how people’s debts evolve as they age and the diverse set of tools they are using to manage their financial lives.

As a next step in the process of understanding, we want to share this survey with you. We hope it will help you both engage with the concept of financial health and potentially improve your own financial health. We also hope your feedback will help us strengthen our framework and this tool.  Finally, we look forward to reporting back soon on the financial health of CFI’s (anonymous) blog readers!

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> Posted by Sarah Rotman Parker, Director, the Center for Financial Services Innovation, and Sonja Kelly, Director, the Center for Financial Inclusion

The following post was originally published on the CGAP blog. 

Over the past year, the Center for Financial Services Innovation (CFSI) and the Center for Financial Inclusion (CFI) have explored financial health in emerging markets. We wanted to understand whether the concept of financial health, promoted widely in the United States by CFSI, could be used as a relevant framework to understand consumers. Financial health is defined as coming about when your daily systems help you build resilience and pursue opportunities. Our working hypothesis was that financial health could serve as a method of tracking progress in emerging markets since it is what people strive to attain, and therefore is one of the core aims of financial inclusion.

Our work took us to rural and urban areas in Kenya and India. With the help of the Dalberg Design Impact Group and funding from the Bill & Melinda Gates Foundation, we asked consumers in these markets questions about their financial lives. These questions ranged from how much money they could come up with if they liquidated all of their assets to whether their friends would help them financially in the case of an emergency (and about a hundred other questions in between these two ends of the spectrum).

The aim of the research was to identify the key indicators of financial health in a developing world context, similar to the eight key indicators that CFSI had identified for the U.S. market. We found that while financial health as a concept holds in countries like India and Kenya, the indicators to define and measure financial health look somewhat different from those in the United States. The resulting framework can be summed up as follows (and the full report is here).

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> Posted by Tanya Ladha, Senior Manager, ‎Center for Financial Services Innovation, and Elisabeth Rhyne, Managing Director, CFI

The following post was originally published on NextBillion.

Meet Shabana. She is a middle-aged woman, lives in a large metropolis and works at one of the city’s bustling train stations. One day, she suffered a severe workplace injury and wasn’t able to work for weeks. With no support from her employer, she realized how financially vulnerable she was, and decided at that moment to make a change. After recovering from her accident, she began saving almost 30 percent of her income, and after a year was shocked – and empowered – by the considerable financial cushion she had built herself.

Shabana’s story is one of resilience in the face of vulnerability, one of adapting daily habits, one of planning and achieving goals. It is a story of financial health, and it is universal. While Shabana lives in Mumbai, India, her story is relevant for millions of individuals around the world, both in developing and developed countries, including here in the U.S. It is this core concept that pushed the Center for Financial Services Innovation (CFSI), in partnership with the Center for Financial Inclusion at Accion and funded by the Bill & Melinda Gates Foundation, to explore how a U.S.-oriented financial health framework could translate into a developing world context.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.