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> Posted by Monique Cohen, Independent Advisor, and Founder of Microfinance Opportunities
When an Equity Bank client in Kenya was asked if she saw value in financial education, she replied without hesitation, “Yes, but I thought it was only for rich people.” Delighted with this ringing endorsement the interviewer never asked her what financial education meant for her. If she had we might have gone down a different track.
Intuitively, financial education seems like a good thing. Many experts will tell you that it or financial capability are important for achieving financial inclusion. Yet, the research tells a contrary story: financial education, building financial literacy, or financial capability interventions in developing countries have little effect on changing financial behaviors, including the uptake and usage of formal financial services. I keep asking: What am I missing in this picture? Why doesn’t it add up? With 12 years of experience in this space I would argue that there is much confusion about what financial education is, what it can do, and what we want it to do.
Financial institutions have much to gain from effective financial education, as, of course, do clients. At present, however, the field is torn between two paradigms – a money management paradigm and a product usage paradigm. Though both have merits, neither gets it quite right. I propose a more client-led perspective as a way to ensure that financial education can become more meaningful for the user.
> Posted by Monique Cohen, Ph.D., Founding-President, Microfinance Opportunities
The following post was originally published on the Child and Youth Finance International Blog.
“I am not good at managing my money. I need some extra training so that I can know how to manage myself. Because you know money is like trouble. You get big money and it’s like big trouble, you know,” (A young man living in Nairobi, 2011).
Walk down any street in Nairobi, Dar es Salam, or Cairo, or in a small African town and it seems everyone, including teenagers, has a phone to their ear. Indeed, for those 18 and under, few have known a world without mobiles. Not surprisingly, school-age boys and girls (5-14), teens (14-18), and young people entering the labor force or tertiary education (over 18) are seen as a potential new market for the provision of financial services. While recent experimentation in this space has focused on savings, there is growing consensus that young people should be able to access a full range of financial services, with the priorities changing as they advance in their life cycle (see YouthSave, YouthStart, and Child and Youth Finance International). Not only are youth savings and youth financial education hot topics in the financial services space, but there is also a growing recognition that young people have money, and technology-based financial services offer a gateway for their financial inclusion. Read the rest of this entry »
So many people wished to salute Monique Cohen that we wanted to give them more room, and so here are two more colleagues expressing their appreciation for her work.
Heather Clark is an independent consultant who, among her appointments, previously managed CFI’s now-completed Beyond Codes project. Robyn Robertson is currently Director of Financial Education at Opportunity International. Of course, more comments are always welcome.
Recently someone asked me “who do you consider a hero?”
I thought about this for a long time. For me a hero has to have vision, determination, and the wherewithal to make the vision something important, valuable to society, and lasting. It’s much better if the vision battles the current wisdom, as there is nothing like challenging the way the world works.
Implementing Monique’s vision was not easy in the early days. No one wanted to hear about clients, when the focus was on organizational sustainability. Monique battled the early days of impact assessment and continued, amazingly undaunted. She found the vision — “it’s about understanding clients,” she said.
Perhaps it sounds so simple now. But without Monique, without Microfinance Opportunities, we would never have had such a clear path for the future.
> Posted by Monique Cohen, Founder and President of Microfinance Opportunities
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to , Fellow, Center for Financial Inclusion at ACCION International.
If financial services are a means to an end, then financial education is a means to a means.
Let me explain. Generally speaking, we see a link between financial services and clients meeting their financial goals. Taking one step back, however, we see that financial education facilitates the success of financial services.
Clients don’t always know what is possible, which limits their ability to make good choices. Financial education is a way of showing clients what is possible. With this knowledge, they will be better able to choose and use financial services.
Let’s take cell phone banking. Because cell phone banking makes services accessible to people in remote locations, many of the people who want to take up cell phone banking have never had a bank account. They may not understand the concept behind banking. Unless we engage in financial education, we are asking them, unfairly, to leap-frog both into a new technology and a financial system that may be unfamiliar, intimidating, and confusing.
Financial education does have a role in helping us to increase the use of our products, yes. But, as Larry Reed mentioned in this forum, it also plays a role in educating us, the providers. I argue that the exercise of financial education forces recognition of the gaps in our customers’ comprehension of how financial products can help them achieve their goals. Read the rest of this entry »
> Posted by Guy Stuart and Monique Cohen
Rose lives in a village about 5km from the provincial town of Murang’a in the Central Province of Kenya. Her husband works in Nairobi. During the time when our diaries study interviewed her, between November 2009 and June 2010, she earned very little, less than $10 per week. But her husband sent her 29 remittances through Safaricom’s M-Pesa mobile money service from Nairobi over a 33-week period. He also brought cash home on visits. Rose contributed about Ksh.270 ($5.70) to a merry-go-round (a type of ROSCA) about 25 times during the course of our study. At the end of February her husband sent her Ksh.10,500 (about $210) in three remittances in one week. She withdrew all but Ksh. 500 in the same week and spent it on construction materials. Her husband came home that week and stayed for two weeks. He then returned to Nairobi, and on his return he sent Rose more money.
Rose is one of the 92 respondents Microfinance Opportunities (MFO) tracked during an eight-month Financial Diaries study in Kenya. This study yielded detailed transactional data that enabled us to better understand the economic lives of low-income individuals and households in two rural areas and one urban area.
The diaries also provide a close look at how low-income Kenyans actually use the now-famous mobile money service, M-PESA. M-PESA is an SMS-based mobile money transfer system owned and run by Safaricom, the leading mobile phone operator in Kenya. There are 30,000 M-PESA agents nationwide through whom people can deposit cash into or withdraw cash from their M-PESA accounts. Once they have cash in their accounts, customers can text their money to anyone in the country who has a mobile phone. The recipient can then either on-send the money to someone else or cash it out at an agent. There are over 13.5 million M-PESA accounts. The adult population of Kenya is 20 million.
As with our other financial diaries study in Malawi, and studies performed by other researchers such as Stuart Rutherford, Daryl Collins, and Orlanda Ruthven, the data from Kenya show that the poor handle a lot of cash, often more than twice their income. Furthermore, they use a wide variety of informal financial services, including intra-family loans and gifts as well as rotating savings and credit associations. Read the rest of this entry »
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