CreatingFinancialAwarenessofClients:CommunicationMethodologiesthatWorkDikshaSinghandJohnArun,IFMRLEAD

Inrecentyears, financialcapabilityhasemergedasakeystrategicobjectivetocomplementthefinancial inclusionandconsumerprotectionagendasofpolicymakersandpractitionersaroundtheworld:

• Governments in 45 countries of different income-levels, including India, have stepped up the efforts todesign and implement National Strategies for Financial Education1 and financial service providers areincreasingly looking to integrate financial awareness and advisory services for clients into their existingservicelines

• Traditionalmodels suchasclassroom-basedtrainingarenotalwayscost-effectivescale (Schoaretal),andimposeimplicittransactionandopportunitycostsonclients.Moreover,there is littlerigorousevidenceontheirimpactinimprovingfinancialawarenessandpromotingbehavioralchange

InnovativeExperimentsfromtheField

Product/Model Advantages Challenges

1. Heuristics-basedfinancialtrainingformicroentrepreneurs

• Micro and small entrepreneurs often lack thenecessary financial capabilities to makecomplexbusinessandfinancialdecisions.

• A heuristics-based approach focuses ondelivering simple rules-of-thumb pointers toclients instead of in-depth information aboutfinancialconcepts.

• Combined with the rapid diffusion of mobilephone services across India, rules-of-thumbbased trainingoffersanemergingopportunityforfinancialserviceproviderstobuildfinancialcapabilityatscale.

Leverages Interactive VoiceResponse technology todeliver training modules toclient’s mobile phones, andSMSreminderstonudgethemto make sound financialdecisions. Both thesetechnologies can be cost-effectiveatscale

Itsimplifiescontent intoeasy-to-understand and rememberthumbrules,therebyloweringthecognitiveloadonclients

Onboarding clients to thenewtechnologyplatform

Evidence from arandomized evaluation ofthis approach in parts ofKarnataka and MadhyaPradesh suggests thatkeeping clients engagedover voice messages andensuring follow-up ontrainingmodulesaftertheysignupforthetrainingcanbechallenging

2. Integratingmobilefinancialeducationandmobilefinancialservices

• Launched with the aim to increase thecapability of microcredit borrowers, mostlywomen, toadoptmobilephonesasa channelforfinancialservicessuchasloanrepayments

• Grameen Foundation India tied up with amobile money services provider and amicrofinance institution Sonata to delivermobile banking services and education toSonata’sfemaleborrowersinUttarPradesh.AsofMay 2016, 23,222 of Sonata’s clients have

Using a human-centereddesign approach, the serviceproviders mapped the roles,capabilities and influence ofeach member in the client’secosystem and used thelearnings to design financialeducationmodelsandtrainingmaterials. Approach focuseson addressing pain points for

Sinceitisanagent-assistedmodel of delivery, it relieson the understanding andacceptance of technologybyfront-lineagents;

Ensuring scalability whilemaintainingstandardizationofcontent

1http://www.oecd.org/finance/financial-education/G20_OECD_NSFinEd_Summary.pdf

33%ofadultsgloballyarefinanciallyliterate(S&PGlobalFinlitSurvey,2014)

Only24%ofadultsinIndiaarefinanciallyliterate(S&PGlobalFinlitSurvey,2014)

WomeninIndiaexhibit lowerlevels of financial literacy ascompared to men. (FinancialLiteracyandInclusioninIndia,NCFE)

been trained under this program, of whichnearly one-third clients have used themobilemoneyserviceforloanrepayments.

clients such as opportunitycosts incurred in making inpersonloanrepayments

3. SMSnudgestoimprovesavings&creditbehavior

• The penetration of mobile phones combinedwith the relatively low-cost of sending bulktext messages offers service providers theopportunity to communicate directly withcustomers and ‘nudge’ them to achieve theirfinancial,healthandothergoals

• Evidence from a randomized evaluation of14,000savingsaccountholdersinPeru,Bolivia,and the Philippines found that simple andfrequentreminderstoclientswereeffectiveinraising savings balances and helping peoplereach their savings goals. Evidence from asimilar evaluation in Uganda alsodemonstrated a positive impact of textmessagingonrepaymentbehavior2

SMS reminders are easy toimplement and inexpensive,thus easy to scale; messagescan be customized andtargeted to different clientsegments; amenable to rapidtesting

Being anemerging areaofresearch, the long-termimpacts of SMS remindersonfinancialawarenessandcapabilityarestillunclear

GlobalLandscapeofInnovations

TypeofProgram ProgramDesignandDelivery Examples

Mass-MarketPrograms

• Telenovelas and soap operas with financialeducation messages directed at massaudiences

• TV and radio broadcasts of financialawarenessandeducationcontent

• KASHF in Pakistan and BancoAdopemintheDominicanRepublic

• Ujjivan in IndiaandGovernmentofIndia’snationalPradhanMantriJanDhanYojanacampaign

GroupPrograms

• Selection of at-risk customers to providetargeted“delinquencymanagement”training

• Selection of “star performer” micro-entrepreneur customers to provideadvanced-level financial education onbusiness-relatedtopics

• Banco Adopem in DominicanRepublic

• Shakti Foundation, Bangladesh,KWFT, Kenya and Mann DeshiMahilaBank,India

IndividualPrograms

• Financialeducationtrainingalongsideofferofsavings account-linked conditional cashtransfer(CCT)programs

• Incentivesprovidingrewardopportunitiesforcompleting education modules online plusdemonstratingdesiredcardusagebehavior

• Proyecto Capital “Juntos” programinPeru

• PayPerks,USA

ScalingFinancialAwareness–BeyondtheClassroom

Whileseveraltechnology-basedcommunicationandlearningmethodssuchascommunityradio,mobileapps,voiceand textmessaging are now being introduced, it is important that these approaches are rigorously evaluated interms of their impact on financial awareness and skills. Moreover, factors such as cost effectiveness, scale ofoutreach,profileoftargetgroupsandotherssuchassmartphonepenetrationandusageetc.mustbeconsideredinchoosingtheappropriatestrategy.Lastly,tocatertothediverseneedsofdifferentpopulationsegments,especiallyfinancially vulnerable groups as youth, elderly, migrants, women, no one size fits all, and policymakers andpractitionersmayneedtouseacombinationofapproachestoachievethedesiredimpact.

2SMSMessages:Nudgestohelpthepoorachievetheirfinancialgoals,InnovationsforPoverty-Action