#tbt: 2011 workshop paper on financial literacy


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In 2011, we commissioned more than 40 papers to accompany the workshops and plenaries organized at our Global Microcredit Summit 2011. This week’s #ThrowbackThursday is a great opportunity to review the wealth of knowledge generated by the Summit. Listen to the audio recording from the workshop here.

Financial Literacy: A Step for Clients Towards Financial Inclusion

Authors: Monique Cohen and Candace Nelson

Introduction: Financial Education for Financial Inclusion

These are tumultuous and exciting times for microfinance, marked equally by the stunning potential of the cell phone to change the face of financial services and disturbing reports of suicides linked to over-indebtedness. Against this backdrop, a shift in the industry is taking place, drawing our attention from the financial institution back to the client. Indicators of a renewed concern for clients include research to quantify the “unbanked,” rallying calls for consumer protection, and efforts to better meet customer needs with diversified products. A key driver of this change in focus is the now widely embraced goal of “financial inclusion.” Governments of developed economies, in G20 Summit agreements, have recognized financial inclusion and consumer protection as integral to achieving financial stability and integrity. Financial access has been highlighted as a “key accelerator” to meet
the Millennium Development Goals. Key to attaining this laudable goal is financial education (World Savings Bank Institute, 2010).

Financial inclusion is a multi-dimensional, pro-client concept, encompassing better access, better products and services, and better use. Herein lies its challenge — without the third element, use, the first two are not worth much. Technological innovations are bringing both new customers, potentially including millions of unbanked cell phone owners, and new service providers — a diverse array of retail outlets, telcoms and others — into the market. Diversification of products and services has already resulted in rich, and complex, choices for consumers, especially compared to the early days of one-size-fits-all working capital loans. Yet, increased access and better choices do not automatically translate into effective use. The path from uptake (i.e., opening an account) to usage is still an uncharted course. Effective use is hampered by asymmetries of information and power between financial institutions and poor consumers, an imbalance which grows as customers are less experienced and the products they can choose are more sophisticated an imbalance which holds real potential for negative outcomes due to institutional abuses or ill informed client decisions.

Financial education is an important tool to address this imbalance and help consumers both accept and use the products to which they increasingly have access. Because it can facilitate effective product use, financial education is critical to financial inclusion. It can help clients to both to develop the skills to compare and select the best products for their needs and empower them to exercise their rights and responsibilities in the consumer protection equation. Properly designed, financial education is tailored to the client’s specific context, helping them to understand how financial instruments, formal or informal, can address their daily financial concerns, from the vagaries of daily cash flow to risk management. Its power lies in its potential to be relevant to anyone and everyone, from the person who contemplates moving savings from under the mattress to a community savings group, to the saver who tries to compare account choices offered by competing banks. As such it spans the informal and formal financial sectors, supporting clients’ access to, and more importantly, use of, diverse financial services.

Current developments in microfinance are both exciting and potentially perilous. To take advantage of the former and protect against the latter, those placing the client at the center of their efforts are embracing financial education. This paper will situate financial education in an evolving financial landscape, identify its stakeholders, and most importantly, summarize experience to date and explore how that experience is shaping the vision and agenda for its future.

Read the full paper.

Listen to the audio recording of the workshop.

Related reading

Voices from the Field: Essma Ben Hamida

Pathways: financial inclusion to end extreme poverty | Find out what we heard from the industry in this year’s Listening Tour

We’ll be bringing you articles throughout April that reflect the results of this year’s Listening Tour Photo credit: by Geoff (originally posted to Flickr as Pilgrim’s path) [CC BY 2.0], via Wikimedia Commons

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In preparation for our 18th Microcredit Summit, the Campaign conducted a Listening Tour from December 2014 through February 2015. The Listening Tour served two purposes. First, it was our hope to find out how our audience (you) felt about on the World Bank’s goal of eradicating poverty by 2030, and equally important, we wished to consult you in identifying the topics that were at the top of everyone’s mind.

April is the Month of MicrofinanceLearn more

April is the Month of Microfinance
Learn more

The Listening Tour is our time to listen — and your time to speak — on the issues that the microfinance and financial inclusion sector face. We collected your feedback through an online survey and organized conversations with 27 leaders in the microfinance and financial inclusion sector. We heard from them on how financial inclusion can contribute to the goal of ending extreme poverty by 2030 and the role of microfinance in the post-2015 agenda. The results of this consultation will be reflected in the 2015 State of the Campaign Report, the 18th Microcredit Summit, and Campaign Commitments.

Below is a short excerpt from our conversation with Essma Ben Hamida, executive director of Enda Inter-Arabe in Tunisia.

Q: What do you think will be needed to achieve the goal of global financial inclusion by 2020 and how can this contribute to the goal of eradicating extreme poverty by 2030?

Essma Ben Hamida

Essma Ben Hamida is executive director of Enda Inter-Arabe in Tunisia

I’m not very optimistic, given the current situation. Banks and MFIs are having a crisis of liquidity especially during this last financial crisis. There is a lot of money in the MENA region, but our outreach numbers are low compared to other regions. Also, with just 1% of the population projected to own 50% of global wealth by end-2015[1], it is hard to see how the poorest can hope for financial inclusion. If it were possible, it would make an important contribution since without access to any financial resources, it is impossible even to work your way out of poverty. Those 1%, frankly, could not care less.

Q: In relation to our host region, what are the challenges and opportunities facing Africa & the Middle East in regards to microfinance and financial inclusion?

In Tunisia, we had a fairly successful democratic transition, much better than some of the other countries in the region, though we were still impacted by the situation in Libya. Banks didn’t have money because wealthy people were hiding money somewhere else, but now it seems we are getting back to normal. Enda is working more now after the revolution and our portfolio is again looking healthy. From time to time, we have to close a branch for a day or two, but I believe that the crisis has demonstrated the need for microfinance. [The revolution] has caused a lot more people to start a small business and the need for microfinance has grown strongly.

The MENA region is undergoing a democratic transition, and we need to make sure women and youth are included among the beneficiaries. They helped create that movement and we must listen to their frustrations and needs and find solutions. This can be achieved partly through creating and strengthening micro-enterprises thanks to micro-finance services.

Women empowerment is very important for the Arab region. Besides loan disbursement [to women], Enda does a lot of training, discussions, partnerships with NGOs, support for marketing, and computer literacy training as well as exposing them to different models and ideas. It’s important to talk about how we can empower [women] through financial literacy and overall citizenship education. For youth, we have to invest in their start-ups and assist with non-financial services such as training, coaching, developing business plans, exchange visits, and a lot more.

Q: What are key themes to consider or important debate topics we need to address in the microfinance & financial inclusion sector in the coming year?

Technology can help in many ways. For instance, mobile banking can save time and money for clients and reduce costs for MFIs. Using tablets and relevant apps can hugely improve loan officers’ performance. We see technological advances in financial products and services, and as a region, we want to know how to use them. They seem to be working well in some places in Africa (M-PESA), but what other experiences are working in our region? But governments, especially central banks, must encourage this rather than setting up barriers to technologies that have been working in other countries for several years already.

I also would add crowdfunding as an alternative source of funding for financial inclusion of the millions of micro-entrepreneurs in our region. It is still ignored and even rejected by central bankers in our countries. An exchange between central bankers and Kiva (USA), Babyloan (France), and other crowdfunding groups for microfinance would be very helpful for the industry in our region. Overall, we need to work to bring different models from around the world to learn from all the regions.

About Enda Inter-Arabe

Enda is the first and by far the largest microfinance institution in Tunisia. With a staff of close to 1,200 working out of 80 branches, Enda serves 250,000 active clients with a US$110 million loan portfolio and a global repayment rate which stood at 99% at end-2010 before the revolution in 2011. Today, it has declined to a still-respectable 96%, though quite a few clients are facing difficulties due to current economic problems in the country.

In addition to issuing traditional lines of credit, Enda has developed specialized products including education, housing and agriculture loans, and has recently introduced a special loan to encourage young people to launch into self-employment. Enda also provides business development services, including financial literacy classes, vocational training, marketing, and workplace guidance.

Prior to her career in microfinance, Essma worked as a journalist/reporter in Tunisia, New York, Rome, and Geneva and as a consultant for the United Nations. She has received distinguished awards and decorations. She was selected outstanding social entrepreneur for the MENA region in 2010 by the Schwab Foundation and the World Economic Forum.

Visit Enda Inter-Arabe’s website: http://www.endarabe.org.tn/


[1] Oxfam International press release (1/19/2015), “Richest 1% will own more than all the rest by 2016.” Accessed 4/1/2015: https://www.oxfam.org/en/pressroom/pressreleases/2015-01-19/richest-1-will-own-more-all-rest-2016

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