To Build Financial Capability – Get Your Hands Dirty

> Posted by Center Staff

Remember the first time you tried to cook? Chances are you were nervous or at least apprehensive about how the food would turn out. If friends or family were in attendance, or, worse, were to eat what you were preparing, you were probably even less confident. Remember the second time you cooked? Or the third? Probably not. The more you actually got into the kitchen, the more your skills sharpened, and the more routine it became.

Using formal financial services for the first time, like cooking, can be intimidating – especially for people not used to interacting with formal institutions. Banks are big and complicated. A person of moderate means might feel that the bank will treat her as a low priority customer. And the notion of entrusting one’s livelihood to an unfamiliar entity is scary.

As part of CFI’s new financial capability project, we scanned the globe for the top innovations to help clients build their capability and make sound financial decisions. One of the behaviorally-informed practices we identified among these innovations as having great promise to affect changes in behavior is learning by doing, a strategy closely connected to effective, practical learning. Think of how much quicker your capability grew by actually cooking, than by reading a cook book.

Learning by doing, whether through technology-enabled simulations, or in real life with the supervision of front-line staff, enables customers to overcome the initial barriers to use that come with unfamiliarity and lack of confidence. Learning by doing offers customers the space to learn and get comfortable with financial products. This can be especially valuable for customer activation.

In our project we came across many organizations that promote learning by doing – some via group settings, others through interactive games or individual interventions. Here are a few of our favorites.

To promote savings, AgentPiggy, a virtual piggy bank from Chile, gets children and parents involved in creating and working toward financial goals. AgentPiggy allows parents to create a starting balance and weekly allowance amount for their child’s virtual piggy bank. The activities prompt learning by doing as children set goals and manage their money via specific challenges. For example, parents can set up a system where children earn money through completing challenges such as performing certain household chores.

Fundación Capital (FC) helps build the financial capability of recipients of government cash transfers in Colombia and 11 other countries in Latin America through its program Iniciativa LISTA. Developed in 2012 in rural Colombia, Iniciativa LISTA aims to change attitudes towards and provide knowledge about financial services. The program is currently being scaled to 100,000 households under Colombia’s Más Familias en Acción. For LISTA, FC developed a tablet loaded with financial education modules and games. The LISTA tablet serves as a decentralized, self-paced, customized learning platform that can be used in the absence of a trained facilitator. Each family in a village keeps a tablet for a few days, allowing users to practice with technology in private.

The tablet also includes an ATM simulator and other practice exercises. The ATM simulator is the most popular element on FC’s tablet, which also suggests that it is the most useful. The primary goal is to reduce fear of ATMs and increase confidence around technology. The confidence barrier is large and can lead to financial exclusion among poor women. FC found that the tablets were especially popular among youth. Similar programs are being prepared or implemented in Brazil’s Bolsa Familia, the Dominican Republic’s G2P programs, and Mexico’s PROSPERA.

Screenshot of Fundación Capital’s tablet-based ATM simulator

Swadhaar FinAccess, a microfinance institution in India, worked with Accion to launch a mobile money pilot with Airtel Money and Axis Bank that enables Swadhaar’s loan customers to repay loan installments using mobile money. To address slow adoption of this option, Accion and Swadhaar developed training modules to help clients gain comfort with the new service. The modules were informed by research and used engaging approaches like storytelling and videos. In addition, local peer educators were hired to demonstrate how to use the mobile money account, accompany clients to agents, and troubleshoot issues such as registering the SIM or obtaining a PIN code. An app was developed allowing trainers and peer educators to assist clients to practice mobile transactions. Early findings demonstrated that targeted customer education was important to driving uptake and use of both the loan repayment solution and other transactions such as saving, airtime recharge, and bill payment.

For youth inclusion, integrating financial capability-building into school curricula has been at the top of the list of actions in many national financial capability strategies. Banking authorities are cooperating with Ministries of Education in a substantial number of countries, including Brazil and Peru, and significant public money is channeled in this way. Compared to stand-alone financial education for adults, financial education for children may have greater long-term effect, as it reaches people when habits are being created. However, even here, it would be important to incorporate learning by doing. Learning by doing can be applied by linking education to the opening and use of youth bank accounts. Innovations for Poverty Action is testing the effectiveness of this approach in Uganda and Ghana, and it has shown short-term results.

This post was adapted from ‘A Change in Behavior: Innovations in Financial Capability’. For more on learning by doing, and the other six behaviorally-informed practices, click here.

Image credits: Accion; Fundación Capital

Have you read?

A Change in Behavior: Innovations in Financial Capability

Six Recommendations on Financial Capability

Making Fun Work for Financial Capability