Financial Education for the Poor

This paper makes a case for financial literacy for the poor and proposes an agenda for action.

The paper states that:

• Poor people’s access to finance is diverse and complex – they borrow from family, friends, pawnbrokers and semi-formal sources such as microfinance institutions (MFIs);
• Accessing microfinance services empowers the poor, makes them more proactive, protects them against risks, opens up new opportunities and increases their self-confidence;
• Microfinance and financial education complement each other;
• Financial education helps the poor interface effectively with their financial landscapes, choose among financial options and manage the financial resources they have;
• The microfinance industry is playing an increasing role in the money management of the poor by offering a wider range of products and services;
• However, there exists a lack of information between MFIs and their clients;
• Empowering clients to make informed choices about the use of financial services will benefit both;
• Financial education benefits different groups of people, such as the “resource poor”, microfinance clients, MFIs, etc.

The paper describes:

• Financial education programs such as SEWA Bank’s financial counseling service, the Food and Agricultural Organization’s guide for money management for farmers, etc.
• The challenges in developing microfinance education tools for microfinance clients.

It concludes by proposing an agenda for action that includes research, development of tools and materials, identification of partner organizations, development of experimental programs and indicators.