Financial education: how to build momentum?

  • Florian BERNDT, GIZ
  • Speakers
  • Esther NANOVU, GIZ Uganda
  • Ewa BANKOWSKA, Microfinance Centre (MFC)
  • Tim KAISER, University of Koblenz-Landau & German Institute for Economic Research (DIW Berlin)

    The moderator Florian BERNDT introduced this session on the effectiveness and efficiency of financial education approaches and the presenters provided different perspectives on this topic: Practical experience with an interactive tool for financial education based on Active learning fosters financial behaviour (experimental evidence); Financial health (from diagnosis to medicine).

    Esther NANJOVU presented the Financial Literacy Ring (FLIR). The Financial Literacy Ring is an interactive tool developed by GIZ in cooperation with Mountains of the Moon University, Uganda as part of GIZ’s financial inclusion work. The purpose of the tool is to provide financial education to financial illiterates such as smallholder farmers, market vendors and youth. It was designed to be used by GIZ and its partners with a wide variety of beneficiaries regardless of literacy levels and other factors, but often without access to digital tools. The possibility to share experiences and raise questions makes the tool interactive.

    The guide on how to use the Financial Literacy Ring shows that it addresses five financial topics set out in five stations: personal financial management; Savings; Debt management; Investment and; Financial service providers.

    Each station comprises of five steps and requires about 25 minutes to complete. A facilitator provides guidance through the learning process to participants on these steps for each of the stations. The facilitator uses visuals, story-telling and applies simple financial principles to educate the participants. This tool has been tested in a Randomised Control Trial by GIZ, Mountains of the Moon University and DIW Berlin in Uganda.

    The next presentation showed the results of the tool explained above.

    The University of Koblenz-Landau & German Institute for Economic Research (DIW Berlin) in a joint programme with GIZ and Mountains of the Moon University evaluated the interactive tool for financial education.

    Despite a rather negative outcome of a review of existing research on 126 configurations on impact evaluation, DIW Berlin found some evidence from recent experiments which suggests that intervention-impacts may be higher when financial education is offered at a teachable moment: i.e. when a person has joined a savings group, providing a window of opportunity for financial education; simplified (working with rules of thumb): i.e. do not put all your eggs in one basket; personalised instead of a one-size-fits all programme, or convenient and entertaining training.

    The above insights can be used to improve teaching methods for active learning such as the financial literacy ring by GIZ.

    In the research by DIW Berlin, one group received lectures, one group (around 300-400 farmers) received financial education based on the active learning method and one group did not receive financial education at all (control group). The researchers performed a survey to find an answer to the main research question: Do people change behaviour?

    The conclusion of the research was that financial education works. Financial education achieved the intended affects even with very short two-hour courses. Active learning seems to be a delivery method to improve effectiveness of financial education. By changing how you teach, you can influence household behaviour.

    Out of the five interrelated topics of the financial literacy ring, the savings topic showed the strongest change in behaviour of the active learning group, including an increase in savings by 20% compared to the control group. This was measured using an index comprising results for different parameters such as how much savings people had, where they saved, etc. In fact, only for the savings domain was it possible to conclude, based on the measurements, that active learning was significantly better than lectures. 

    The Microfinance Centre is in the process of developing a financial education app and presented its draft prototype, used for field test with microfinance clients (in partnership with Center for Financial Inclusion at Accion). Development of the app is part of the strategy of MFC to modernise financial education and provide a solution to common problems of traditional financial education, such as the high amount of expensive staff time required to invite participants to trainings in physical locations.

    MFC realises that digital tools are not suitable for all target groups and that other forms of financial education remain relevant. The type of financial education must be adapted to its context. Moreover, not all MFIs are interested in providing financial education.

    The app was developed to make use of automatisation of behaviour. It uses simple rules of thumb to make the advice provided by the app simple to apply in real life. A real life example showed that a young adult had put aside 1 Euro every time he went shopping, and could then go on vacation from the savings he had made.

    MFIs can use the app with their clients to perform a personal financial health check. The app lets users identify their financial situation through questions and gives them one of four profiles based on their score. The results give MFIs insights into the users’ financial state – how financially healthy they are. In the case of the Bank of Serbia that tested the app, 50% of their clients received low scores. This means that the financial health of these clients is poor.

    The benefits for the user are both insight into their financial situation and easy to understand advice, based on simple rules of thumb, which they can use to improve their financial health.

    The MFIs can use the app in different ways: they can use it with staff to help them change their financial practices, and to promote it via staff and through social media to clients, in order to help clients change their financial practices. The app may be personalised to individual users if MFIs can find a way to apply their data such as their cash flow to the user profile. However, a bottleneck to such personalisation is the privacy issue and protection of financial data.


    One of the audience members questioned the scalability of GIZ’s tool for financial education. Nanjovu explained that the tool is widely used by several of GIZ’s partners. She pointed out that this tool is particularly suitable to reach rural people without access to internet or even phones. Digital tools that allow for easy upscaling of financial education programmes are more appropriate for other target groups.

    Another audience member raised a question about the cost effectiveness of financial education. Bankowska responded that digital tools can result in significant cost savings as it is the experience of MFC that MFI staff has to spend a lot of time on the organisation of physical meetings and especially on the invitations. She confirmed, however, that digital solutions are not feasible for each target group as was mentioned by Nanjovu. KAISER added that his research showed that active learning methods can improve cost effectiveness of financial education.