Improving financial health

  • Sahana ARUN KUMAR, Amarante Consulting
  • Mathilde BAUWIN, ADA
  • Klaas MOLENAAR, Timpoc Consultants
  • Karima WARDAK, UNCDF


Mathilde BAUWIN kicked off the session by reflecting on the various definitions of ‘Financial Health’. This was long time perceived as ‘the financial situation of big companies’. Since 2015, this evolved into ‘the financial health of people (consumers)’ and ‘the financial health of small businesses (USA)’, according to publications of CFSI (now the Financial Health Network). MFC refers to it as ‘the condition in which a household effectively manages its income and expenses, is resilient to financial shocks and plans its financial future with long term perspective’. While Accion points more to ‘the capacity of the individual’, a study done by Gallup talks of ‘financial inclusion, literacy and control’. CGAP uses the terms ‘financial literacy, capability, access, uptake and usage of services’, leading to financial inclusion, health and well-being. The research carried out by EMN and ADA has combined much of the above notions into the following common understanding: ‘Financial health being the positive outcome for people, and subsequently for their businesses, resulting from certain knowledge and behaviour’.

Karima WARDAK subsequently introduced the work of UNCDF, operating in 47 least developed countries on local development and financial inclusion. It is now also focusing more on digitisation efforts in these countries. According to UNCDF, the pathway out of poverty is to generate income and manage that well to achieve financial health. The work on financial inclusion has developed a lot, since 2011 reaching more than 1.2 billion people. She mentioned Benin and Tanzania as two examples where digital services have developed considerably over the past 5 years. In their work, they now shift more and more from numbers and gaps to ‘how people get by’, i.e. mechanisms and services for families to manage their lives and finances. She presented UNCDF’s Financial Health Framework, covering steps to spend, save, borrow and plan. She illustrated with a case example from Malaysia how setting targets helped to manage finance, from access and usage to financial health and capacity to manage.

Klaas MOLENAAR referred further to the above mentioned research carried out by EMN and ADA on micro-entrepreneurs’ financial health (funded by JP Morgan Foundation), based on interviews with 83 European and Southern micro-entrepreneurs. Molenaar explained that the study started out as a request for a self-assessment tool for financial and business development service providers, and as most ratings were found to be top-down, initially aimed at a kind of credit-scoring. He argued that a different perspective was required, focusing on the micro-entrepreneurs, their understanding of financial issues and the possibility to assist them in enhancing such understanding and capability to deal with financial problems, and should be less focused on the requirements of financial service providers on how they can better run their business. Financial health enhancement programmes would therefore need to include mentoring and coaching, and not be just about measuring financial health and performance. Assessment tools ought to be designed from the perspective of the micro-entrepreneur and thus use mainly the word ‘I’ rather than ‘You’. It allows any user then to think as an entrepreneur. The outcome must also be focused more on capabilities and understanding.

Mathilde BAUWIN continued the presentation, explaining that the financial health situation of a micro-entrepreneur may be represented in 4 segments: the personal position as a manager; how to manage the business and finance well; how to plan the business and its financing; and, how to prepare for the future. Lessons from entrepreneurs in the South showed that most of them face the same kind of financial issues, and need to consider themselves as entrepreneurs to be able to deal with them. For this reason, a learning and coaching process which integrates personal development as one of the objectives will be more efficient, including to tackle financial issues. Bauwin mentioned that one entrepreneur interviewed said: “Running a business is first and foremost about you rather than the business. It is of course about knowledge but also about self-confidence.”


Sahana ARUN KUMAR invited more questions from the audience, and someone asked whether differences were noted between older and younger entrepreneurs. Molenaar responded that even if younger people are expected to be more apt with digital tools, they often struggle with similar financial difficulties as older entrepreneurs. Hence, they also need coaching to optimise performance in the financial health segments, a mentor helping to build confidence with the entrepreneur. Molenaar added that the assessment does not address the impact of financial issues on the financial wellbeing at household level, though this could be an interesting additional feature to be included. 

Wardak mentioned in this respect that it is important to understand more fundamentally the minds and behaviour of entrepreneurs, in order to know better how to provide support and services. By cultivating financial health, and providing hand-in-hand public and private initiatives, you can go beyond financial health and improve access to services. She referred again to the case of Malaysia, where the B40 FinLab Challenge works to provide transformational (digital) services to 15 million low- and middle-income people and MSMEs. They take start-ups (GoGet-ers) to meet their clients, something they often had not done before. The tools also relate to other aspirations of GoGet-ers, to also reach those that are otherwise hesitant to enter financial institutions (such as insurances). While working more with platforms and apps than with individuals, coaching such as mentioned by Molenaar is provided to make people more familiar with the platforms. In Malaysia they had actually not started with the concept of ‘financial health’ but rather wanted to create a platform for people to understand how to access financial services. They also wanted to tackle scalability, how that works, and how they can help (e.g. through the ‘pod app’). They therefore profile users and their possible needs and questions, such as for health and job-based insurances such as disability and unemployment insurances. 

Arun Kumar asked the audience if there is a business case in making customers financially healthy, and how service providers can be incentivised. The audience generally acknowledged, stating that active customers will also make more efficient use of services, thus enhancing overall performance. Financial health should be at the core of service provision, according to Molenaar thus preventing risks. Another remark from the audience related to the ever faster pace of the world, making it important to build services up over longer time and not look for quick solutions. This can be incentivised by building it more systematically into the work of MFIs. According to Bauwin, not just MFIs but also non-financial service providers should focus on the behaviour of entrepreneurs. Arun Kumar concluded that it is important to speak a common language at the platforms for mutual understanding, and to take time with the various actors to discuss and understand the partnerships better. Molenaar added that results and impacts cannot be assumed, but rather have to be investigated and measured; practice-based thinking will not happen if you do not give it a spark.