Microfinance and financial literacy - Evers und Jung

The EMN BI-ANNUAL MAGAZINE on MICROFINANCE in EUROPE
ISSN N°: 1955-6179
MICROFINANCE
n°4 December 2008
Microfinance and
financial literacy
Financial education policy of the European Commission
By Daniel Kosicki, Internal Market & Services DG, European Commission •
Diverse, dynamic, uncoordinated: Financial Literacy in the EU
By Marco Habschick, Mirko Bendig, EVERS & JUNG •
The role of financial institutions: an approach from the Spanish Savings Banks
By Inés García, Pintos Balbás, Spanish Confederation of Savings banks •
UK Experience and learnings on financial literacy
By Faisel Rahman, Muna Yassin, Fair Finance •
Financial Education in Central and Eastern Europe (CEE) and the New
Independent States (NIS): An Example
By Katarzyna Kubin, Microfinance Centre for CEE and the NIS (MFC) •
Financial Literacy, Education for Life in Central America
By Juan Vega, Promifin •
European
Commission

“Microfinance Europe” is the bi-annual EMN magazine. It
provides clear insights into European microfinance programmes, with a specific focus on policy measures
that could support the development of the sector. Its in-depth articles offer an up-to-date commentary
on what is happening in the different European countries, how policies and practices are implemented
and evolving and what recommendations can be made by practitioners, researchers and academics to
promote microfinance and microenterprise development in the European Union.
EMN gathers articles from different sources. The content of these articles is under the sole responsibility
of their authors. They do not necessarily reflect the views of EMN.
EMN would like to thank the authors of the various articles for their contributions.
INDEX
Financial education policy of the European Commission......................................... 4
Diverse, dynamic, uncoordinated: Financial Literacy in the EU................................ 6
The role of financial institutions: an approach from the Spanish Savings Banks...... 9
UK Experience and learnings on financial literacy..................................................... 12
Financial Education in Central and Eastern Europe (CEE) and the
New Independent States (NIS): An Example............................................................. 14
Financial Literacy, Education for Life in Central America.......................................... 18
Editorial Committee: Allan Bussard (Integra), Jan Evers (EVERS&JUNG), Philippe Guichandut (EMN), Klaas
Molenaar (Triodos Facet), Hedwig Siewersten (Triodos Facet), Michael Mamuta and Rigo Ovchiyan (Russian
Microfinance Center).
© European Microfinance Network. This publication is for personal informational purposes only. All rights reserved.
No part of this publication may be used for commercial purposes, altered or published in any manner or form
without prior permission from the publisher and EMN.
This publication is supported for under the European Community Programme for Employment and Social Solidarity (2007-2013). This
programme is managed by the Directorate-Generale for Employment, social affairs and equal opportunities of the European Commission.
It was established to financially support the implementation of the objectives of the European Union in the employment and social affairs
area, as set out in the Social Agenda, and thereby contribute to the achievement of the Lisbon Strategy goals in these fields.
The seven-year Programme targets all stakeholders who can help shape the development of appropriate and effective employment
and social legislation and policies, across the EU-27, EFTA-EEA and EU candidate and pre-candidate countries.
PROGRESS mission is to strengthen the EU contribution in support of Member States’ commitments and efforts to create
more and better jobs and to build a more cohesive society. To that effect, PROGRESS will be instrumental in:
providing analysis and policy advice on PROGRESS policy areas;
monitoring and reporting on the implementation of EU legislation and policies in PROGRESS policy areas;
promoting policy transfer, learning and support among Member States on EU objectives and priorities; and
relaying the views of the stakeholders and society at large
For more information see: http://ec.europa.eu/employment_social/progress/index_en.html
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EMN’s bi-annual magazine - N°4 December, 2008

MICROFINANCE
Europe
“Microfinance and Financial Literacy”
For its fourth issue, “Microfinance Europe” gathers articles presenting the challenges faced by the sector in relation to
financial literacy.
Microfinance, by giving access to financial services to people originally excluded from the mainstream financial market,
is particularly concerned by the level of understanding of its clients (and potential clients) of such a market. In recent
years, faced with the growing complexity of financial services, more and more microfinance programmes have started
to realize that providing their clients with good financial literacy was essential to help them succeed in their integration
into the mainstream economy and society. This concern has been raised by many different stakeholders. Recently,
the European Commission released various papers on the subject and in one of them gives the following definition:
“Financial education enables individuals to improve their understanding of financial products and concepts, and develop
the skills necessary to improve their financial literacy; i.e. to be aware of financial risks and opportunities and to make
informed decisions in their choice of financial services” 1 . Financial education can thus address topics ranging from the
practical, such as operating a bank account, to the more conceptual, such as understanding income/expenditure and
long-term planning, and the more general, such as the principles of consumer protection and ethical consumption. It
is clear that financial education, if very relevant for microfinance operators, has a much broader scope and does not
concern only people excluded from the mainstream economy. If it definitely assists in the better integration of sociallyexcluded
people and the fight against poverty, it can also play an active role in promoting an active citizenship, and
benefit the society at large.
In that context, in this issue of “Microfinance Europe”, various articles were gathered from different types of
organizations and from different countries in order to have a larger overview of the main programmes available, the
main trends and the questions raised in implementing such programmes, especially for microfinance operators.
The first article gives an overview of the policy of the European Commission in this domain and explains the involvement
of the Commission in this area. The following article provides the results of a study conducted by EVERS&JUNG
on behalf of the European Commission on the various financial literacy programmes within the European Union,
underlining the lessons learnt from the large variety of existing experiences. The next article describes how the Savings
Banks in Spain have been involved in this issue and what their main approach and results have been. The fourth
article highlights how Fair Finance, a microfinance practitioner in the United Kingdom, is involved and what are the
practical lessons learned so far. The fifth article describes how a network like the MFC has been working on this theme
in Central and Eastern Europe (CEE) and the New Independent States (NIS). The final article gives an analysis of how
microfinance programmes in Central America are tackling financial literacy and what lessons have been learnt from the
various initiatives, bringing a broader perspective to European programmes.
1 European Commission. (2007) Communication on Financial Education, pg. 1.
EMN’s N°2 December bi-annual magazine ,2007 - REM’s - N°4 December, bi-annual magazine 2008
3

Fin a n c
o f t h e Eu r o p e a n
By Daniel Kosicki, Internal Market & Services DG, European Commission
Th e m a i n r o l e o f t h e In t e r n a l Ma r k e t & Se rv i c es DG is to
c o o r d i n at e t h e Co m m is s i o n’s p o l i c y o n t h e Eu r o p e a n Si ng l e
Ma r k e t a n d to s e e k t h e r e m o va l o f u n j u s t i f i ed o b s ta c l e s to t r a d e,
in pa r t i c u l a r in t h e field o f s e rv i c es a n d f i n a n c i a l m a r k e t s.
In t r o d u c t i o n
The European Commission has recently taken several practical
steps towards promoting and improving financial education in
the EU. This article explains the rationale of the Commission’s
involvement in the financial education of consumers and the nature
of the Commission’s policy in this area.
Th e n e e d f o r f i n a n c i a l e d u c at i o n
In recent years, financial services have been becoming increasingly
complex. Considering the number of words written about the causes
of the current financial crisis, there is probably no need to convince
These two parallel trends lead to a tough situation where people
have to make ever more important decisions in the ever more
complex world of modern finance. Various surveys conducted
recently have confirmed that consumers are often not in a
position to manage their personal finances properly – not only the
issues with long-term bearing on their lives, but also basic daily
operations, such as managing a family budget or choosing an
appropriate bank account. This situation needs addressing:
consumers need financial education.
Fi n a n c i a l e d u c at i o n a n d t h e In t e r n a l Ma r k e t
Financial education is important not only for individuals, but also
for the whole society and economy. Empowered consumers will
make better choices for their individual well-being, which in turn
will increase welfare overall. They will tend to be more active
users of financial services, which will support development of the
financial industry and thus contribute to higher economic growth.
In particular, consumers with higher awareness are likely to use
more of the opportunities created by the Internal Market.
For all these reasons, the European Commission has recognised
the crucial role of financial education for the creation of a single
market for financial services in the EU. Financial integration,
especially in its retail dimension, cannot progress without
financially capable consumers. In addition, consumers will benefit
more from the free movement of services and capital if properly
informed and trained. Therefore financial education has been
integrated into the Commission’s Internal Market agenda.
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EMN’s bi-annual magazine - N°4 December, 2008
anyone about this. Traditional barriers between banking, insurance
and investment products have been blurred. Modern financial
products often include sophisticated features. An ever widening
range of products and services is available to cater for various
needs and personal circumstances. But an average consumer can
find this abundance and variety difficult to handle.
Yet, in many countries people are facing increasing responsibility for
their personal finance. A whole spectrum of instruments is available
for retail investors who have to decide on allocation of their savings.
Increasing rates of home ownership in many countries mean that
more people take out mortgage loans, choosing between fixed
and floating rates, and in some cases opting for a foreign currency
exposure. And last but not least, today’s generation has to make
additional financial provisions for retirement.
Financial education was first mentioned in the White Paper on
Financial Services Policy for the period 2005 – 2010 1 . It has been
included in the Green Paper on Retail Financial Services issued
in mid-2007 2 . It is also one of the measures for empowering
consumers listed in the Single Market Review of November 2007 3 .
Th e Co m m is s i o n Co m m u n i c at i o n
In December 2007, the Commission set out, in the form of a
Communication 4 , its vision for financial education in the EU. This
document is based on extensive research and consultation carried
out in the previous two years, including an EU-wide conference
on ‘Improving Financial Capability’ held in Brussels in March 2007
and a ‘Survey of financial literacy Schemes in the EU’ published
in November that year. 5 The Communication listed the benefits
of financial education as well as the principles for the provision of
high-quality financial education programmes, and announced four
practical initiatives aimed at promoting financial education with
stakeholders in the public and private spheres.
Following the Commission’s Communication, the European
Parliament and the Council have also stressed the importance
of improving consumer financial capability. The EU Ministers
of Finance adopted conclusions on financial education on 14
May 2008, while the European Parliament adopted a report on
improving consumer education and awareness of credit and
finance drafted by Iliana Iotova on 18 November 6 .
1 COM (2005) 629 final.
2 COM (2007) 226.
3 COM (2007) 724.
4 COM (2007) 808.
5 Habschick M. et al. (2007) Survey of financial literacy schemes in the
EU27, Evers & Jung, Hamburg, November 2007, available at http://ec.europa.eu/
internal_market/finservices-retail/capability/index_en.htm
6 2007/2288(INI)

i a l e d u c at i o n p o l i c y
Co m m i s s i o n
The EU’s role in the area of financial education is mainly supportive,
as education is a competence of the Member States. The national
level is the most appropriate for the delivery of consumer education
programmes. It is also the most effective and efficient. Member
States have a key role to play, for example by adopting national
financial education strategies based on a public–private partnership.
The Commission believes that its role is to act as a promoter of
financial education EU-wide: showing its benefits, coordinating
efforts, demonstrating best practice.
The four practical initiatives announced in the Communication are as
follows:
Ex p e r t Gr o u p
The Commission has created the Expert Group on Financial
Education (EGFE) 7 – a network of practitioners. The call for
applications, open from mid-May until mid-June, resulted in receiving
over 100 candidatures. 25 experts were subsequently selected.
The experts represent various backgrounds: mainly the national
authorities and the financial services industry, but also consumer
organizations and academia.
The first meeting of the EGFE took place on 7 October 2008 in
Brussels. The discussions focussed on national strategies for
financial education, in particular on the challenges linked with
coordinating the work of public and private stakeholders. A report
from the first meeting will be published in the coming weeks. The
second meeting is planned for the end of April 2009. In future
meetings the experts will discuss, among other issues, financial
literacy of children and young people, awareness of the issues linked
with pensions and the impact of the financial crisis on the providers
of financial education.
Do l c e ta
Work is also in progress on the new module of Dolceta (the
Commission’s on-line consumer education website) called “Financial
Literacy – Tools for Teachers”. The common framework of the
module has been completed and the national teams in the Member
States have started to work on the adapted lesson plans, which will
be offered to teachers in primary and secondary schools for use on a
voluntary basis. This project was launched in April 2008 and the final
release is planned for March 2010. The existing modules of Dolceta
can be viewed at www.dolceta.eu. ‘Financial Literacy’ will be the
seventh module.
Data b a s e
The Commission is finalising the development of the European
Database for Financial Education (EDFE). It will serve as an
“electronic library” of existing financial education projects with regard
to their geographical base, subject matter covered, target audience,
method of delivery used and contact details of the providers. It will
be a living database, open for submission of information about new
schemes by all types of providers. The EDFE should be published
on the “Europa” website by the end of 2008.
Pat r o n a g e
The Commission offers honorary patronage to selected events
promoting financial education. The patronage can take form of
a message of support, the right to use the Commission logo or
participation of a speaker from the Commission. However, no
specific financial support is available. Recently, patronage was
granted for the following events:
Conference “Financial Institutions for Financial Education”, Warsaw,
24/06/2008, organized by the Warsaw School of Economics and the
Polish Association for Citizens’ Financial Safety;
National award ceremony for the contest “Develop your business
venture”, Rome, 01/10/2008, organised by the Italian Banking
Association within the framework of the PattiChiari financial
education programme for high school students;
“Conference for Financial Awareness”, Budapest, 02/10/2008,
organised by the Central Bank of Hungary to launch the national
strategy for financial education.
Co n c l u s i o n
While promoting its importance EU-wide, the Commission is of the
view that financial education remains primarily the responsibility
of the Member States. Governments should play the key role in
raising general awareness of the need to improve consumers’
financial capability and in coordinating various public and private
initiatives at the national level. Financial literacy programmes
should be available for all citizens, and preferably included in the
school curriculum. Financial education is an important means for
empowering consumers to make informed decisions. It impacts upon
their lives, the society and the economy. Therefore, the Commission
is continuously encouraging the Member States to develop their
national financial education strategies.
7 Based on the Commission Decision 2008/365/EC of 30 April 2008.
EMN’s N°2 December bi-annual magazine ,2007 - REM’s - N°4 December, bi-annual magazine 2008
5

By Marco Habschick, Mirko Bendig - EVERS & JUNG
Div e r s e ,
Fin a n c i a l Li t e
EVERS & JUNG c o m b i n es r e s e a r c h a n d c o n s u lt i ng in f i n a n c e
i s s u e s w it h m i c r o f i n a n c e a n d f i n a n c i a l l it e r a c y b e i ng a m o n g t h e
f o c u s t o p i cs. Th e c o m pa n y is a f o u n d i ng m e m b e r o f EMN.
In t r o d u c t i o n
Over the last two decades the importance of financial literacy has
grown in European economies as financial markets have developed
and as a result of demographic, economic and policy changes.
Both the needs of individuals and the financial products on offer
have become more complex. Today, without financial literacy, the
full and informed participation of individuals in economic life is more
challenging, at the same time as it is becoming more important and
even fostered on the national and EU level.
This is a serious issue for the EU Member States, many of whom
now require increased personal responsibility for financial security,
as state-sponsored social security systems are retrenching and new
market opportunities arise steadily in the financial sector. Therefore,
financial literacy is a growing priority, both for the EU institutions as
well as for the Member States and the market players. It is also
crucial for individuals and households, as lifestyles change as a
result of more frequent changes in employment, for example, or
Th e Eu r o p e a n l a n d s c a p e
There are several hundreds of schemes currently running in
the Member States. 180 financial literacy initiatives have been
identified and catalogued in a EU survey 2007. 154 of these can
be categorised as “core schemes”, the rest can be regarded
as schemes in a broader sense. For some Member States,
this accumulation of existing schemes may be able to give a
wholly accurate picture of the financial literacy landscape and
demonstrate an extensive overview for the biggest part of the EU.
However, this article particularly aims to present a closer look at
the specific details of these categorised schemes.
Re m a r k a b ly, t h e r e a r e s e v e r a l s t r i k i ng fa c t s
w h i c h a r e w o r t h m e n t i o n i ng:
The distribution of financial literacy schemes varies greatly
throughout the EU. Most of the core schemes which were found in
the survey are based in the UK (32%), Germany (22%) and Austria
(10%). The strongest country in Eastern Europe is Poland (6%). 2
2 It has to be seen though that the share of France and the Netherlands is
biased due to low response rates to the survey.
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EMN’s bi-annual magazine - N°4 December, 2008
increased incidences of divorce. Such changes create a need
to adjust private finances regularly to suit new work and family
circumstances. Furthermore, life expectancy has also grown
dramatically, increasing people’s need for greater awareness of
pension provision.
For all these reasons, the task of administering and allocating
personal financial resources appropriately is considerably more
elaborate and extensive, in terms of both the skills and the
knowledge needed, than was the case for previous generations.
These developments pose considerable threats for the financial
wellbeing of individuals and households alike. They also present
a variety of risks to society, which will bear the costs arising
from market inefficiency. At the very least, the potential of the
financial markets is likely not to be exploited optimally under these
conditions. Therefore, financial literacy is a growing priority, both
for the EU institutions, as well as for the Member States and the
market players.
The aim of this article is to deliver an overview of the respective
characteristics of the existing financial literacy activities in the EU
Member States and the lessons learnt from the main findings of
these schemes in Europe in particular 1
1 This article is based on the findings of the “Survey of Financial Literacy
Schemes in the EU27” compiled by EVERS & JUNG in 2007.
Bulgaria, Latvia, Luxembourg, Slovenia and Romania seem to be
solely covered by transnational EU programmes.
The main target groups for current initiatives are children and
young adults. With almost two-thirds of schemes targeting these
groups, this is clearly the dominant type. Most of these schemes
are set up in classrooms or universities. They mainly enable
the participants to understand the nature of money and provide
information about day-to-day money management and financial
planning for the future (e.g. Finanzführerschein/Financial driver’s
licence, Austria).
One out of four schemes (25%) target specifically low-income or
low-education groups. Most of them are provided by non-profit
associations or consumer protection agencies. Typically they
cover several content areas, but the main ones are day-to-day
money management and financial planning for the future (e.g. Blijf
Positief/Stay positive, NL, and MoneyHelp, UK).
Utilisation of the Internet is widespread with 66% of all core
schemes using this channel. In some cases (8%) the schemes
are set up as web-only services (like Dolceta, EU) or the Internet
is employed in combination with printed handbooks, leaflets or
brochures (e.g. the FSA’s Consumer Communications, UK). The

d y n a m i c , u n c o o r d i n at e d :
r a c y in t h e EU
main content areas are day-to-day money management, financial planning for the future and choosing financial products. Most of
these schemes target adults but some are also designed as computer games (e.g. “Klipp+Klar/Clear as daylight, Germany).
Usually financial literacy schemes in the EU use multiple instruments and channels:
48% use four or more channels/instruments and 17% use six or more channels/instruments (e.g. Finances & Pédagogie / Finance &
Education, France). Channels used most frequently are websites, leaflets/brochures, printed handbooks and training courses. There
are many schemes providing their service through intermediaries. 65% use intermediaries or provide their service through other
organisations. 32% provide their service solely through intermediaries.
Usually the schemes are provided nationally or regionally within a country (e.g. My Finances/Moje finanse, Poland). This is quite
understandable because large parts of the content have national relevance or are language dependent. Very few schemes
cross national borders. Examples are the four EU-wide or international schemes (e.g. Junior Achievement - Young Enterprise
Programme).
Usually the schemes cover several content areas of financial services and basic money issues. There are only a few that cover
one single content area. And if so, these schemes mostly provide information about bank accounts and basic money issues, like
MyMoneyMatters in the UK or Pensionsföredrag / Pension economy in Sweden.
A relevant part of the respective initiatives is operated by private financial service providers (15%) and targets customers as well as
non-customers. Only two of these initiatives review specific products and financial service providers. Therefore, one can state that
although financial service providers have financial interests, their content dealing with financial literacy normally remains impartial
(e.g. Make the Most of Your Money, UK).
Some of the schemes in the EU27 are unique. They are often designed for specific target groups or purposes. Thus, it may be difficult
to group their attributes in respect to the other schemes, but they are worth mentioning for their individual approach and to indicate a
full European picture.
Le s s o n s Le a r n e d
The dynamics of the still young field of financial literacy in Europe are astonishing. Nearly all Member States have implemented
financial literacy schemes and are about to create or are at least planning additional activities in combating financial illiteracy. In spite
of their different environments, all seem to be encountering
the same challenges. Furthermore, there is still a strong
need for deeper analysis and evaluation to obtain a better
understanding in terms of perspectives for the existing
financial literacy activities.
In regard to dealing with this situation, there are some
effective strategies which are obvious:
Wo m e n En t r e p r e n e u r s p r o j e c t
(No n-p r o f it a s s o c i at i o n, Ma lta)
The “Women Entrepreneurs” project of SIFE - Students in
Free Enterprise provides basic, every-day financial techniques
to local young women and female entrepreneurs as well as
promoting their financial independence. It aims to reach its target
audience through a number of conferences, training courses,
open discussions as well as regular publications like printed
toolkits and handbooks. The female entrepreneurs are educated
in the basic knowledge of bank accounts, money management,
credit and debt, investment, saving and retirement. According to
the provider, 2,000 women took part in 2006.
EMN’s N°2 December bi-annual magazine ,2007 - REM’s - N°4 December, bi-annual magazine 2008
7

1.
Fo s t e r i ng m u t u a l l e a r n i ng
There is hardly a lack of clarity about contents, target groups or methodologies in financial literacy. New schemes frequently display
significant similarities to existing ones. At the same time any exchange between the Member States is still rare, though. The time
seems right to concentrate on transnational cooperation instead of reinventing the proverbial wheel each time. The results indicate
that such exchanges would produce significant effects if arranged between, for instance, all schemes which target the same groups
or belong to the same provider category. The European Commission could play an important role in making this process possible.
2.
Es ta b l is h i ng a b e n c h m a r k i ng p r o c e s s
Benchmarking is an excellent method for disseminating innovation. Team members of EVERS & JUNG experienced this within the
project. The project “Benchmarking in European Microlending”, carried out on behalf of DG Enterprise (1998/99), is still seen as
a catalyst for raising awareness of microlending as such and for the professional and effective networking of the microlenders in
Europe. A similar momentum could be induced for financial literacy now.
3.
Ex a m i n i ng t h e “w h y n o t s”
There is only a small degree of dissent about the ideal contents of a financial literacy scheme. The bigger question is why people
do not regularly apply the skills they have learnt. Sociological and behavioural finance research gives fascinating insights into the
complexity of human economic behaviour. This should be included in the discussion and research of financial illiteracy as well as in
the creation of new schemes.
4.
Fo s t e r i ng o f s c h e m e f r a n c h is i ng
The UK, with its concepts of national scheme frameworks
and regional hubs, shows how an efficient application of
public funds can be successfully applied to financial literacy
activities. In Austria and Germany too, the first franchising-like
structures can be seen (“Debt suitcase”). This is a promising
approach for disseminating proven concepts to other regions.
It should be evaluated thoroughly and if its effectiveness can
be proven it should be fostered on the national and EU levels.
Le i c e s t e r Mo n e y l i n e
(No n-p r o f it a s s o c i at o n, UK)
Leicester Moneyline provides broad financial literacy and
budgeting advice to entrepreneurs in both a group setting and on
a one-to-one basis. The programme addresses basic knowledge
of bank accounts and money management using leaflets,
brochures, training courses and one-to-one guidance. Much
of the work focuses on high interest loans. According to the
provider, 50 adults participated in the initiative in 2006.
Co n c l u s i o n
This snapshot of a very dynamic field can be seen as a first step for further research as well as for a mutual learning process,
because there appears to have been little exchange between the Member States to date. There are already some very successful
and efficient methodologies in several Member States – the UK being by far the most advanced in this area. Therefore, from now
on it would be timely for the EU to concentrate on transnational cooperation instead of reinventing the wheel each time in terms of
content, curricula and methodology.
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EMN’s bi-annual magazine - N°4 December, 2008

F i n a n c i a l e d u c a t i o n :
t h e r o l e o f f i n a n c i a l i n s t i t u t i o n s
An a p p r o a c h f r o m t h e Spa n i s h Sav i n g s Ba n k s
By Inés García and Pintos Balbás, Spanish Confederation of Savings Banks
Spa n is h s av i n g s b a n k s a r e p r i vat e f o u n d at i o ns t h at c o m b i n e t h e i r f i n a n c i a l a c t i v it y w it h a s o c i a l m i s s i o n. Th e y a r e f u l l r e ta i l
f i n a n c i a l i ns t it u t i o ns. Th e y i n v e s t a v e ry s ig n i f i c a nt pa r t o f t h e i r r e v e n u e s in Ob r a So c i a l, c o m m u n it y i n v e s t m e n t p r o j e c t s. Th e
Spa n is h Co n f e d e r at i o n o f Sav i ng s Ba n k s (Co n f e d e r a c i ó n Es pa ñ o l a d e Ca j a s d e Ah o r r o s - CECA) is t h e n at i o n a l a s s o c i at i o n
o f t h e 45 Spa n is h s av i n g s b a n k s. Fo r f u r t h e r i n f o r m at i o n p l e a s e r e f e r to w w w .c a j a s d e a h o r r o s.es o r w w w .c e c a.e s.
Is f i n a n c i a l e d u c at i o n a n i s s u e
An t o n i, 35 y e a r s o l d, e c o n o m is t
My bank has offered to purchase some
very complex financial instruments
for me. I really do not know very well
how they work, even though I am an
economist! But it seems that they are
offering a very high return on your
money, what a mess !
Ge r a r d o, 28 y e a r s o l d, b r i c k l ay e r
I do not know how to handle so many bills.
At the bank they are asking for too many
documents and a steady job in order to
grant me a loan. I believe that I will go to a
credit regroup company: I was told that the
procedure is simple and that they offer low
interest rates.
Jo n, 42 y e a r s o l d, c o n s u lta n t
Because of the financial crisis, the selfemployed
sector is finding it difficult to
survive. If I had known it before, I would
never have had asked for all those loans
that I can no longer pay back.
Mo n i c a, 24 y e a r s o l d, l aw y e r
I have just begun to work. It is the first time
that I have had so much money! At my
job they have offered to open a retirement
plan for us ... but it seems so far away!
I believe that I’d rather invest the money
in the stock market: it just seems to be a
better deal.
Jav i e r, 32 y e a r s o l d, c o m p u t e r t e c h n i c i a n
Inés and I want to buy our own apartment.
The truth is, that I do not know whether
to open up a home ownership savings
plan or to start putting our savings into an
investment fund that seems to give better
results and seems more flexible.
Be at r i z, 80 y e a r s o l d, p e n s i o n e r
Since my husband died I have had to deal
with all these banking issues... I just do
not understand a thing: I do not know if it
is a trap; why should I have to mortgage
my house to increase my retirement
pension The house is already mine!
Ha s s a n, 21 y e a r s o l d, e l e c t r i c i a n
I have just arrived in Spain. In order to
rent an apartment they are asking me for
a bank guarantee, what is that I have
never even been to the door of a bank!
Sa b e l a, 10 y e a r s o l d, s t u d e n t
My teacher brought a moneybox so
that all my classmates can deposit in it
whatever they are able to save from their
weekly allowances. With the money we
will buy a computer for our schoolroom.
Ait o r, 55 y e a r s o l d, j o u r n a l is t
It’s incredible, but retirement is just
around the corner. How much money will
I have to live on I have some money
saved up, but will it be enough to live well
through old age
Ju a n, 17 y e a r s o l d, s t u d e n t
I want to buy a motorcycle for my birthday.
My father says that he will give me the
same amount as I am able to save.
EMN’s N°2 December bi-annual magazine ,2007 - REM’s - N°4 December, bi-annual magazine 2008
9

Th e s e f i c t i t i o u s t e s t i m o n i es (o r a r e t h e y) l ay e m p h a s i s o n c e r ta i n i s s u e s:
•
•
•
•
•
•
•
Financial education only addresses people that lack basic education Is it not relevant even in the most educated class of
society Is it related to general basic education
Is it important to hold on to a savings culture
Are we prepared for making informed, wise and important decisions such as the purchase of a house, planning for retirement,
financing children’s higher education
Are we totally aware of the risk-taking outcomes of some of the financial decisions we take
Does somebody still really think that high profitability does not entail risk-taking
In what way do demographic changes affect Spain’s economy (aging population, high immigration rate)
How can financial education help overcome financial dependency
Some facts in brief: in the United Kingdom 43% of the population say they are reluctant to take risks, nevertheless a large majority
have committed to non-guaranteed investments; 65% of Dutch households do not know how to calculate their pension; the
Spaniards have 41% of their savings deposited in financial instruments with a certain level of risk (shares and bonds); 47% of
American workers without savings think that they will have sufficient money for retirement 1 .
Re l e va n c e o f f i n a n c i a l e d u c at i o n
All these questions and many others highlight the importance of a financial education adapted to people’s needs: to help individuals
make the right decisions, to enjoy economic independence, to enable financial inclusion of all those who wish it. Financial education
is strongly linked to over-indebtedness, the growing use of ever-increasingly complex financial instruments, people’s need to
control their financial situation, financial service accessibility and consumer protection.
Because of the key importance of these issues, different administrations have already acknowledged their outcome: the OECD
in its International Gateway for Financial Education, the European Commission in its December 2007 2 Publication, the European
Parliament in its next Iotova report. These sources insist on the necessity of lifetime financial education, the importance of
including these subjects in regular school programs and of creating financial education networks that involve all stakeholders.
Financial education not only has to do with national and international governments but also with private establishments such as
NGOs, education institutions, consumer associations and financial institutions, all acting at different levels and on issues they are
committed to.
Fi n a n c i a l e d u c at i o n a n d f i n a n c i a l i ns t it u t i o ns
Why are financial institutions interested in customers being not only informed but, even better, financially literate Their interest
and expectations are huge. Financial institutions are good connoisseurs of financial instruments and services and of the problems
their potential clients sometimes have in adjusting their demands to their financial needs. It is true that credit institutions “live”
to grant loans, and are therefore greatly interested in promoting the awareness of financial instruments that help upgrade their
market. But we want our clients to be able to pay back their loans! Over-indebtedness, unpaid debts. Are not good business for
credit institutions: we’d rather have, not necessarily rich clients, but those who are able to make informed and wise decisions and
.... be able to live up to them. And also clients, who are able to ask for complex financial instruments which answer and adjust to
their real financial needs.
Financial education aims at introducing a greater balance into the existing asymmetry of information between financial institutions
and their clients. The concept of financial education helps in removing the unnecessary advantage that financial institutions have
over their clients. The institutions possess an enormous amount of information on their clients (his or her income level, spending
habits, civil state). But what do clients know about the institutions in which they are depositing their savings It is important that
clients be as well informed about their financial institutions and what they are offering, as the institutions are informed about the
clients. This way we can help develop confidence-based foundations between clients and their financial system.
It is time to learn lessons from the worldwide financial crisis that we are experiencing by enhancing consumer confidence as a key
value that guarantees the survival of credit institutions. Thus financial education becomes a core issue, a “social investment” that
enhances personal and community development.
10
1 Information included in a presentation delivered by the Director for Investors of the CNMV (National Securities Exchange Commission) at the 1st Savings Banks
Sectoral CSR Conference, 7 November 2008 in La Coruña (Spain)
2 COM (2007) 808
EMN’s bi-annual magazine - N°4 December, 2008

Wh y a r e Spa n is h Sav i ng s Ba n k s c o n c e r n e d w it h f i n a n c i a l e d u c at i o n
Spanish Savings banks are currently very much aware of the importance of these issues. Savings banks want Sabela and Juan
to understand the value of saving, Monica to invest today’s money for future requirements, Hassan to understand and use their
services, Gerardo to comprehend that certain financial instruments increase the amount that he will have to pay back, Javier and
Ines to make the most important financial decision of their lives backed up by well-skilled knowledge, Antoni to understand the
trade-off between profit and risk taking, Jon to be able to assume his financial commitments without getting into trouble, Aitor to
enjoy a nice quiet retirement and Beatriz to become familiar with newly-designed financial instruments that will help her enjoy
financial wellbeing and a better income.
Financial education is a deep-seated element of our Corporate Social Responsibility devoted to helping create
ownership of the future, while reinforcing our own business strategy. Some clarifying examples can be found in
the OECD’s Gateway for Financial Education and the European Commission Publication’s annexed survey:
• Un i c a j a collaborates with the International University of Andalusia and the University of Malaga in an interactive
website offering financial education called Edufinet (www.edufinet.com).
• Ca i x a Te r r a s s a is the mentor of the “Learn to Manage your Money” program, in which over 44,000 students
have participated since 2000 (www.caixaterrassa.es). This program is designed to familiarize students with
banking concepts and to have them embrace a savings culture.
• Th e Spa n is h Co n f e d e r at i o n o f Sav i ng s Ba n k s (CECA) gives school students all across Europe
an opportunity to become acquainted in an enjoyable way with financial and business topics by participating
in a competition. In 2007 nearly 15,000 students participated and were sponsored by 13 savings banks. This
program is focused on stock exchange investment strategies, securities accounts and virtual starting capital (www.
juegodelabolsa.eu).
• Ca j a Es pa ñ a works together with the Fundación de la Lengua on a full resource program for immigrants
living in Castile-Leon. Caja España banking employees train immigrants on financial instruments and banking
operations basics in order to help make their integration in our country easier (www.fundacionlengua.es/files/
actividades/centros/inicio.html and www.cajaespana.es).
• Ca j a d e Bu r g o s runs a programme, “Pequeños emprendedores” (Young entrepreneurs), aimed at
developing the entrepreneurial spirit among 10-12 year-old students. With the support of Caja de Burgos, they
create a cooperative company, decide on its name and kind of activity and, particularly, on its financial needs. Caja
de Burgos grants them a “symbolic loan” for the creation of their company (up to €300), with which they buy goods
and make other financial decisions. At the end of the program (one year) they pay back the loan . This program
has been running since 2006 and around 650 students in the town of Burgos have already participated. (www.
cajadeburgos.es/osc/educacion/default.htm or www.emplearte.es)
• Ca i x a No va o f f e r s an “Easy Guide to Buying and Financing your House”, aimed at potential buyers of
housing and lodgings. It includes useful information on legal and administrative details, data on housing markets
and how to access customized financial instruments. It includes a simulation facility to calculate costs of different
financial alternatives and offers a whole range of financial housing products and services (www.caixanova.es or
www.solucionhipotecaria.es). Caixa Nova has distributed around 3,000 copies of this Guide.
As part of its desire to develop innovative initiatives, the Spanish Confederation of Savings Banks (CECA) has given active
support to the innovative ideas presented by the European Commission in its previously-mentioned 2007 publication. To ensure
the accomplishment of the savings banks’ mission, as of 2009 it has been agreed to start on a large range of activities directly
linked to the 2008-2010 Financial Education Program launched this year by the Bank of Spain and the National Securities
Exchange Commission (CNMV). Above and beyond fomenting and promoting the savings banks’ own initiatives, during the first
semester 2009 CECA will organize a conference focused on financial education. The conference will be the starting point of longlasting
initiatives in which we hope to work hand in hand with all interested stakeholders: associations, corporations, foundations,
educational institutions, regional and governmental units, public administrations and other financial institutions.
Therefore, as of now we want to invite all those who think that it is important to increase the spread of financial literacy to join
us.
EMN’s N°2 December bi-annual magazine ,2007 - REM’s - N°4 December, bi-annual magazine 2008
11

UK E
LEARNINGS ON FIN
By Faisel Rahman and Muna Yassin – Fair Finance
Fa i r Fi n a n c e is a n o t f o r p r o f it o r g a n is at i o n b a s e d in Ea s t
Lo n d o n. It w a s c r e at e d in 2005 a f t e r a 5 y e a r p i l ot o f
m i c r o f i n a n c e a n d d e b t a d v i c e s e rv i c e s. It c u r r e n t ly h e l p s
t h o u s a n d s o f p e o p l e e a c h y e a r in Lo n d o n w it h a f f o r d a b l e
p e r s o n a l f i n a n c e to ta c k l e m o n e y l e n d e r s a n d ta r g e t t h e
f i n a n c i a l ly e x c l u d e d, m i c r o f i n a n c e to h e l p c r e at e b u s i n es s in
p o o r c o m m u n it i es a n d d e b t a d v i c e to h e l p t h e o v e r-i nd e b t e d.
It h a s g r o w n f r o m o n e c o u n c i l e s tat e in St e p n e y to c o v e r i ng 8
Lo n d o n b o r o u g h s
In t r o d u c t i o n
Having financial literacy is defined as the ability to make appropriate
decisions to manage your finances. Unfortunately, for most people,
the two words guaranteed to send you to sleep are financial and
Th e g r o w i ng i m p o rta n c e o f f i n a n c i a l l it e r a c y
What is clear is that our educational systems have not kept up with
the changing nature and importance of financial services to our
daily lives. Do all 18 year olds really have a full understanding of
APR’s, payment charges, the total cost of credit and determining
if a loan is affordable Do all pensioners truly understand equity
release and pension options Do all young workers understand
the importance of setting up pensions and savings accounts for
their future
This issue will become more and more important as the ‘State’
begins to pull back from involvement in people’s personal finances
and passes more responsibility to the individual. This is clearly
seen in the UK where the concept of caveat emptor underpins
the financial regulator and the government approach to consumer
behaviour. Over the next few years the UK will be piloting ideas
on transferring housing benefit payments directly to individuals
to manage, rather than direct to their landlords. For the first time
people will have their full state budget to manage themselves, and
will need to spend the money wisely. In addition as all Western
European countries begin to look at pension liabilities the onus on
individuals to establish private pension options and savings will
rise.
12
EMN’s bi-annual magazine - N°4 December, 2008
literacy, if you add pensions and savings then you have a perfect
cure for insomnia!
This is a shame as having good financial literacy is vitally important
– making bad financial decisions today will often impact us in the
future when we can’t go back and change our choices. However
most people make financial choices on short term decision
making, mainly because they either don’t understand what they’re
being offered, its impact or its full relevance. This could be simply
misunderstanding fees, rates, buy outs, early redemption charges
to simply just appropriateness of product choice.Increasing rates
of home ownership in many countries mean that more people take
out mortgage loans, choosing between fixed and floating rates,
and in some cases opting for a foreign currency exposure. And last
but not least, today’s generation has to make additional financial
provisions for retirement.
The n e e d o f f i n a n c i a l l i t e r a c y f o r
m i c r o f i n a n c e p r o g r a m m e
At Fair Finance, as well as microfinance, we provide emergency
support through one-to-one debt advice services to help people
who are in financial distress or hardship. Over the last year we
determined that we needed to try and get to a wider group of
people – before they had financial problems – so that we could
be more proactive and take a preventative approach to helping
them address their own financial needs. We wanted to see if we
could improve people’s financial literacy then we might reduce the
numbers of people coming for help to deal with problems caused
by financial mismanagement or over-borrowing. We believed also
that Fair Finance would attract people who previously had been
excluded, and that we would be able to bring our experience in
making financial issues accessible in an area that others had
difficulty in making work.
We partnered with CitiBank who provided funding, and a number
of local housing and community providers to deliver a range of
financial literacy workshops to women and young adults to pilot our
approach and concepts. We have so far run 5 workshops covering
basic issues that people can link and associate to such as: Money
Management – covers the basics with emphasis on budgeting,
prioritising of commitments and importance of savings; Wise
Financial Shopper – focus on ensuring that participants can make
informed choices when choosing financial products; Demystifying
financial jargon and common terms; and Recovery Processes –
focus on ensuring individuals know what to expect when faced
with debts, bailiffs, county court procedures and what constitutes
harassment. Sessions were up to 2 hours, semi-structured, with
access to crèche facilities, and the chance to follow up with an
advisor on a one-to-one basis after the session.

XPRIENCES AND
ANCIAL LITERACY
Le s s o n s l e a r n e d
So m e o f o u r l e a r n i ng’s i n c l ud e:
• The initial planning and design of the sessions took longer
than anticipated. However making it relevant is the key:
content is easier to digest for participants if delivered in a way
that takes into account real life experiences – it is important to
ensure that information is practical for the audience
• A third of participants in general were willing to attend more
than one session
• Women preferred to have the sessions with women only, it
made it easier for them to discuss financial issues.
• Participants have developed their own financial ‘coping’
mechanisms which are based on the following – financial
circumstances, money management skills learnt from parents
and family members, working and adapting these is the key
for helping people take on and keep the lessons.
• None of our participants had received formal teaching in
financial issues that they could remember, and therefore any
sessions needs to take this into account
• Discussions throughout the sessions were lively with
participants comfortable enough to relay personal experiences
that were then discussed as a group with suggestions being
put forward by participants
•
The following key themes being raised constantly:
• to make sure they know how much they are
spending on essential items
• to see if they can get better deals by shopping
around
• to work out a budget and stick to it, and to make
short, medium and long term financial plans/goals
i.e. saving for a trip back home
• Women found supporting materials very useful especially the
free Fair Finance ‘goody bags’ which contained financial smart
cards, budgeting pads, calculators and more. They also found
very useful the ‘golden rules’ handouts which summarised the
tips and tricks required for better money management detailed
in the sessions.
• Participants really appreciated the chance to speak with a debt
adviser one on one at the end of the session to go through
specific issues.
• Local partners were key to promote and advertise the service
– housing landlords, community organisations and other
gatekeepers.
We will be running theses workshops for the next 6 months and will evaluate the impacts on the participants over the next 12 and 24
months. This service is expensive and requires much time and money to reach even a small number of people effectively – our program
cost $20,000 and will see 150 people, mainly women (90%) and predominantly from minority communities (75%).
Co n c l u s i o n
Financial companies spend billions each year on marketing thousands of new and amazing ways of getting you to spend money. Very
little is spent on financial education, and very few national curricula’s are keeping pace with the rate of change, or importance, of financial
products to people. A few things are clear: any solution that does not engage the banks and governments will be too small to be successful;
any solution that aims to reach enough people to make a difference will be expensive; and finally, success in engaging people will only
happen when financial literacy is made relevant to people and is practical to their needs. Ultimately no amount of ‘education’ or ‘literacy’ will
help if products are provided unethically or irresponsibly, so in this regard financial regulators have an important overview and watchdog
role to play to ensure that financial products are clear, transparent and provided fairly.
A financially literate population means a country that makes more efficient uses of its financial resources. A financially capable population
means a society that are more empowered and in control of their financial lives.
For Fair Finance showing how this can work for the most excluded in society is a key objective for us, and important in contributing to the
sustainability of our clients current and future needs. As governments continue to struggle with this agenda there is a role for microfinance
agencies everywhere to ensure that the voices and needs of the excluded are not lost in the debate.
EMN’s N°2 December bi-annual magazine ,2007 - REM’s - N°4 December, bi-annual magazine 2008
13

F i n a n c i a l
a n d Ea s t e r n Eu r o p e (
In d e p e n d e n t St a t e s (NIS):
By Katarzyna Kubin, Microfinance Centre for CEE and the NIS (MFC)
Th e Mi c r o f i n a n c e Ce n t r e f o r Ce n t r a l a n d Ea s t e r n Eu r o p e
a n d t h e Ne w In d e p e n d e n t Stat e s (MFC), Wa r s aw, Po l a n d
is a n o n-g o v e r n m e n ta l o r g a n i z at i o n, f o u n d e d in 1997
a s a m i c r o f i n a n c e i nd u s t ry fa c i l itat o r in t h e CEE a n d
NIS r e g i o n t h at s e r v e s a s a r e s o u r c e c e n t e r a n d a
n e t w o r k o f o v e r 100 m i c r o f i n a n c e s e c to r i ns t it u t i o ns
in 26 c o u n t r i es o f t h e r e g i o n. Th e MFC’s o v e r a r c h i ng
m i s s i o n is to c o n t r i b ut e to p o v e r t y r e d u c t i o n a n d h u m a n
p o t e n t i a l d e v e l o p m e n t b y p r o m o t i ng a s o c i a l ly-o r i e nt e d a n d
s u s ta i n a b l e m i c r o f i n a n c e s e c to r t h at p r o v i d e s a d e q u at e
f i n a n c i a l a n d n o n-f i n a n c i a l s e rv i c e s to a l a r g e n u m b e r
o f p o o r families a n d m i c r o-e n t r e p r e n e u r s. To wa r d t h e s e
g o a l s, t h e MFC c o n d u c t s a p p l i e d r e s e a r c h to d e v e l o p
k n o w l e d g e a n d p r a c t i c a l t o o l s t h at s u p p o r t m i c r o f i n a n c e
w o r k , fa c i l itat e s pa r t n e r s h i p a c r o s s s e c t o r s, a n d c r e at e s
a p l at f o r m f o r e x c h a n g e o f g o o d p r a c t i c es.
The following article will focus specifically on the MFC’s
Financial Education Program. It begins with a short summary
of the importance of financial education for financial inclusion.
The article then presents how the financial education program
fits into the MFC’s mission and other activities, followed by a
description of the history and current content of the program.
The article then considers other activities implemented
alongside financial education to strengthen and entrench the
impact of work with low-income people. The article concludes
with a short summary of the programme’s achievements to
date, lessons learned and future prospects.
Gro w i n g At t e n t i o n t o Fi n a n c i a l Li t e r a c y:
The topic of financial literacy has gained widespread popularity among stakeholders across sectors and in recent years; European
policy-makers have hailed the role of financial education in poverty reduction and in creating inclusive financial markets. In 2006,
the finance ministers at the G8 meeting emphasized the importance of raising financial literacy; in 2005, the European Commission
released the Green Paper on Financial Services Policy, in which it identified financial literacy as a priority action area. Both the
OECD and the European Commission published influential documents in support of financial education and outlined practical
guidelines for institutions undertaking such activities. This growing interest in and support for initiatives aiming to raise financial
literacy are a response to the increasingly sophisticated offers of the financial sector on the one hand, and the more complicated and
individualized needs of consumers on the other (see Table 1 below).
Table 1: Causes of Increased Interest in Raising Financial Literacy 1
Individual level
Systemic level
Greater individual responsibility for quality of life and financial
security
Increasing number of self-employed people
Less job security because of decreasing opportunities for long-term,
full-time contracts
Longer life spans (ex. create the need for new financial products)
Decreasing role of the welfare state
Deregulation of markets
Wider range of products and rapid pace of development of new
products
New distribution channels that make access to formal financial
services massively accessible (ex. credit cards)
1 Table draws from: OECD. (2005) Improving Financial Literacy: Analysis of Issues and Policies.
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EMN’s bi-annual magazine - N°4 December, 2008

Ed u c a t i o n in Ce n t r a l
CEE) a n d t h e Ne w
An Ex a m p l e
Wh o Be n e f i t s f r o m Fi n a n c i a l Ed u c at i o n
Financial education is especially important among low-income
people, those who use financial services as well as the
unbanked. Limited resources and often an outright lack of fluidity
before the next paycheck, in conjunction with limited access to
the financial sector, means that low-income people are more
likely to take recourse to illegal money-lenders or fall victim
to predatory lending practices by formal financial institutions.
They are also more vulnerable to the effects of emergencies
or even seasonal higher expenses: a study conducted on a
representative sample of low-income Polish families revealed
that 61% experienced a significant decrease in the financial
standard of living after a series of three minor sicknesses during
one month in a given household. In difficult financial situations,
low-income households often react by borrowing. Such behavior
leads to high rates of indebtedness, which in turn keeps the poor
from emerging above the poverty line. Financial education can
help such families have greater control over their finances and
thus reduce the negative impact of emergencies or periods of
higher financial stress.
However, financial education is not only for the poor or the
unbanked. Those who already use financial services can also
benefit. Research has shown that people tend to think they know
more about managing finances and financial services than they
actually do. As the financial market becomes more diverse and
complex, this lack of knowledge can have serious consequences
for even stable household budgets, which fall risk to bankruptcy.
Fi n a n c i a l Ed u c at i o n at t h e MFC
Financial education is a priority for the Microfinance Centre
(MFC) given its regional focus in Central and Eastern Europe
and the New Independent States (CEE and NIS), and its mission
focus on alleviating poverty, and supporting inclusive and
socially-responsible financial sectors.
• Th e s p e c i f i c c o n t e x t in t h e CEE a n d NIS r e g i o n
The need for financial education in the CEE and NIS is
particular given the region’s history of communism. A centralized
command economy meant that people had strictly limited
incomes that did not need to be managed for lack of consumer
and financial service options. This history left an imprint on the
financial sector, which remains shallow with fewer products
and services than in Western European countries, and on the
people, who have little knowledge and low skills for managing
personal finances in the post-communist context. Meanwhile,
the transition from communism left a great proportion of this
region’s population without a steady income and obliged to forge
a new place for themselves in the market.
Based on poverty statistics in CEE and NIS countries, we
estimate that around one third of the population is particularly
vulnerable and in need of greater financial literacy.
Simultaneously, statistics of existing financial literacy programs
reveal that out of 156 financial literacy schemes identified in
the EU27, only 14% are located in Eastern European countries.
Thus, the CEE and NIS region is prime territory for expanding
financial education to empower people to take control of their
personal finances, tobenefit from the existing financial sector,
and to foster entrepreneurial attitudes and behaviors.
• Th e s p e c i a l r o l e o f m i c r o f i n a n c e i ns t it u t i o ns
The distribution of financial sector institutions in the CEE and
NIS varies between countries, but the financial sector as a whole
remains underdeveloped. Given the marked poverty of the
people in the region, and the need to support the self-employed
and small businesses, microfinance institutions constitute a
significant financial service provider (see Graph 1).
Graph 1: The proportion of credit use from different sources in
selected countries of CEE and NIS
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
BiH Pol Rom Ukr Aze Geo
other (money lenders,
paw nshops)
relatives/friends
other institutions including
credit unions, MFIs
Source: MFC. (2008) The State of Microfinance
Industry in Eastern Europe and Central Asia, 2007. (Forthcoming).
As a membership organization for over a hundred institutions
working in the microfinance sector in the CEE and NIS region,
the MFC considers it a priority to support MFIs in improving and
expanding services to low-income clients. Financial education
is a tool that advances this priority. It fosters a responsible
consumer base that can avoid abuses by financial institutions;
clients with greater financial literacy are also valuable to the
financial sector because:
• they are able to make choices about available financial
services and products with minimal support and guidance;
• they tend to have better repayment rates and are able to
maximize the use of a range of financial products;
• they are better equipped to directly transfer useful
information to the provider about the kinds of services that
best respond to their needs, including product feature or
type, delivery channels, prices.
Moreover, by supporting financial literacy among potential
clients, MFIs can develop their client pool: financial education
encourages the unbanked to consider themselves legitimate
clients of financial institutions.
bank
EMN’s N°2 December bi-annual magazine ,2007 - REM’s - N°4 December, bi-annual magazine 2008
15

• Th e “Pl a n Yo u r Fu t u r e” Cu r r i c u l u m:
The MFC piloted its financial education program in 2004-2005 through a Citigroup Foundation funded initiative led by Microfinance
Opportunities (MFO) and Freedom From Hunger (FFH). A demand study and needs assessment that preceded the launching of
MFC’s financial education curriculum, “Plan Your Future”, helped to adapt the materials that were developed through the MFO
and FFH Global Financial Education Program to the specific context of the CEE and NIS region.
The “Plan Your Future” curriculum contains five key sessions delivered over the course of 15 hours through an interactive
workshop. The curriculum helps participants identify their household incomes and expenditures; introduces participants to the
idea of saving by spending less; teaches the benefits of creating special savings pools for defined purposes such as to cushion
against emergencies or to achieve selected objectives. Participants also learn about basic financial services and products.
Throughout the curriculum, participants are encouraged to apply the knowledge they gain by making a financial plan for their
household, including defining financial goals, calculating budgets and identifying relevant financial services that can help them
achieve their goals.
The curriculum is targeted above all to low-income adults and aims to:
• Foster and promote good money management skills and encourage setting realistic goals for the future;
• Promote self-confidence and assertiveness with regard to finances, which are the basis for entrepreneurship;
• Raise the level of knowledge and understanding about a variety of financial services and products.
The flowchart below depicts the changes in attitudes, knowledge and skills that the curriculum is designed to influence:
Lock of control
Limited budeting and cash-flow management
Paycheck to Paycheck
No habit to make long-term plans.
Negative attitude and no systematic
approach to saving.
Reactive behavior
No preparation for risks. Reactive
borrowing. Overindebtness
Distrust financial services
Limited use of financial services, scarce
knowledge of options and a consumer rights
FINANCIAL EDUCATION
Money Management
Controlled budgets and cash-flow
Planning Ahead
Setting and pursuing long term goals to
build assets. Regular and targeted saving
practices. Smart borrowing
Risk Management
Using proactive approaches to risks. Using
insurance services.
Use of financial services
Able to select and use safely the right
financial services
A Lo n g-Te r m, In t e g r at e d Ap p r o a c h:
Although financial education is a powerful tool for empowering people to take control of their finances and for protecting them from
financial sector abuses, it must be complemented by developments in other areas, including:
• Policies explicitly designed to protect the consumer;
• Regulation of financial institutions both through appropriate legal frameworks and regulating institutions (ex. credit bureaus);
• Greater access to financial markets for all sectors of the population, which requires new product development and innovative
delivery approaches.
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EMN’s bi-annual magazine - N°4 December, 2008

The MFC aspires to address these areas through an integrated approach, which is implemented throughout the region by
orienting activities on the following guiding principles:
• Su s ta i n a b i l it y: The “Plan Your Future” curriculum is transferred to strong, local organizations whose staff go through a process
of learning the curriculum, pilot delivery, and finally an evaluation workshop with MFC trainers to exchange experience and
build the confidence of local trainers. This process also ensures that the curriculum is adapted to the context of the given
country and that the trainers are fully prepared to achieve greater scale in disseminating financial education. Such an
approach aims to mobilize local champion organizations to continue delivering financial education independently of the MFC.
• Bu i ld i ng a n e n a b l i ng e n v i r o n m e nt : The MFC facilitates exchange and cooperation between a range of stakeholders within a
given country in order to garner broad support for financial education initiatives locally. Ultimately the goal is for policy-makers
to include financial education in social policy and national strategies.
• In c l u s i v e m a r k e t s: The MFC works with financial sector partners to promote and develop new products geared toward the
low-income market. New products are often complemented by financial education specifically focused on the product type.
• Pa r t n e r s h i p a p p r o a c h: Exchange between institutions working in the field of financial education is an important way of gaining
momentum and strengthening existing programs. The MFC is developing a network of organizations that are involved
in financial education in Europe, the CEE and NIS through the Financial Education for Vulnerable Adults – FEVA Group.
Moreover, the MFC and the FEVA Group partners are working together to create an on-line resources center for financial
education practitioners (www.fevagroup.org).
• In n o vat i o n: The MFC continues to carry out market studies to define the needs of new target groups (ex. remittance recipients,
migrants, social minorities, youth), topics for new specialized modules in financial education, and new ways of reaching
beneficiaries.
A r e s u m e:
Since it was launched in 2005, the MFC’s financial education program has reached over 5,000 low-income beneficiaries
throughout the CEE and NIS region, including in Bosnia and Herzegovina, Kazakhstan, Poland, Russia, and the Ukraine. 150
trainers have been certified by the MFC in various countries throughout the region to deliver financial education locally. Moreover,
three specialized modules addressing distinguished financial products (insurance, savings and loans) have been developed and
tested; an individual counselling module based on the “Plan Your Future” curriculum was piloted among remittance recipients.
This work is possible in a large part thanks to collaboration with strong partners such as Microfinance Opportunities, and the
continued confidence and support of sponsors and an increasing number of partners throughout the CEE and NIS.
The expansion of the MFC financial education program has provided important lessons about effective delivery, building
partnership, and working with policy-makers:
•
•
•
•
Strong local champions that continue financial education delivery on a mass scale without the direct support of the MFC can
be found among public, private and non-governmental sector institutions. Offering support and advice on integrating financial
education into existing programs fosters sustainability.
The media are an important partner for institutions providing financial education. Well managed and committed partnerships
with financial sector institutions can also be an important source of financial support.
Financial education can be provided in a range of contexts (ex. work, public spaces, employment centers) and through
different media (ex. television, games, workshops, etc.). Combining these different approaches can increase the effectiveness
of message transfer. Moreover, introducing new financial services and products targeted at the low-income population can
provide an opportunity to experiment with new approaches to financial education delivery.
Finding a strong local delivery partner and establishing cross-sectoral cooperation is crucial before liaising with policymakers
and other highly placed stakeholders with the goal of garnering long-term support for financial education activities.
Although the MFC’s financial education program is only one of the programs developing in the CEE and NIS, a great amount of
work remains before the goals set by institutions such as the European Commission can be achieved. With the continued support
of sponsors and the systematic effort of national governments and local partners, as well as the collaboration of innovative and
open financial sector partners, we will be closer to achieving the overarching objectives of financial education: decreased poverty
and more.
EMN’s N°2 December bi-annual magazine ,2007 - REM’s - N°4 December, bi-annual magazine 2008
17

By Juan Vega - Promifin
F i n a n c i
f o r Li f e in Ce n
Th e Fi n a n c i a l Se r v i c e s Pr o m o t i o n Pr o g r a m f o r Lo w In c o m e Po p u l at i o ns - o r PROMIFIN (w w w .promifin-c o s u d e.o r g) (Pr o g r a m a
d e Fo m e n t o d e Se r v i c i os Fi n a n c i e r os pa r a Po b l a c i o n es d e Ba j o s In g r e s o s) is a p r o g r a m f i n a n c ed b y t h e Sw is s Ag e n c y f o r
De v e l o p m e n t a n d Co o p e r at i o n - SDC, a n d it is r u n b y TRIODOS-FACET f r o m Ho l l a n d (w w w .t r i od o s fa c e t.nl) w it h t h e
b a c k s t o p p i ng o f Fa c e ta Ce n t r a l f r o m Gu at e m a l a.
PROMIFIN a i ms to p r o m o t e t h e d e v e l o p m e n t o f f i n a n c i a l s e rv i c e s in Ni c a r ag u a, Ho n d u r a s a n d El Sa lva d o r t h r o u g h t h e
i ns t it u t i o n a l s t r e n g t h e n i ng o f f i n a n c i a l i ns t it u t i o ns, t h e d e v e l o p m e n t o f a s u p p o r t i n f r as t r u c t u r e o f t e c h n i c a l a s s is ta n c e,
t r a i n i ng, c r e d it b u r e a u s, c a pa c it y b u i ld i ng s e rv i c e s a n d t h e d e v e l o p m e n t o f a n e n a b l i ng e n v i r o n m e nt. In t h e p r i vat e s e c to r,
t h e p r o g r a m m e w o r k s w it h m o r e t h a n 70 f i n a n c i a l i ns t it u t i o ns (b a n k s, NGOs, m i c r o f i n a n c e i ns t it u t i o ns, c r e d it a n d s av i n g s
c o o p e r at i v e s).
Tr i od o s Fa c e t is a c o n s u lt i ng c o m pa n y s p e c i a l i z ed in t h e p r o m o t i o n a n d d e v e l o p m e n t o f s m a l l a n d m e d i u m-s i z e d e n t e r p r i s e s.
It s m i s s i o n is to c r e at e a c c e s s to f i n a n c i a l a n d b u s i n es s d e v e l o p m e n t s e rv i c e s. Th is i n c l ud e s d e v e l o p i n g n e w a p p r o a c h e s to
SME p r o m o t i o n a n d SME f i n a n c e. Be s i d e s o f f e r i ng c o n s u lt i ng s e rv i c e s Ti od o s Fa c e t is a l s o i n v o lv e d in t h e i m p l e m e n tat i o n o f
p r o g r a m m e s a n d p r o j e c t s a n d a s s i s t in t h e r e q u i r ed c a pa c it y b u i ld i ng.
De s c r i p t i o n o f t h e p r o c e s s
As a result of the rapid emergence of financial services providers, especially in credit-related areas, it has been necessary
to develop regulations that help to support the demand for financial services, so that all microfinance organizations grow
competitively.
This type of regulation is indispensable in helping prevent problems related to high indebtedness that can arise if the demand for
loans increases without control.
People with low incomes share the same objectives as other individuals; for example, the need to live well and to have financial
stability for themselves and their families. However, the lack of resources and available options quite often leads them to a state of
desperation and inertia.
Managing the little money they have access to wisely is a determining factor in satisfying their everyday needs, facing
emergencies, and taking advantage of the opportunities that may come their way.
Generally, poor people have limited access to the knowledge and skills that are needed to manage their financial resources
effectively.
Financial Literacy has a primary objective, to provide the knowledge and skills to manage financial resources effectively. When
people know how to make wise financial decisions, it is possible to plan and achieve objectives. So when people outline their
objectives and plan how to accomplish them, it is a lot easier to obtain satisfying results.
It is at this point that the Financial Literacy Project establishes a very noticeable presence. Financial literacy goes beyond the
simple teaching of how to manage income. Other important objectives in the project are creating an attitude that makes people
aware of the importance of saving, controlling spending, managing debts and, finally, fostering a disciplined management of
income and its sources.
Saving habits are the foundation of promising investment opportunities that will, eventually, allow the living standards of people to
improve. They also promote sustainable development of individuals in any society.
In Nicaragua and Honduras, PROMIFIN-COSUDE has supported the adaptation, innovation, and implementation of a
methodology developed by Freedom from Hunger to promote the expansion and application of the Financial Education for the
Poor programme. This methodology incorporates the use of participative techniques for teaching adults.
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EMN’s bi-annual magazine - N°4 December, 2008

a l Li t e r a c y , Ed u c a t i o n
t r a l Am e r i c a
A careful analysis of the actual economic conditions and the active involvement of the participants in the financial education program,
who are, at the same time, apprentices and managers of their own income, have permitted the implementation of methodologies
and strategies to train and transfer knowledge. This is also a simultaneous process of learning and development.
Female communal leaders trained on
Financial Education in Nicaragua.
Trainer in Honduras explaining the use of
graphical materials for use in the project.
Financial
Services
Budget
Savings
The Financial Education Program includes different modules that instruct
people how to manage their money effectively by taking the most
assertive financial decisions.
The modules present the elaboration and follow-up of budget flows
(income and expenses), debt management and the comparison between
alternatives for managing expenses, goals, and savings initiatives with
financial institutions, as well as the explanation of remittances, insurance,
The implementation of the project in rural areas has been aided by the
use of printed materials (graphics, illustrations) that have made it easier
to transfer knowledge and abilities so that those participants who are not
literate can learn how to manage their money.
Financial
negotiation
Debt
Management
As a means of replicating the project modules, female heads of
low income rural households were also trained to teach in their
communities and share their experience with other women from their
localities. These women were chosen because of their commitment
and willingness to learn.
Staff from microfinance institutions, independent advisors, cooperation programs, training institutions, and other public organizations,
who were interested in financial literacy and who have also contributed to the spread of the project, were also invited to participate in
the project to reach other end-users from poor urban and rural areas, who want to have access to loans.
To have a widespread coverage of the project, PROMIFIN is going to broadcast the project content through an alliance with an
institution that trains radio broadcasters.
EMN’s N°2 December bi-annual magazine ,2007 - REM’s - N°4 December, bi-annual magazine 2008
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Ma i n a c c o m p l is h m e n t s
The Financial Education Program has been in place for about 10 months in Nicaragua and three months in Honduras. So far, the
program has trained 1,400 people (1,100 in Nicaragua and 300 in Honduras), of which 200 people are trainers and are 1,200
participants of both genders.
Table 1. Factors influencing the Financial Education process
Positive Aspects
• The willingness of partners – women – to cooperate
with public or microfinance institutions.
• Communal female trainers help to alleviate the
problem of client location.
• Alliances with private and public programmes
interested in reaching as many people as possible
with this type of methodology.
• Practical and interactive methodology customized
to meet the needs of female heads of household
participating in the project.
• Enthusiasm and interest from the participants
in order to acquire knowledge that provides
immediate and positive answers to their everyday
problems.
Aspects to consider
• Make sure that all means of transportation for
trainers and resources for the training sessions are
available at the time and place they are needed.
• Make sure that there are follow-up and quality
control processes for the communication and
training of all participants.
• Link the programme to involved institutions to
guarantee its prevalence.
• Strengthen the active involvement of institutions in
charge of replicating the topics discussed in the
programme.
• Persuade participants to continue using the
techniques and knowledge learned with some kind
of follow-up mechanism for group work mainly in
rural areas.
Financial literacy workshops with participants using graphical materials in Honduras
• The first ten months operation of the program, which has been called “ Financial literacy for Living”, have implied intensive
efforts to develop the methodology and adequate materials so that the concept of the project is assimilated into both when they
are taught to the participants and when these participants have to teach others in their communities.
• A major effort has been required to be able to develop, adapt, and validate the mechanisms for teaching, so that they can be userfriendly
(including for those participants who are not only poor but also illiterate).
• It has also been necessary to adapt the project context to meet the real needs of the rural locations in which the project is being
developed.
• The design of a user-friendly schedule that allows the participants to monitor their daily income and expenses. If they have
been meeting their savings targets, this has been of great help in the development of the project.
• This schedule includes an annual changes analysis scheme that looks at the assets, debt levels and improvements in the
standard of living (regarding areas such as education of children, housing, access to water and power, etc.).
• The materials and methodology implemented have allowed the participants to self-assess their performance and the pattern that
their levels of savings and quality of life have been displaying during the course of the project.
A very positive aspect developed through the project has been the involvement of family households of those women trained, to
fill out applications. This has proven to be very effective in teaching everyone in the family, especially children, the importance of
managing resources.
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EMN’s bi-annual magazine - N°4 December, 2008

Graduation of female communal leaders
trained in financial education in Nicaragua
The most noticeable changes observed in the people trained in financial
education can be seen in the capacity that female heads of household
have to manage their budget and plan goals and savings schemes that
previously were not part of their interests as they considered themselves
poor families.
Having realized that with discipline and constancy it is possible to
avoid unnecessary expenses, save more money and improve the
quality of life represents an awakening that brings hope to thousands
of families with low incomes.
The knowledge these families have has also contributed to rethinking
about every cost, direct or indirect, associated with lending money.
With this knowledge, these people have the capacity to make and take
decisions that have to do with how much money they can lend according
to their income level.
Fi n a n c i a l Lit e r a c y Pr o j e c t: Ex p e c t e d c o v e r a g e
In Nicaragua, the government has agreed through the Rural Credit Fund to carry out the project that PROMIFIN has developed
to reach 75,000 women living in poor rural areas during the next five years.
PROMIFIN will also lobby to assure that the Department of Education includes some modules of financial literacy in the curricula
for basic education.
In Honduras, through the alliance with Instituto Hondureno de Educacion Radial (IEHR) and the development of the modules
for training broadcasts, it is planned to reach 30 thousand families.
In El Salvador, throughout Banco Multisectorial de Inversiones, an important ally for PROMIIFIN, it is also planned to make
alliances with those institutions interested in taking part in this project in this country.
It is expected that, with all these activities, the project’s initiatives will remain in place once this has been completed.
Le s s o n s Le a r n e d
FOLLOW-UP
AND FEEDBACK
MECHANISMS
INTRINSIC
MOTIVATION
EFFECTIVE
DEVELOPMENT
PROVIDE
ASSISTANCE AS
NEEDED
It is important to make sure that the profile of the
trainer fits the purposes of the project throughout
the whole process. The trainer has to be a person
who has the capacity to listen and who shows
respect and empathy for others. This person needs
to be patient and goal-oriented. Also, the trainer has
to have ease of expression and the ability to teach
others, and most importantly, this person needs
to be willing to play the role of an authentic
facilitator of knowledge.
It is important to identify and promote group
motivation (so that those who are about to learn feel
and see the need to be trained).
ADAPTATION OF
FORMS FOR
EVERYDAY USE
PRIORITIZE
EXPENSE
CONTROL
Diagram 2 shows the necessary steps that training
people encompasses so that the objectives of the
project can be reached.
EMN’s N°2 December bi-annual magazine ,2007 - REM’s - N°4 December, bi-annual magazine 2008
21

“We cannot save because we are poor people,” used to be the
dominant thought, and now it has changed to “Buying only what is
necessary, adopting a discipline for saving is possible.”
To make the learning process effective it is primordial to figure out what, intrinsically, motivates or raises the interest of the group to
be trained.
Arising from this motivation, it is necessary to adapt the modules and topics to provide as much assistance as possible to the
participants, so that they see the benefits of being involved in the project, such as managing their income effectively.
Every change that we have seen in the participants has been achieved through a thorough prioritization and more efficient
management of their expenses, allocating any discretionary income to make more profit which results in an increase in their
savings.
Among the most important topics to discuss in the courses of the project are controlling and managing expenses - core parts of
financial literacy – and learning about profit maximization.
Adapting the format of income and expense records so that they meet the real needs of the participants has been necessary in
order for the participants to be able to use them. It is important to conclude the course with a budget for the coming months so
that the participants can actually see the results of their work and so as to keep them motivated to continue using what they have
learned in the project.
The adaptation of the formats and the learning process are maximized when the participants do group work with a certain degree
of homogeneity; that is, similar backgrounds, income levels or occupations.
The problem with this homogeneity could be finding common interests among the participants because what some may find
interesting and useful may not be useful for others.
It is advisable to have mechanisms to do follow-up and feedback work that help monitor the results relating to the following
criteria;
• Quality of teaching
• Customization of materials for teaching
• Degree of motivation of the participants
• Effective use of tools and materials after the training
• Changes in the way money is being saved or spent
• Increase in the levels of savings or income
• Improvements in the quality of life of the participants who have already used the materials and tools
We do believe that the biggest achievement we have had so far is having people change their way of thinking.
For many years, international aid organizations have been supporting the efforts to expand the coverage of financial services.
It is also necessary to mention that aspects such as the demand for financial services training—such as this project—for poor
people and the arrangement of self-support groups that promote the culture of savings are real-life challenges that have to be faced
and solved to meet the needs of people with low-income families and to assure a better quality of life for them.
Pe o p l e’s f r e e d o m s ta r t s f r o m t h e m o m e n t t h e y s ta r t l e a r n i ng . The major effort made by hundreds of
facilitators on Financial Literacy in Nicaragua and Honduras, and soon in El Salvador, aided by public and private institutions
committed to the development of peoples and the relief of poverty, represents the beginning of a new way to improve the quality
of life of thousands of people with low incomes.
PROMIFIN has invested more than US$70 thousand on the development and replication of the financial literacy training program
and will continue helping to spread this major initiative.
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EMN’s bi-annual magazine - N°4 December, 2008

EMN’s N°2 December bi-annual magazine ,2007 - REM’s - N°4 December, bi-annual magazine 2008
23

European Microfinance Network
103 rue de Vaugirard - 75006 Paris - France
Tel: +33 (0)142 22 0119 - Fax: +33 (0)1 42 22 06 44
web:www.european-microfinance.org
e-mail : emn@european-microfinance.org
European
Commission
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