Financial Competence Building in Fiji

Financial Competence
Building in Fiji
FIJI NATIONAL MICROFINANCE WORKSHOP
Medium Term Strategy for Financial Inclusion in Fiji
4-5 November, 2009 Novotel, Lami
1
Financial Competence + Financial Inclusion = Household Wellbeing
Subjective
Wellbeing
Attitude to
Money
Competent
Financial
Behaviour
Functional
Literacy
Financial
knowledge
and skill
Household
Wellbeing
Financial
Inclusion
2
Capability, Competence, Wellbeing
+
Capability
+
Competence
Well-being
• Capability – the ability to do something (knowledge and
skill, access)
• Competence - how well something is done
• Wellbeing – the impact of the action(s)
– on the individual
– on their household
3
FINANCIAL LITERACY TRAINING IN FIJI
• Started in 2004 with ANZ-UNDP Rural Banking
service with NCSMED as training provider
• NCSMED – FLET with MFU & MSME programmes
• FDB with Ministry of Education implemented Money
Smart in 2007
• Westpac – Financial First Steps
• CNB with Ministry of Education – adopt a school
• SPSE – seminars, visit schools, tertiary institutions,
work places
• CMDA – Vanua, youth, investor education centre
• 57 Creative – Making Cents, free magazine
• CCF – consumer education, advocacy, advisory,
referral on complaints
RESULTS & IMPACT
• 45,000 school children and adults have received
structured financial literacy training since 2004 approx 46% female
• 22 organizations with capacity to conduct financial
literacy training
• 10 trainer of trainers for FLET – network of 26
trainers
• Large majority of population have no access to
financial education
• Low levels of financial competence may inhibit
growth and uptake of financial services by low
income people
RURAL INDIGENOUS FINANCIAL COMPETENCY
RESULTS OF NAITASIRI RESEARCH
Villagers consider the Financial Literacy Training to be
worthwhile
Why did you attend the Financial Literacy Training Workshop
Men
Women
To learn how to manage money and/or budget
44%
20%
To learn how to save and/or learn about using a bank account
24%
46%
To learn how to better manage a business
16%
16%
Respondent was asked to attend
31%
13%
What benefit did you gain from attending the Workshop
Men
Women
Learned how to manage money and/or budget
60%
31%
Learned how to save and/or learned about using a bank account
30%
52%
Learned how to better manage a business
11%
16%
No benefit
8%
8%
7
Villagers also consider the Rural Banking Service to be
worthwhile
Why did you
open Rural
Savings Account
What benefit
have you gained
from your Rural
Savings Account
Money is safe
14%
6%
Able to save money
45%
18%
Provide for children/ education
18%
6%
Bank Cash (business/farm)
8%
-
Achieve goals/ Manage money/ provide for future
needs
-
41%
Earn Interest
-
8%
8
Functional Literacy is an Issue…
• Many villagers cannot read the brochures or training material unaided
• Required reading age (English) equivalent to 9 years + formal education
Functional Literacy Questions Answered Correctly
Numeracy
0-2
3-4
5-6
Total
0-1
22%
11%
10%
43%
Literacy 2-3
6%
12%
20%
38%
4-5
1%
4%
13%
19%
Total
30%
27%
44%
100%
• Many villagers reading age likely to be too low for most financial documents
• Many villagers also have poor numeracy
9
… and inhibits participation in the Financial Literacy
Training and Rural Banking Service
Villagers Functional Literacy
Attended FLET
Did Not Attend FLET
Low
8%
Has Rural
Savings Account
Does Not Have
Rural Savings Ac
Low
12%
High
47%
Medium
45%
Low
30%
High
35%
Medium
35%
High
49%
Medium
39%
High
20%
Low
41%
Medium
39%
10
Villagers who attended the Financial Literacy Training
have greater Financial Knowledge
Able to Describe a Budget
80%
70%
60%
50%
40%
30%
20%
10%
0%
Flet
non-FLET
Fiji
Solomon Islands
11
… and likely to practice what they know
Household has a Budget
100%
90%
80%
70%
60%
No
50%
Yes
40%
30%
20%
10%
0%
Both
FLET
Bank
Neither
• At household level, attendance by one member of the household at the Financial
Literacy Training is a significant predictor of the household having a budget
• At individual level, villager’s ability describe a budget is a significant predictor of
whether household has a budget
• Having a rural savings account and high functional literacy are significant
predictors as to whether villagers can describe a budget
• There is, therefore evidence of intra household learning
12
Villagers with access to the Banking System exhibit
more positive Financial Behaviours
Use of Surplus Funds
FLET/Bank
Non-FLET/
FLET/ nonBank
Bank
Non-FLET/
non-Bank
Put surplus in bank
51%
35%
10%
13%
Save surplus at home
33%
53%
61%
66%
Spend surplus
15%
11%
29%
21%
Have a Rural Savings Ac
Don’t keep
money safe
10%
Hide at
home
Do not have a Rural Savings Ac
20%
Hide at
home
Don’t keep
money safe
50%
60%
90%
Keep
money safe
Deposit in
an
Account
80%
Keep
money
safe
Deposit in
an Account
50%
40%
13
Women accept greater responsibility than men for managing
household’s cash flows & engage in broader range of income
generating activities
Managing Household Cash Flows
Usual Way Household Expenses Are Managed
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Keep financial records
Check bills and accounts are correct
Have a household budget
Set financial goals for the household
Men
Women
18%
45%
37%
54%
63%
66%
57%
85%
Men
Women
Paying Bills
Male
Don't Manage
Female
Manage Sometimes
Usually Manage
Without difficulty
31%
22%
Sometimes a struggle
Always struggle/ Financial Problems
29%
15%
42%
32%
Don’t know
16%
3%
Spend money as it is received and do not plan
100%
Sources of Income
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Women
Agree
Men
Neither
Disagree
Male
0
Female
1
2
3
4
14
Villagers currently access credit…
Type of Loan
Purpose of Loan
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
FLET/ Bank
Store Credit
non-FLET/ Bank FLET/ non-Bank non-FLET/ nonBank
FLET/ Bank
Hire Purchase
Groceries
Commercial/ Agricultural
Use of store credit for purchases
non-FLET/ Bank FLET/ non-Bank non-FLET/ nonBank
Household/ Family
Commercial Agricultural
Interest
30%
• Many villagers have a limited understanding of
25%
interest
• Deposit interest – 36% - 61%
• Credit interest – 8% - 16%
20%
15%
10%
5%
0%
FLET and Rural
Banking
Rural Banking
Only
FLET only
Neither FLET nor
Rural banking
15
… however, many villagers are not competent at
managing their borrowings
Able to describe how a formal loan works
Know Store Credit is a Form of Loan
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Know
Do not know
Both
Rural Banking
Able to state how a loan works
FLET
FLET/
Bank
Non-FLET/
non-Bank
Male
Female
59%
30%
44%
36%
66%
26%
36%
39%
Neither
Not able to state how a loan works
Loan Repayments and Arrears
FLET/
Bank
non-FLET/
Bank
FLET/ nonBank
non-FLET/
non-Bank
100%
85%
44%
47%
Arrears Store credit
0%
NS
50%
42%
Arrears Hire purchase
0%
NS
0%
25%
Repayments up to date
16
Those with training & savings account place higher
priority on business, immediate family & children’s
education
FLET/
Bank
non-FLET/
non- Bank
Financial
Priority
Financial
Priority
Improve/ Extend farm
Start/Extend Business
Increase savings/ Investment
Repay loans/ canteen credit
8%
20%
2%
4%
6%
8%
5%
6%
Immediate Family Welfare
Children's Education
Improve Family Home
47%
63%
24%
29%
56%
24%
Household Furnishing/ Appliances
2%
3%
Extended Family Obligations
Village/Church/Vanua
contributions
0%
2%
29%
26%
17
Villagers who exhibit more competent financial
behaviours focus more on investment…
Investment Goals
Household Goals
40%
80%
35%
70%
30%
60%
25%
50%
20%
40%
15%
30%
10%
20%
5%
10%
0%
0%
Improve/ Extend farm
FLET/ Bank
Start/Extend Business
Bank
FLET
Increase savings/
Investment
Children's Education
non-FLET/ non- Bank
FLET/ Bank
Social Goals
Improve Family Home
Bank
FLET
Household Furnishing/
Appliances
non-FLET/ non- Bank
Gender Differences
8%
70%
7%
60%
6%
50%
5%
40%
4%
30%
3%
20%
2%
10%
1%
0%
0%
Extended Family Obligations
FLET/ Bank
Bank
Village/Church/Vanua contributions
FLET
non-FLET/ non- Bank
Improve/ Extend
farm
Start/Extend
Business
Men
Household
Furnishing/
Appliances
Children's
Education
Women
18
…and re-invest more in the farm and generate more
income …
Investment per Hectare
FLET/
Bank
No
Irrigation
Yes
Average number of farm
implements
Average head of stock
Average supplement expenditure
per hectare
non-FLET/
non-Bank
42%
58%
62%
38%
0.38
0.22
4.21
2.18
$370
$355
Calculated Relative Income
FLET/
Bank
non-FLET/
non-Bank
Income Hectare
$
3,141
$
2,692
Exp Hectare
$
502
$
381
Net Income Hectare
$
2,622
$
2,401
19
… and own more household durables
Number of Household Durables
Durables pre-2005
Durables Purchased post-2005
Total Durables 2007
Kitchen Appliances
FLET/
Bank
non-FLET/
non-Bank
2.0
1.4
1.2
3.2
0.6
1.2
2.6
0.2
Selected Household Durables
Bedroom furniture
Living room furniture
Refrigerator/Freezer
Oven
Washing Machine
Sewing machine
Television
Radio
Telephone
Car/van
Average
<2005
Average
>2005
FLET/
Bank
non-FLET/
non-Bank
2002
HIES
62%
18%
4%
15%
2%
9%
12%
24%
1%
1%
88%
24%
7%
15%
5%
14%
17%
49%
19%
1%
87%
33%
11%
24%
15%
17%
26%
54%
26%
1%
91%
21%
5%
12%
0%
16%
21%
64%
17%
1%
NA
NA
22%
31%
12%
NA
28%
NA
11%
8%
20
Financial Capability, Financial Competence, Household Wellbeing
Financial
Capability
+
Financial
Competence
+
Household
Well-being
• Financial Capability can be increased
• Higher Financial Capability leads to greater
Financial Competence (self-re-enforcing)
• Greater Financial Competence leads to greater
Household Wellbeing
21
Villagers with higher functional literacy tend to engage more with the money economy
and to seek to enhance Financial Capability, which leads to greater Financial Competence
and greater Household Wellbeing
• Higher investment in agriculture
• Higher investment in business
• More household durables
+
Attitude to
Money
+
Competent
Financial
Behaviour
Functional
Literacy
+
+
+
Household
Wellbeing
+
Financial
knowledge
and skill
• Higher savings activity
• Better management of credit
• Higher propensity to Budget
• More positive general financial behaviour
• More conservative estimation of income and
expenditure
22
Money Pacific
Goals
FEMM 2009 agreed that each Pacific island nation,
through combined actions of the public and private
sectors, achieve these goals by 2020:
– all children to receive financial education through
core curricula;
– all adults to have access to financial education;
– simple and transparent consumer protection to be
in place; and
– halve the number of household without access to
basic financial services.
23
CHALLENGES
OPPORTUNITIES
No national policy or
strategy
Financial inclusion strategy being
developed. RBF signed on to Coombs
Declaration/Money Pacific Goals.
No Lead Organization
Potential leaders exist – RBF, FDB,
NCSMED
No baseline information
Naitasiri survey. Competency framework
available. Interest by stakeholders.
Low levels of financial
inclusion
Financial competency aids financial
deepening
Financial education
requires resources
Integrate with financial inclusion
strategy. PPP to share cost. Use current
networks. Banks & donors interested.
CHALLENGES
OPPORTUNITIES
Low levels of adult • Strong demand
functional literacy • Begin, continue financial education at
schools
and numeracy
• Innovative training methods available
Pervasive lack of
understanding of
debt
• Institutions exist that can play
stronger role on consumer protection
• Consumer protection & education at
centre of financial competency strategy
• Industry can self-regulate
Women have less
access to training
• Women have large impact on
household wellbeing
• Women more bankable then men
SUGGESTED PRIORITY ACTIONS
• RBF to take lead Policy, Advocacy & Coordination
roles – with small multi-stakeholder task group
• Work towards a National Financial Competency
Strategy - MoneyPacific Goals as guide
• Establish Financial Competency Baseline –
measure current level, set targets & track
progress
• Give priority to consumer protection & education
• Support, accelerate & expand ongoing programs
VINAKA
27