Eager investors, conflicted teachers, reluctant students: The promises and pitfalls of teaching financial literacy

> Posted by John Gitau, CEO, Kenya Financial Education Centre
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to Sonja E. Kelly, Fellow, Center for Financial Inclusion at Accion.
I have taught financial literacy in East Africa for the past eight years, and have managed my own firm for the past four.  And here is one thing I have noticed: the financial inclusion community as a whole does not have a common definition or goal for financial education. This lack of an agreed-upon definition makes difficult the process of creating financially capable populations.
Here is how I define key terms:
Financial education is the process of teaching the knowledge, skills and attitudes necessary in personal money management. The end result of financial education is financial literacy. Financial literacy is the ability to manage personal money well. But financial literacy is not an end in itself. It is a tool which when used well results in financial capability. Therefore, financial capability is the ability to apply financial literacy in personal money management to improve financial well-being. When a financially literate person takes action in a way that results in better money use, we say such a person is financially capable.
Not everyone maintains these definitions and goals, though. MFIs, corporations, NGOs, and SACCOs (savings and credit cooperatives) each come to me with different goals, some impossible to achieve. MFIs want me to teach their clients quickly so that they can improve on their loans repayments and increase saving. They are not keen on me teaching investment and some even warn me to be careful when handling the topic of the use of financial services. They want me not to dwell on costs but emphasize benefits. I sometimes find these requests quite amusing.
Some instructions I get from MFIs on how to teach their clients border on humorous. One MFI wanted me to teach four-hour financial literacy workshops to its clients, organized in groups of 50, in a way that could improve repayment performance by more than 20 percent. To such an instruction, I couldn’t resist a loud laughter. In spite of the money involved, I declined. Financial literacy to adults is not like an insulin dose to balance sugar levels.
And here is why it’s amusing: in my career, I have come to an understanding about how adults learn. The way the MFIs recommend I teach their clients goes against almost all the principles. Add to the mix the fact that it is money management at the centre of learning and you realize why most MFIs hardly get financial literacy right.
What corporations ask me not to do is even more comical. They want their staff to be taught how to budget their money to avoid impecuniary disruptions that affect working morale. But they don’t want me to emphasize savings because with savings comes investing and financial freedom that threatens employment indispensability. They would rather I emphasize passive income investments outside the companies’ business lines.
NGOs want me to teach everything that can create economic empowerment among their customers. To them, demonstrating effectiveness in money use attracts more donor funding. They respect me as the professional who knows how best to do my job. With them, I am able to effectively teach financial literacy as it is supposed to be taught complete with monitoring and evaluation. But still, there is a limit to the amount that can be taught in a set amount of time.
SACCOs want their members empowered, especially in investment and saving. However, they want to spend as little as possible for training. Thus, like MFIs they want rapid training, and most of the time they don’t seem to care whether the members have learned or not. Given that SACCO management decides what training is suitable for members in a top-down approach, members appear lost in the training, almost wondering what financial literacy is all about. In my experience, they are more difficult to teach even than corporate staff members. Those who are keen are the ones who plan to use the lessons for their personal investment objectives.
What’s even more interesting is that many students, whether they are staff of corporations, clients of MFIs or Sacco members, don’t want to learn financial literacy. In addition to thinking they know how to manage their money, they wonder why they have to learn.  I take a lot of time in introducing financial literacy and outlining its importance and benefits. Fortunately for MFIs, they are able to entice their clients to embrace financial literacy training because it is a compulsory prelude to loan disbursement. But from my experience, most clients are just going through the motions. Their minds are not in the learning but in the loans they will get and what they will do with the money. To MFIs, the fact that they have had their clients taught gives them psychological satisfaction. Greedy financial education training companies do take advantage of such misalignment. Some MFIs train their staff as trainers to teach clients. To the staff, it is doing a job. Worse still, some MFIs have the same teachers manage debt repayments from the same clients they teach. With such a set up, financial literacy becomes the baby that is swept away with the bath water.
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John Gitau, a financial education consultant and trainer, is the CEO of Kenya Financial Education Centre, an independent centre that offers financial training to staff and clients of financial service providers. His passion is teaching financial literacy and designing financial products for the poor.  From 1992 to 2010, he was a Capital Markets Authority regulated investment consultant with Bridges Capital Ltd. He is a master trainer of trainers with the Global Financial Education Program (GFEP), developed by Microfinance Opportunities in collaboration with Freedom from Hunger and Citi Foundation.
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