Financial Education: A Means to a Means

> Posted by Monique Cohen, Founder and President of Microfinance Opportunities
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.
If financial services are a means to an end, then financial education is a means to a means.
Let me explain. Generally speaking, we see a link between financial services and clients  meeting their financial goals. Taking one step back, however, we see that financial education facilitates the success of financial services.
Clients don’t always know what is possible, which limits their ability to make good choices. Financial education is a way of showing clients what is possible. With this knowledge, they will be better able to choose and use financial services.
Let’s take cell phone banking. Because cell phone banking makes services accessible to people in remote locations, many of the people who want to take up cell phone banking have never had a bank account. They may not understand the concept behind banking. Unless we engage in financial education, we are asking them, unfairly, to leap-frog both into a new technology and a financial system that may be unfamiliar, intimidating, and confusing.
Financial education does have a role in helping us to increase the use of our products, yes. But, as Larry Reed mentioned in this forum, it also plays a role in educating us, the providers. I argue that the exercise of financial education forces recognition of the gaps in our customers’ comprehension of how financial products can help them achieve their goals.
Financial education cultivates financial capability in our clients and our target market. When I think about clients who are financially capable, I envision people who know their rights as consumers and have the confidence to exercise these rights. They also have a sense of their own responsibility as clients, and they understand the product terms and conditions and what that means for them.
Financial education does not necessarily need to strive to create equally capable consumers, just equally informed ones. I’m not pushing for lofty goals such as full financial literacy (although I think we can all agree that would be nice). Put simply, a client needs to have the power and the ability to say, “I don’t want that product because it doesn’t suit my needs.” Or, alternatively, to say, “This product best suits my needs, and I know how to properly use it to reach my financial goals.”
Fortunately, this is neither a new nor an untested concept. While I was surprised that financial education was listed as the first priority in the Opportunities and Obstacles survey, I have seen a recent broadening of interest in financial education within the financial services industry. When I first founded Microfinance Opportunities, we wrote one of the first financial education curricula available, targeted to people just above and below the poverty line. Now, however, we see a diverse set of actors, a great deal of interest, and many more delivery channels through which we can create and promote financial literacy. It is this coming together of actors, interest, and products that is creating an exciting collaborative convergence around financial education.
The problem with a “means to a means” is that it is difficult to measure results. This obstacle is a challenging one in an age when we are obsessed with asking the question: “does it work?” We tend to focus on immediate evidence rather than long-term effects. I am certainly not suggesting that we neglect to discuss the usefulness of financial education in a systematic way, but I do think that we should not be so concerned with measuring immediate impacts in financial education. Much like the complexity of measuring the impact of elementary school education, financial education has long-term effects that we must be patient to discover with methodological rigor and statistical significance.
With these qualifications, our “means to a means” can play an integral role in helping us achieve full financial inclusion.
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Monique Cohen is the founder and president of Microfinance Opportunities. With more than 25 years of field experience, Monique Cohen is widely regarded as one of the world’s leading experts on clients and microfinance services. Monique founded Microfinance Opportunities in 2002 to dive deep into the study of how low-income individuals manage money and risk, and to provide them with the training and confidence they need to make wise financial decisions. Prior to founding Microfinance Opportunities, Monique spent eight years as a senior technical advisor to USAID, working on issues of microenterprise development. Monique has a doctorate degree in economic geography from Clark University. Over the years, she has taught courses at the Boulder Microfinance Training Program; Columbia University; the University of Southern New Hampshire’s Microenterprise Development Institute; and has been the keynote speaker at dozens of conferences and events.
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