FinMark Trust is promoting consumer financial empowerment by facilitating greater understanding of the gaps in the rights, redress and knowledge of low-income consumers and by sharing best practices in addressing these.

The activities of the Consumer Financial Empowerment theme embody the notion that sustainable financial inclusion requires a consumer that is both financially capable and exposed to appropriate and suitable financial services.

Underlying this approach is the understanding that the relationships and behaviour between financial entities and consumers are key to market outcomes.  There is a power, information and resource imbalance between financial firms and consumers. Moreover, inappropriate behaviour impacts reputations and confidence which can impact the already fragile existence of consumers negatively. For this reason, consumer financial empowerment efforts must be two-pronged, involving both consumer education and consumer protection.

The objective of confident, informed and empowered consumers involves the efforts of policy makers, public sector entities, educators, commercial providers and non-governmental organisations. Political and commercial pressures in South Africa have led to growing awareness as to the importance of enhancing financial capability – but the process needs to move beyond awareness to one of implementation, monitoring and evaluation.  FinMark Trust has a role to play in terms of helping frame, facilitate and providing input into the debate in South Africa and in the rest of the Southern African Development community (SADC).

Partnerships

Consumer financial empowerment is an important element of the financial inclusion agenda. As countries increase access to financial services, the focus has shifted to increasing usage of financial products to benefit the poor. Consumers who are knowledgeable, empowered and protected will make better decisions about their finances and use of financial products and services. In addition, it is important to better understand mechanisms that poor people favour to improve their financial wellbeing. Financial capability of consumers therefore becomes an important consideration for improved financial inclusion and access to appropriate products and services can result in deepened financial inclusion.

In order to better understand various elements driving improved financial capability and to improve levels of financial inclusion, FinMark Trust undertook a number of studies. The purpose of these studies is to better understand consumer behaviour and to identify actions that can be taken by policy makers, the private sector and civil society to improve financial capability of its consumers.

Savings are increasingly recognised as a major component of the poor’s livelihood strategies, allowing them to respond to emergencies, smooth consumption and build necessary lump sums. It is a key driver to improving livelihoods and can positively impact the economic wellbeing of households. Savings are now a key priority for a number of financial inclusion platforms and programmes, from the Alliance for Financial Inclusion (AFI) to the G20 Principles for Innovative Financial Inclusion.

Understanding the savings landscape provides key insights into how poor people save, what the barriers to savings are, and opportunities for innovation in the savings product arena and policy decisions that affect savings rates in a country. To this end, a savings study was undertaken in Lesotho, Malawi and South Africa in the past financial year. The purpose of the study is to comprehensively document the savings landscape in all three countries to better understand the challenges and opportunities in promoting savings among low income individuals. The study examines global literature on low income savings and a synthesis of the main cross-cutting findings from the three countries. It also contains in-depth analysis of the low income savings landscape in each country and provides recommendations for policy makers and the private sector to support improved savings rates.

In Lesotho the savings study has been aligned to the Making Access Possible (MAP) process and will be used to develop the roadmap as defined within the MAP process.

Further to this, FinMark Trust conducted research to better understand the role and use of co-operative financial institutions (CFIs) as viable alternatives to the commercial banking sector for accessing financial services for lower income individuals in South Africa, Malawi and Swaziland, as well as best practices in the sector. The project scope covered: (a) legislation and regulatory environment; (b) supply-side environment; (c) demand-side research; (d) best practices and technology innovation; and (e) a recommended strategy for FinMark Trust to engage in CFI related matters. The study provides key insights into how the CFI sector can be improved.

Although the impact from stakeholder meetings is often not directly tangible, this remains one of the Trust’s highest impact areas of involvement. Our work is based on using the opportunity to shape strategic decisions, support product development and impact on policy thinking and movements to promote financial inclusion. Following FinMark’s engagement with stakeholders in a number of countries on the value and importance of financial education (FE) to improve financial capability of consumers and the studies on financial education conducted in the past year, the organisation is well placed to provide strategic and technical assistance to countries that have a desire to implement FE programmes.

In 2013 the Trust was approached by Support to Financial Inclusion in Lesotho (SUFIL) (a joint project between the Government of Lesotho represented by the Ministry of Finance, the Central Bank of Lesotho, the United Nations Development Programme (UNDP) and the United Nations Capital Development Fund (UNCDF) to assist stakeholders in Lesotho in the development of an implementation plan for financial education.

A Financial Education Implementation Plan was developed by FinMark Trust in early 2014 following extensive engagement with key stakeholders in Lesotho and analysis of current activities in the country. A key success of this project was the convening of a workshop with stakeholders from government departments including the Ministry of Finance, Ministry of Education, Central Bank of Lesotho, private sector financial services providers, including banks, mobile operators, microfinance institutions, and participants from civil society. The purpose of the multi-stakeholder workshop was to discuss the implementation plan and more importantly to gain support from key stakeholders. This resulted in the establishment of a steering committee consisting of multi-sectoral representation to drive the implementation of Financial Education. Further engagement will be held within the country to ensure that key activities identified in the plan are implemented. We will continue to provide technical and strategic support to ensure the successful and effective implementation of this plan.

Measuring financial capability is important to understand the impact that FE programmes have on consumers. A survey of financial capability can provide useful diagnostic data, enabling policymakers to identify key areas requiring intervention both on the demand and supply-side. Policy makers can use data from financial capability surveys to identify groups with the greatest needs and subsequently build their education initiatives with specific target groups in mind. Data generated by a survey can also help them to develop more appropriate propositions across various dimensions such as product structure, communication and marketing messages, as well as servicing models for example, a survey might gather data necessary to inform the focus of financial education interventions and provide valuable information for private sector providers who offer financial products and services. In addition, by repeating surveys periodically, authorities can assess the impact of these programmes on financial capability levels over time.

Financial education (FE) contributes to improved financial capability of consumers. To this end, research was conducted in 2013 to understand how financial capability can be measured. The study aimed to evaluate the current FE curriculum used by SaveAct – a savings-led savings and credit model operating in rural and peri-urban communities in KwaZulu-Natal and the Eastern Cape in South Africa. The purpose of the study was to identify areas for improvement and adapting the programme to be more effective and to develop financial capability indicators to be included in FinScope surveys going forward.

Financial Education Toolkit

Following the launch of the Mauritius Consumer Finscope Survey in November 2014 which identified financial literacy as an issue of concern, FinMark Trust is rolling out its recently developed Financial Education Toolkit as part of its programme on financial literacy in Mauritius from 4-11 March 2015. The beneficiaries of this training are the Mauritius Bankers Association and the Financial Services Commission. It is expected that some 40 participants from these two institutions will benefit from this training.

While many organisations and governments have recognised the need for improved financial capability in recent years, little has been done to assist practitioners in the design and implementation of effective and impactful financial education policies and interventions.   To this end, the Financial Education Toolkit was developed by FinMark Trust which is aimed at building the skills and capacities of individuals that are involved in the design, funding, management and/or implementation of financial education programmes.

The toolkit includes a practical step-by-step guide on best practices in the design and implementation of financial education interventions at national and programme levels. It is designed for use by both the novice and the experienced practitioner who requires some guidance or fresh thinking and is a practical guide with multiple illustrations and ‘how to’ examples, which can be used both in the classroom and as a reference guide.

The toolkit was recently piloted in Namibia with participants from public and private sector, NGOs and civil society organisations.   Following the launch of the Mauritius Consumer Finscope Survey in November 2014 which identified financial literacy as an issue of concern, FinMark Trust also  rolled out its recently developed Financial Education Toolkit as part of its programme on financial literacy in Mauritius from 4-11 March 2015. The beneficiaries of this training were the Mauritius Bankers Association and the Financial Services Commission with some 40 participants from these two institutions benefitting from this training.

The toolkit can be accessed via http://financialeducationtoolkit.finmark.org.za/.