Creating Financial Awareness of Clients: Communication Methodologies that Work Diksha Singh and John Arun, IFMR LEAD In recent years, financial capability has emerged as a key strategic objective to complement the financial inclusion and consumer protection agendas of policymakers and practitioners around the world: • Governments in 45 countries of different income-levels, including India, have stepped up the efforts to design and implement National Strategies for Financial Education 1 and financial service providers are increasingly looking to integrate financial awareness and advisory services for clients into their existing service lines • Traditional models such as classroom-based training are not always cost-effective scale (Schoar et al), and impose implicit transaction and opportunity costs on clients. Moreover, there is little rigorous evidence on their impact in improving financial awareness and promoting behavioral change Innovative Experiments from the Field Product/Model Advantages Challenges 1. Heuristics-based financial training for microentrepreneurs • Micro and small entrepreneurs often lack the necessary financial capabilities to make complex business and financial decisions. • A heuristics-based approach focuses on delivering simple rules-of-thumb pointers to clients instead of in-depth information about financial concepts. • Combined with the rapid diffusion of mobile phone services across India, rules-of-thumb based training offers an emerging opportunity for financial service providers to build financial capability at scale. Leverages Interactive Voice Response technology to deliver training modules to client’s mobile phones, and SMS reminders to nudge them to make sound financial decisions. Both these technologies can be cost- effective at scale It simplifies content into easy- to-understand and remember thumb rules, thereby lowering the cognitive load on clients Onboarding clients to the new technology platform Evidence from a randomized evaluation of this approach in parts of Karnataka and Madhya Pradesh suggests that keeping clients engaged over voice messages and ensuring follow-up on training modules after they sign up for the training can be challenging 2. Integrating mobile financial education and mobile financial services • Launched with the aim to increase the capability of microcredit borrowers, mostly women, to adopt mobile phones as a channel for financial services such as loan repayments • Grameen Foundation India tied up with a mobile money services provider and a microfinance institution Sonata to deliver mobile banking services and education to Sonata’s female borrowers in Uttar Pradesh. As of May 2016, 23,222 of Sonata’s clients have Using a human-centered design approach, the service providers mapped the roles, capabilities and influence of each member in the client’s ecosystem and used the learnings to design financial education models and training materials. Approach focuses on addressing pain points for Since it is an agent-assisted model of delivery, it relies on the understanding and acceptance of technology by front-line agents; Ensuring scalability while maintaining standardization of content 1 http://www.oecd.org/finance/financial-education/G20_OECD_NSFinEd_Summary.pdf 33% of adults globally are financially literate (S&P Global Finlit Survey, 2014) Only 24% of adults in India are financially literate (S&P Global Finlit Survey, 2014) Women in India exhibit lower levels of financial literacy as compared to men. (Financial Literacy and Inclusion in India, NCFE)