On Friday in Luxembourg, a panel of experts sounded alarm bells on trends in financial health. Amrik Heyer of FSD Kenya noted that financial health in Kenya, for example, has gone down significantly since 2016, the first year for which her data are available. This has occurred while usage of digital financial services (DFS) has gone up.
The panel was adamant that financial inclusion alone does not boost financial health, which encompasses the ability to meet current needs, absorb shocks and pursue financial goals. In fact, Jaspreet Singh of the UN Capital Development Fund argued that account ownership and financial health figures can move in opposite directions. Anup Singh of MicroSave Consulting (MSC) agreed, saying, “We need to focus on other dimensions as well, not just how many people open accounts.”
Mr Anup Singh warned that traditional financial literacy classes do not boost financial health, and that failed transactions are reducing confidence in DFS. Meanwhile, there is a 28 percentage-point gender gap in DFS usage. Although mobile phone access is highly correlated with financial inclusion, the strongest factor correlating with financial health is “social capital.”
Lydia Baffour Awuah of Opportunity International argued for the need to combine savings, insurance and loans with training as well as support in building social capital. In one example of social capital leading to improved financial health, women worked together to buy maize in bulk from a neighboring town, where it was cheaper. (Without working together, any cost savings was outweighed by the cost of travel.) In another example, to address account dormancy in India, Opportunity International started an apprenticeship program targeting women with savings reminders. In nine months, 2,000 women reactivated dormant accounts and began saving money regularly.
Ms Heyer agreed that social capital is important. Her data indicate that people participating in savings groups known as chamas are twice as likely to report being financially healthy. Mr Jaspreet Singh agreed that savings is vitally important to getting beyond financial inclusion to financial health.
Mr Anup Singh described the success that financial services providers have had in working with refugees in Tanzania. One program combined in-person and digital training on how to perform financial services via phones, agents and tablets. As part of the training, participants took home a tablet to practice with their families. Regarding training methodologies, Mr Anup Singh cited the experimentation with “play money” as helping boost users’ understanding and confidence.
This feature is part of a sponsored series on European Microfinance Week, which took place in Luxembourg and online from November 16 through November 18. MicroCapital has been engaged to report on the conference each year since 2012.
Additional Resources
European Microfinance Week 2022
https://emw2022.eu
MicroCapital coverage of European Microfinance Week since 2012, including the European Microfinance Award
https://www.microcapital.org/category/european-microfinance-week/
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