Candace Nelson

Financial Education for All Ages

Innovations Case Discussion:
Aflatoun

While it is easy to argue that financial literacy is key to individual financial stabil-
ity and societal financial inclusion of the poor, it is harder to identify who is
responsible for achieving it. Traditionally, financial education has been the domain
of the family, but as Aflatoun founder Jeroo Billimoria has stated, parents caught
in a cycle of poverty and financial exclusion are less likely to help their children
become good money managers. Parents cannot teach what they do not know
themselves. That Aflatoun has embraced this challenge is a significant contribution
to a growing movement to foster financial literacy around the world. Approaching
this goal by starting with children is truly visionary; it acknowledges that achiev-
ing financial literacy will take at least a generation. Building the confidence and
knowledge that will enable children to acquire good money habits prepares them
to confront the many financial challenges ahead.

Because they reach millions of students who represent the future, schools are
an obvious channel for generational change. Tuttavia, convincing national educa-
tion ministries to incorporate financial education into the core curriculum is a
daunting challenge, particularly given the many competing demands on teachers’
agendas, particularly in countries afflicted by the dire threats posed by HIV/AIDS,
burgeoning numbers of orphans, and ethnic tensions, all of which potentially
demand a response from the education system. That Aflatoun has succeeded in
even one country, Egypt, is a significant achievement.

I comment on financial education as an active consultant for Microfinance
Opportunities, a sister organization to Aflatoun. This Washington, D.C.–based

Candace Nelson has worked in nonformal education, microenterprise development,
and microfinance for 30 years, with World Education, the SEEP Network, and the
McKnight Foundation. With Microfinance Opportunities, she designs financial edu-
cation curriculum for youth and adults, educates trainers, and advises on national
financial education strategy. She also facilitates the savings-led financial services
working group of the SEEP Network, a forum for the promotion of time-bound, dis-
tributing savings groups, and is a member of a research team sponsored by the Aga
Khan Foundation to conduct case studies on these groups.

© 2010 Candace Nelson
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Candace Nelson

NGO has pioneered financial education curriculum for low-income adults in
developing countries in tandem with Aflatoun’s efforts on behalf of children.1 I
believe that raising levels of financial literacy is urgent for all ages, and financial
education is an important tool to accomplish that goal. Because financial circum-
stances change over time, the need for financial education evolves throughout the
lifecycle. The rationale for investing in financial education lies in its contributions
at multiple levels of the economy. Its urgency today is linked to a financial institu-
tional landscape that is changing rapidly and intersecting increasingly with low-
income households throughout the developing world.

Financial education teaches the knowledge, skills, and attitudes that people can
use to adopt good money management practices for earning, spending, saving,
borrowing, and investing.

Microfinance Opportunities uses this definition of financial education to
speak to the wide range of behaviors targets. Building knowledge, skills, and atti-
tudes to change how people manage their money in interaction with a landscape
of financial institutions, prodotti, and opportunities increases financial literacy.2
On an individual level, financial literacy helps households use scarce resources
more effectively, choose the financial products that best meet their needs, E
become proactive decision-makers. At the institutional level, informed consumers
make better clients, lowering institutional risk and contributing to a stronger bot-
tom line. At the market level, these consumers play a monitoring role, placing pres-
sure on financial institutions for appropriately priced and transparent services.3

These are exciting times in financial services for the poor. Microfinance is
offered by an increasingly diverse set of institutions, both formal and informal,
including banks, finance companies, cooperatives, NGOs, and community savings
groups. Savings, insurance, payment services, money transfers, and multiple types
of loans are increasingly available to respond to the lifecycle and market pressures
that low-income households face. Mainstream banks are moving downstream,
making it easier for the poor to open accounts; in Kenya and Uganda, Per esempio,
Equity Bank has set an example that more traditional banks are beginning to fol-
low. Perhaps most significant, technology is bringing electronic and mobile phone
banking to developing countries at a rapid pace, which has the potential to create
access to formal finance for the millions who now have a cell phone but have never
had a bank account.

In light of this proliferation of options, I suggest that financial inclusion of the
poor is not only an issue of access to financial services but also information about
them. The expanding supply of products and services calls for financial education
to help consumers navigate through the options—to effectively compare their fea-
tures and make informed choices about the products that will best serve their
needs. It is a mistake to assume that consumers who have successfully managed
informal debt from moneylenders and the early sources of microcredit can also
manage more, and more complicated, products without sufficient and appropriate
informazione.

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Financial Education for All Ages

Inoltre, the rapid emergence of mobile banking is transforming who is
able to bank and the way they bank. Soon, anyone with a cell phone will be able to
have a bank account. Around the world, cell phones are replacing land lines; In
some countries these amazing devices are substituting for brick-and-mortar bank
branches. Yet older customers,
intimidated by the technology,
often give their children access to
their accounts, which has led to
theft and fraud. Younger people
may handily master the technolo-
gy’s functionality but understand
little about the management
decisions the keypad contains.
New access to incredibly conven-
ient debit cards and ATMs pres-
ents challenges to those trying to
control their spending.

Older customers, intimidated
by the technology, often give
their children access to their
accounts, which has led to
theft and fraud. Younger
people may handily master
the technology’s functionality
but understand little about
the management decisions
the keypad contains.

Although electronic cards
and cell phone banking hold
great potential, their introduc-
tion without the benefit of infor-
mazione, orientation, or education
E
presupposes knowledge
experience
low-
that many
income families do not have. Despite the rapid uptake of the new services, the level
of bank transactions by the previously unbanked has not met expectations.
Through its research of mobile banking in four countries, Microfinance
Opportunities found the reasons for low use include mistrust of “faceless” bank-
ing, confusion over the PIN, and activity that is limited to money transfers and
adding airtime. Financial education can bridge the gap between product market-
ing and effective product use.4

Finalmente, financial education is a corollary to the call around the globe for con-
sumer protection. In today’s climate of economic uncertainty, timely concerns
about predatory lending and profiting from the poor lend some urgency to the
need to embrace ethical treatment of clients. Microfinance institutions are com-
mitting to transparent pricing, appropriate collections practices, ethical staff
behavior, client privacy, and mechanisms to redress grievances (per esempio., Center for
Financial Inclusion, ACCION International). And yet, as the other half of the con-
sumer protection equation, clients’ greatest priority is respect. They want to pre-
serve their dignity in the process of conducting business with a financial institu-
zione, and they want to borrow without fear or humiliation. The consumer protec-
tion principles that financial institutions are adopting do not specify clients’ right
to ask questions, to ask for help understanding products without fear, or to shield
themselves from aggressive marketing.5 Financial education can empower con-

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Candace Nelson

sumers to do these things, especially to fully understand the products they choose
and the contracts they sign. As one Kenyan trainer proclaimed, “There is no con-
sumer protection without financial education.”

Although timeless in its relevance, financial education has been the overlooked
component of global efforts to empower the poor through financial services. Now
Aflatoun is challenging myths about children’s ability to grasp financial concepts
and save money that pertain to people of all ages. It reminds me of the early days
of the microcredit movement, when many of us working for grant-making NGOs
initially questioned the ability of the poor to borrow money and repay with inter-
est. We soon discovered that low-income households are not too poor to learn to
save or to budget, negotiate prices, manage their remittances, and make effective
use of their growing choices of financial products and services. Promoting changes
in behavior that improve how people manage money is the goal of financial edu-
catione. Careful spending, wise borrowing, and regular saving go a long way to
ensuring financial stability for young and old alike.

1. Microfinance Opportunities’ financial curriculum covers nine topics: saving, budgeting, manag-
ing debt, bank services, financial negotiation, insurance, remittances, youth, and consumer pro-
tection. It has trained close to 400 trainers in 46 countries and delivered financial education to
Sopra 21 million consumers through combined efforts in training and mass media. For more infor-
mazione, go to www.microfinanceopportunities.org.

2. The term “financial capabilities” is beginning to appear in place of financial literacy. The two can
be used interchangeably. Financial education is a tool to raise people’s level of financial literacy.
3. Nelson and Wambugu, “Financial Education in Kenya: Scoping Exercise Report,” Financial Sector

Deepening Kenya, Nairobi, agosto 2008.

4. Cohen, Hopkins, and Lee, “Financial Education: A Bridge between Branchless Banking and Low-

Income Clients," 2008.

5. Microfinance Opportunities, “Consumer Protection: A Client Perspective” Brief, 2009.

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