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Financial Literacy

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Financial Literacy For Risk Management In Financing Agriculture Expert Meeting Managing Risk in Financing Agriculture April 1 3, 2009 Johannesburg, South Africa – PowerPoint PPT presentation

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Title: Financial Literacy


1
Financial Literacy
  • For Risk Management
  • In Financing Agriculture

Expert Meeting Managing Risk in Financing
Agriculture April 1 3, 2009 Johannesburg, South
Africa
Mr. Charles Mutua www.sccportal.org
2
SCC
  • The Swedish Cooperative Centre (SCC) was founded
    in 1958 by the Swedish cooperative movement.
  • The overall goal of SCC is poverty alleviation,
    which is expressed in the organisations vision
    of
  • a world free from poverty and injustice.

3
SCCs priority sectors and cross-cutting thematic
areas
Rural Finance
Housing Finance
Micro- insurance
Financial Education
4
Where we are
5
Presentation Outline
  • What is Financial Literacy?
  • What is Financial Literacy is not
  • Why Financial Literacy?
  • Justification
  • Importance
  • What Risks?
  • Financial Literacy along the Value Chain (VC)
  • FL Methodologies Approaches

6
WHAT IS?
  • Financial literacy is the ability to process
    financial information and make informed decisions
    about personal finance
  • (Asian Development Bank)
  • Financial Literacy is a situation which empowers
    consumers to make informed decisions (skills,
    attitudes, knowledge and understanding) enabling
    the consumer to act accordingly
  • Financial literacy/education seeks to strengthen
    and change behaviors that lead to increased
    incomes, better management and protection of
    scarce assets, and effective use of financial
    services
  • (Microfinance Opportunities)
  • It uses Adult learning principles and practices
  • Brings learners own experience to a learning
    event

7
(No Transcript)
8
What is not!
  • It is not Marketing (publicity, sales or
    advertising)
  • Financial Literacy is not just raising of
    awareness and providing information

9
Why Financial Literacy?
  • Justification
  • Kenya for example 38 of the population is
    excluded from financial services (unbanked). Only
    19 uses financial services from formal
    institutions like banks, 8 uses semi-formal
    institutions (SACCOs) while 35 uses informal
    systems (ROSCAs, ASCAs etc)
  • (Financial Access in Kenya 2007, FinAccess)
  • South Africa Only 34 of survey respondents knew
    the correct word to describe annual price
    increases. (ECI Africa 2004, FinScope)

Formal 19
Formal Other 8
Informal 35
Excluded 39
10
WhyContd
An informed customer is a good customer
  • Importance
  • At the individual level - the lack of financial
    literacy makes people more susceptible to the
    devastation caused by emergencies,
    over-indebtedness, over-zealous retailers or
    fraudulent schemes
  • At the institutional level - the lack of
    financial literacy generates misinformation and
    mistrust of formal financial service providers
  • Misinformed consumers make poor clients, who in
    turn represent increased risk for financial
    institutions and contribute to a weaker bottom
    line.
  • At the market level - uninformed consumers cannot
    play a developmental and monitoring role in the
    market to weed out bad practices and providers.
  • Financial literacy is a win-win proposition for
    clients and institutions

11
What Risks?
Inherent Risks in Financing Agriculture
Associated Risks
  • Non Compliance/Client Integrity
  • Customer Performance Risks
  • Transactional Risks
  • / Payment Risks
  • Country / Political Risks
  • Warehouse Merchandise
  • Risks on value, quality..
  • Production Risks
  • Credit risks
  • Payment/Sales Contract Risks
  • Price Risks
  • Currency Risks
  • Diversion Risks
  • Buyers Risks

12
Financial Literacy Along the VC Flow
Finance and Supporting Services
Medium and Large Exporters and Wholesalers
Savings Investments Credit Banking Services Risk
Management (i.e. Insurance) Planning Etc.
Processors
Financial Literacy
Collector/Traders
Farmers Producer Groups
Input Suppliers
13
FL Methodologies
Awareness and Information
Learner-Centered
  • Study Circles
  • Organized visits to financial institutions
  • Involvement of multipliers
  • (e.g. priests, trade unions, teachers)
  • Training of trainers
  • Mentoring, use of corporate volunteers
  • E-platforms
  • Speeches and discussion forums
  • Radio and TV programs
  • Articles and advertising campaigns
  • Print material (posters, leaflets)
  • Competitions
  • Expositions
  • School events
  • Road shows

14
Learner Centered Methodology Key Principles
that must be taken into account
Learners learn best when drawing on their own
knowledge and experience
Learners must be able to apply the new learning
immediately
Relevance
Respect
Learners need to feel respected and like equals
Immediacy
We remember 20 percent of what we hear, 40
percent of what we hear and see, 80 percent of
what we hear, see and do
Dialogue
Learners need to receive praise, even for small
efforts
Learning must be two-way
Affirmation
20/40/80 Rule
Cognitive, Affective, and Psychomotor
Interaction
Learning must involve learners through
discussion, small groups and learning from
peers
Learners need to feel that others value their
ideas and contributions, that others will not
belittle or ridicule them
Engagement
Learning should involve thinking and emotions
as well as doing
Safety
Adapted from Adult Learning Principles and
Curriculum Design for Financial Education, MFO,
FH, Citigroup
15
Approaches
  • At the Individual institutional level
  • Choose a sustainable methodology (one-on-one,
    TOTs, study guides etc)
  • Develop/adapt a relevant curriculum e.g. Swedish
    Cooperative Centre, Financial Literacy Study
    Circle Guide

16
Learning together practically!
17
You reap what you sow!
18
Basic Record Keeping!
19
Contd
  • At the country level
  • Craft national strategies for financial literacy
  • Create partnerships
  • Integrate financial education and insurance in
    curricula of public education system
  • Code of Ethics, e.g. Uganda Microfinance
  • Financial literacy emphasis days/months using a
    combination of instruments
  • Target group specific activities (children,
    youth, women, entrepreneurs)
  • Indirect learning as part of other campaigns
    (health, finance in general

20
Approaches Kenyas Example (Adapted from
Financial Education in Kenya, FSD Kenya, MFO,
2008)
Financial Education Partnership (Public/Private
Partnership)
  • Actors
  • Government (Ministries)
  • Regulators and supervisors
  • Public learning institutions
  • Parastatals
  • Roles and Responsiblities
  • Policy development
  • Policy enforcement
  • Facilitate entry (to schools)
  • Disseminate information
  • Assess impact
  • Staff time and funding
  • Actors
  • Industry players and their
  • networks
  • Civic institutions (NGOs,
  • churches, consumer
  • protection associations)
  • Roles and Responsiblities
  • Leveraging client base
  • Incorporate FE activitites
  • into service delivery
  • Host FE Programs
  • Staff time and funding (CSR)
  • Finance FE campaigns

Vision Champion FE initiative maintain
singular focus maintain neutrality
credibility quality control on content
market FE to stakeholders policy advocacy
identify and co-ordinate working groups,
facilitate research and monitoring and
evaluation activities
21
Contd
  • At the global level
  • International Network on Financial Education
    www.financial-education.org
  • Yearly conference www.FinancialEducationSummit.or
    g
  • Global Training Program www.GlobalFinancialEd.org
  • Financial Education Fund (FEF) - FEF is a new
    fund which will support innovative projects in
    Africa that improve financial capability
    www.genesis-analytics.com
  • Working group Insurance education
    www.microinsurancenetwork.org

22
Merci! Gracias! Ke a Leboha!Ngiyabonga!
Ndoliboa!Nakhensa!
  • Thank You!

Mr. Charles Mutua Senior Programme Officer
Financial Services Swedish Cooperative Centre
Vi Agroforestry Regional Office for Eastern
Africa P.O. Box 45767 00100, Nairobi,
Kenya Tel 254 20 4180201/37 Fax 254 20
4180277 Web www.sccportal.org Email
charles.mutua_at_sccroea.org
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