Defending your wallet from predatory lenders, bad policies or your own spending sprees demands a healthy dose of financial know-how. So what’s the best way to spread such knowledge across a developing nation and unleash financial freedom? The answer might hold lessons well beyond finances – the whole sketchy business of “capacity building” in development might well take note of the answers.
In Rwanda, lush land of a thousand hills in central Africa, researchers conducted an experiment to test competing models of local delivery of financial education. The study focused on 200 savings and credit cooperative associations, known as SACCOs. A randomly selected one-third of these cooperatives were asked to attend a so-called “training of trainers” workshop and to send the manager, a loan officer and a board member. Another one-third of SACCOs were invited to the same workshop and allowed to select their attendees. More community members and fewer loan officers showed up under the second approach.
Under the theme “Nawe Birakureba” or “It’s up to you!” the curriculum focused on a typical Rwandan family and their neighborhood, and the financial issues swirling through their lives. Short radio dramas drove home key lessons, such as save a coin a day or before spending, ask yourself – do I want this, or need it?
In the months after the trainers returned to their communities, a dramatic difference emerged between the tested approaches.
Emmanuel Hakizimfura, Douglas Randall and Bilal Husain Zia, authors of a World Bank policy research paper, explain how the villagers came out on top.
The free-choice group of trainers spread the content to 68,000 households with higher attendance than in the directed group. And those they taught actually learned a lot. Surveys showed “stark differences” in financial behavior, with improvements in planning, budgeting and savings. Those trained by the SAACO officers showed no significant improvements in any outcome measured.
So why were the savings association officers so lousy at teaching, uh, savings? Lack of time and motivation. Already working through a busy agenda, the loan officers had little time to take on more duties without an incentive, the researchers found. And the village people tended to be more experienced at teaching others.
While a good proxy for “capacity building” in poverty-fighting development, financial education actually carries huge importance for equity in the world economy in the wake of the Great Recession a decade ago. “With the explosive growth of financial inclusion programs and the emergence of mobile money, policymakers and NGOs are urging more widespread financial awareness and knowledge to enable the poor to better understand and utilize the new financial products at their disposal,” the researchers report. To get there, send the villagers to learn, and leave the chiefs at home.