Financial Literacy for the Working Poor

June 1, 2009 Posted by Update

Swadhaar FinAccess was founded with the goal of providing the urban poor in Mumbai increased access to regular, reliable, and efficient financial services in a sustainable and scalable manner, and became a Unitus partner in 2006. In 2008, the organization launched Swadhaar FinServe Pvt. Ltd.—an NBFC (Non-Banking Financial Company)—to take over microfinance operations, which has steadily expanded to serve over 10,000 clients.

Since July of last year, Swadhaar FinAccess has focused its operations on financial education and savings programs to increase the capability of the urban poor to better manage their financial resources, improve self-reliance, and ultimately attain a more secure future. In March 2009, Swadhaar completed the first pilot of its financial education program “Talk on Money—How to Save and How to Increase Income,” which was offered to women from the slum communities in Mumbai. Unitus interviewed Executive Director Haseena Vahanvaty in April about this program for its MFI network newsletter, The Accelerator. The following is an excerpt from that interview.

Q: What are the objectives of your financial education program?

A: The three main objectives are 1) to impart the knowledge and skills necessary for learners to be better managers of their own money and better consumers of financial services; 2) to instill new behaviors and attitudes so that learners look beyond a “day-to-day” financial horizon and connect daily choices to future goals; and 3) to acquaint learners with financial products and services available to them, and to increase their use of these products and services.

Q: The program operates in the slums of Bandra, Wadala, and Chembur, some of the largest slums in Mumbai. What is the profile of the women attending the program?

A: Participants are women (mostly married) between the ages of 20 and 55. They work as domestic help, do “piece rate” tasks such as embroidery or stitching, work in the unorganized sector, or are homemakers. The informal and short-term nature of this work translates into incomes that are both low (ranging from Rs. 2000 to Rs. 6000 per month) and unstable. Many participants are migrants from rural India.

Q: Many financial education programs struggle to design a training module that meets the needs of microfinance clients. How has your training module been designed to meet the needs of women from the urban slum?

A: Swadhaar did seven months’ preparatory work prior to the launch of the program to ensure the program would meet the needs of these women. To ensure this, we:

1. Designed content with input from a needs assessment of the community women. The content includes basic preliminary financial concepts that are easily implemented by the women. 

2. Identified community centers within the slum communities to conduct the training program. Conducting the training within the communities provides the women easy access to the training, allows for community participation, and increases the visibility of the training in the community to motivate other women to participate. 

3. Produced low-cost training materials, comprised of flip charts, posters, picture cards, and a Budget Diary for every participant. The visual materials are easy to use and transport. 

4. Use teaching methodologies like games, stories, and case studies to make learning and teaching interesting and fun.

We’ve found that our training module can be used in all urban Indian settings with few adaptations.

Q: Lack of financial awareness among clients can lead to overindebtedness and greater economic vulnerability. How does your financial education program address overindebtedness?

A: Our program focuses on teaching women how to calculate family monthly income, track monthly expenses, and prepare monthly and annual household budgets. We also enforce the idea of savings being an integral part of the monthly budget. A diary is given to each participant to note down daily expenses to help her to avoid wasteful expenditure.

In addition, we introduce Swadhaar FinServe’s loan product in the program. Women learn to use calculators to calculate interest rates from different sources. They are shocked to learn the difference between interest rates charged by the moneylender and other informal sources and those charged by Swadhaar and banks. They also learn to distinguish between productive and non-productive purposes for taking loans.

Q: Some studies suggest that financial literacy programs may lead to higher repayment rates and client retention, but may not result in increases in business income or assets for clients. Do you think your program will ultimately impact your clients’ businesses and income?

A: Our financial literacy enrollment is available to all women from the community and is not restricted to loan clients. Our primary goal is to empower those that are interested with knowledge to manage their finances, which we hope will make them more prudent and disciplined borrowers. We believe this will bring about a change in their attitude and motivate them to look for income-generating opportunities and avoid the conspicuous consumption prevalent in urban slums.

Q: One of the big obstacles in evaluating financial education programs is determining how to measure success. How do you measure the success of your program? What results have you seen to date?

A: The immediate outcomes of the training have been:

52 percent of participants opened savings accounts.

• A shift in women’s attitude toward savings. 

• A demand in the community for savings and loans from safer sources. 

• Expressed need from other women in the community and NGOs for a similar training. 

• Requested regular monthly meetings from participants in the community to sustain the new behavior they have learned.

We plan to have an outside research agency conduct the impact study of the program after completion of the pilot.

Q: If you had one piece of advice to give others in the Unitus Network, what would it be?

A: It is best expressed by 55-year-old Laxmi Karpe from Chembur, who sums up her sentiments about Swadhaar’s training program: “If only we had attended this program earlier, we would not be trapped in a cycle of indebtedness.” We recommend that MFIs emphasize inclusion of financial education along with loan products, ensuring that women not only gain credit, but also the ability to spend it wisely.

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