Seminar on Financial Education: Challenges, Trends and Measures of Success in Supporting Financial Inclusion in Sub-Saharan Africa SEPTEMBER 2016

Luz Maria Salamina Lead Financial Sector Specialist

Financial Education is a process

the process …to improve the understanding of financial

products, concepts and risks and,

through information, instruction and/or objective

advice, develop the skills and

confidence to … to make informed choices… and to

take other effective actions to improve their financial well-

being.”

OECD in 2005 and endorsed by G20 leaders in 2012

Financial Literacy is the outcome of the

process

financial awareness, knowledge, skills,

attitude and behaviours

necessary to make sound financial

decisions

OECD in 2005 and endorsed by G20 leaders in 2012

Stages of Financial Literacy

1) basic notions as awareness

2) increased knowledge of financial concepts

3) development of skills and attitudes for the management of personal finance in the short and long term

Public-Private-Partnership for Financial Literacy?

Traditional PPP Long-term contract

between a private party and a government entity,

for providing a public asset or service.

Enables governments to benefit from the expertise

of the private sector. Remuneration for the

private party is linked to performance.

Financial Literacy

Collaboration between all relevant stakeholders: financial and non-financial private parties

(for profit and non for profit), and public entities from various

authorities (Central Banks, Education ministries, others).

Private sector provides expertise on the topic.

Remuneration is not directly related to the transaction for

the private party.

IFC – PPP- Education Brazil Bello Horizonte

• TRANSACTION STRUCTURE • IFC proposed a 20-year

concession to finance, build, equip and operate non-pedagogical services of 32 new preschools and five primary schools..

• The private consortium would operate non-pedagogical services such as maintenance and security

• Mobilized 80Million private investment

Philipines

• The Philippines was one of the first developing countries with a Build-Operate-and-Transfer (BOT) Law and a dedicated BOT Center.

• has been a leader in the use of non-infrastructure forms of PPP, such as contracting for the delivery of education services.

• The Education Service Contracting (ESC) scheme, pays private schools to enroll students at public expense to reduce state school overcrowding since 1987.

• Vouchers: Coupons to partially or fully compensate students for the cost of private school tuition in any of the eligible schools.

Education partnerships are

evolving into more

comprehensive PPPs that take

on the core problems in

education: the quality of

teachers, the management of

teaching, and the teaching itself.

Roadmap for Financial Education hand in hand with consumer protection and inclusion policies

Objective Target audience

Impact assessment Resources

G-20 OECD National Strategy Financial Education

In principle, all segments of the population. In practice may need to target specific/ vulnerable groups elderly, youth, migrants, low income groups, women, workers, the unemployed.

Overall impact to be assessed through the development surveys at the beginning of the NS and conducted at regular intervals. Quantifiable indicators

Financial (cash and in-kind) resources Stakeholders: public and private

Policy areas and/or target groups (i.e. retirement planning, credit, savings, youth) Operational goals (platform for stakeholders to work together)

Financial Education - Stakeholders and Roles Public authorities Private sector and financial

service providers Other civil society and

international stakeholders

All relevant entities: Ministries of Finance and Education, the Central Bank, the financial regulator and supervisor(s), other public national, regional and local authorities.

Financial institutions, credit bureaus, collateral registries, non financial credit providers.

Relevant nongovernmental organisations, trade unions, consumer associations, employers, media and other national disseminators

• Consulted National Strategy Framework

• Identify national priorities

• Design / promote regulation, guidance, quality standards, codes of conduct13 …

• Own the knowledge, expertise and resources of the financial market

• As a component of their social responsibility and good governance.

• Participate in the consultation for the National Strategy

• Opinion influencers • Participate in

implementation

consumer

Implementation of Financial Education Program

Delivery methods

Impact evaluation

G-20 OECD National Strategy Financial Education

Establish measurement methodologies and indicators of financial education and financial capabilities.

Based on best practices and research: • FL in schools • Public websites • Awareness campaigns • Special events • Workplace programs • Train the trainer

Challenges

“Your good credit can help you grow your business”

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SMEs don’t have time to spare. SMEs don’t necessarily want to learn what we want to teach them. We need to address their needs to get their attention.

THANK YOU

Luz Maria Salamina Principal Financial Specialist lsalamina@ifc.org +27 11 731 32645

Take aways • Strong champion • Working group committed and representative

of all relevant stakeholders (including the consumer)

• Clear objectives • Measuring tools: quantifiable indicators • Ensure sustainability

THANK YOU

Luz Maria Salamina Principal Financial Specialist lsalamina@ifc.org +27 11 731 32645

1) PUBLIC SECTOR CHAMPION:

•Recognized public figures should serve as the spokespersons and advocates for the project and the use of a P3. Well-informed champions can play a critical role in minimizing misperceptions about the value to the public of an effectively developed P3.

2) STATUTORY ENVIRONMENT:

•There should be a statutory foundation for the implementation of each partnership. Transparency and a competitive proposal process should be delineated in this statute. However, unsolicited proposals can be a positive catalyst for initiating creative, innovative approaches to addressing specific public sector needs.

3) PUBLIC SECTOR’S ORGANIZED STRUCTURE:

•The public sector should have a dedicated team for P3 projects or programs. This unit should be involved from conceptualization to negotiation, through final monitoring of the execution of the partnership. This unit should develop Requests For Proposals (RFPs) that include performance goals, not design specifications. Consideration of proposals should be based on best value, not lowest prices. Thorough, inclusive value for money (VFM) calculations provide a powerful tool for evaluating overall economic value.

4) DETAILED CONTRACT

(BUSINESS PLAN):

• A P3 is a contractual relationship between the public and private sectors for the execution of a project or service. This contract should include a detailed description of the responsibilities, risks and benefits of both the public and private partners. Such an agreement will increase the probability of success of the partnership. Realizing that all contingencies cannot be foreseen, a good contract will include a clearly defined method of dispute resolution.

5) CLEARLY DEFINED REVENUE STREAM:

•While the private partner may provide a portion or all of the funding for capital improvements, there must be an identifiable revenue stream sufficient to retire this investment and provide an acceptable rate of return over the term of the partnership. The income stream can be generated by a variety and combination of sources (fees, tolls, availability payments, shadow tolls, tax increment financing, commercial use of underutilized assets or a wide range of additional options), but must be reasonably assured for the length of the partnership’s investment period

6) STAKEHOLDER SUPPORT:

•More people will be affected by a partnership than just the public officials and the private sector partner. Affected employees, the portions of the public receiving the service, the press, appropriate labor unions and relevant interest groups will all have opinions, and may have misconceptions about a partnership and its value to all the public. It is important to communicate openly and candidly with these stakeholders to minimize potential resistance to establishing a partnership.

7) PICK YOUR PARTNER

CAREFULLY

•The “best value” (not always lowest price) in a partnership is critical in maintaining the long-term relationship that is central to a successful partnership. A candidate’s experience in the specific area of partnerships being considered is an important factor in identifying the right partner. Equally, the financial capacity of the private partner should be considered in the final selection process.

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How do we handle perception?

We ask questions

Step #1

How can I get a loan What is collateral?

I am afraid of going to a bank

I don’t have enough money to save.

I borrow from my brother.

I want to buy a house

I want to buy a house

PEOPLE HAVE MANY CONCERNS ABOUT THEIR MONEY, FINANCES AND CREDIT. THEIR CONCERNS MAY BE DIFFERENT THAN WHAT WE WANT TO TELL THEM…

SO WE ASK THEM Survey, focus groups…

Thesis

If we address the worries people have, We get their attention…

Classify their worries / concerns Develop messages to answer to them

WITH CREDIT

From family and friends

Q1 = M1 Q2 = M2 Q3 = M3

From Formal institutions

Q1 = M1 Q2 = M2 Q3 = M3

WITHOUT CREDIT

Want credit

Q1 = M1 Q2 = M2 Q3 = M3

Don’t want credit

Q1 = M1 Q2 = M2 Q3 = M3

How to send the message efficiently?

Identify the influencers

Step #2

To prepare a good communication program, we should first understand the cycle of “influence”

The Lender

Who influences the lender? The Regulator

Who influences the Regulator?

The society

Who influences the Society?

The Media

Who influences the consumer?

How to make it sustainable?

Team up

Step #3

The stakeholders must be in alignment

• Create a working group with relevant stakeholders

• Cross training among stakeholders

• Good relations among participants is fundamental.

• The working group will implement the strategy

PARTICIPANS OBJECTIVES

LOCAL LEADER

WORKING ETHICS

HIRE COMM CONSULTANT

ACTION PLAN

WORKING GROUP

TEAM WORK FOR FINANCIAL LITERACY

PARTICIPANS

WORKING GROUP

TEAM WORK FOR FINANCIAL LITERACY

CHOOSE THE PARTICIPANTS (sample process)

• The group should have max 15 reps

• Participants should be knowledgeable of their business and have communications / marketing background or skills.

CREDIT BUREAUS

COMM CONSULTANT

CREDIT PROVIDERS

REGULATOR

OTHERS

PARTICIPANS OBJECTIVES

WORKING GROUP

WORKING GROUP FOR FINANCIAL LITERACY

AGREE ON OBJECTIVES AND INDICATORS

# of complaints Surveys (consumers, media, banks)

Media coverage + Free press generated

# of activity in social media (hits, comments)

# of Self queries

OBJECTIVE: INCREASE

AWARENESS AND GENERAL KNOWLEDGE

PARTICIPANS OBJECTIVES

TEAM LEADER

WORKING GROUP

THE PROCESS: choose a team leader, agree on working ethics and hire the comm consultant

WORK ETHICS

HIRE COMM CONSULTANT

10/5/2016

Team leader

• State the purpose of the team leader: “to ensure continuity”

• Qualifications • Role and

responsibilities • Acknowledge by the

group • The local leader will

engage together with STC in the execution of the action plan

Work ethics

• TOR • Discuss and agree

on action plan • Agree on periodicity

of meetings.

Comm Consultant

• TOR for the consultant.

• Develop the media plan

PARTICIPANS OBJECTIVES

LOCAL LEADER

WORKING GROUP

DESIGN THE STRATEGY AND ACTION PLAN

WORKING ETHICS

HIRE COMM CONSULTANT

ACTION PLAN

10/5/2016

ACTION PLAN:

Survey

• To identify the knowledge of the consumer and their needs and concerns.

• Will be the source for the communication messages.

• Will inquire things like: • Media most

viewed • Money matters • Credit knowledge • others

Messages and Media Plan

• Face to face •Conferences •Training sessions • “Train the media”

•Radio: •Condition the

contracts to participate periodically on live talk shows.

•TV •Try to get tag lines at

news. •Work on participation

as provider of news. •Press •Paid and free press

(opinion column)

Spokespersons

•MD from the credit bureaus

•Others from various credit providers

• It is good to have and influential person willing to be spokesperson.

•Media training for each •There can be several

people trained as spokespersons, but the formally recognized spokespersons should be the minimum.

Budget

• The Comm Specialist will present concept notes and budget for all activities in the plan.

• The working group approves the plan and the budget.

• The comm. specialist will design and implement the media plan within budget

• The working committee will work on the sources of funds to implement the plan.

• Follow up meetings, reports and indicators.

Working Group for Literacy

1. Identify participants

1. Hire consultant 1. Learn about lending 1. Agree on indicators

Financial Literacy operational structure proposed:

2. Common objectives

3. Workshop

4. TOR and COC

2. Do a Research

3. Design strategy

4. Select & train spokes people

5. Select TTL

2. Report quarterly

3. Re align measurements and strategy if needed

3. Work as one body

Cross education among

stakeholders

Communication’s

Campaign

5. Agree on indicators 6. Implement strat

Follow up Indicators

and reports

2. Participate in workshops with all stakeholders

THANK YOU

Luz Maria Salamina Principal Financial Specialist lsalamina@ifc.org +27 11 731 32645

To sustain a partnership, partners must have reciprocal benefits and hold complementary roles.

Philanthropy from the private sector or government benevolence is not a reliable

foundation for a partnership.

Central governments decentralize some decision-making and financial power to local tiers or share them with community members and the private sector, not out of benevolence, but in the expectation of political or economic return (tax breaks, flexible policies, etc). Business supports local development through donations and development funds out of the conviction that development of the area where it is based also helps its own business. Thus, all partners have the expectation to gain and are more likely to sustain the partnership when its benefits are mutual.