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Making Sense of Financial Capability Surveys around the World

Making Sense of Financial Capability Surveys around the World A Review of Existing Financial Capability and Literacy Measurement Instruments. The World Bank Siegfried Zottel/Valeria Perotti. Russia-OECD-World Bank Conference Moscow, 13-14 June, 2013. Purpose of the Review.

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Making Sense of Financial Capability Surveys around the World

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  1. Making Sense of Financial Capability Surveys around the World A Review of Existing Financial Capability and Literacy Measurement Instruments The World Bank Siegfried Zottel/Valeria Perotti Russia-OECD-World Bank Conference Moscow, 13-14 June, 2013

  2. Purpose of the Review • Guide policy makers on existing measurement instruments • Useful for policy makers who prioritize FC, FI, or FCP • Describe and compare key instruments that are: • Innovative • Focused on demand-side (household vs. business) • Well established • Well documented 2

  3. Surveys Reviewed FSA Consumer Awareness Jump$tart FinScope Findex UK FSA Consumer Fraud US WB FCCP Eurobarometer Portugal Survey of Consumers Ghana FSS Singapore Financial Diaries US Health & Retirement Study Fiji Kenya FinAccess CP Kenya New Zealand OECD/INFE WB/Russia FLIT

  4. Content of the review • Key questions addressed by the survey review: • How can a survey support policy making? • What do these surveys measure and how? • How can the data be analyzed? 4

  5. 1. How can a survey support policy making?

  6. Baseline assessment of weak areas/targets • Identify potential channels for info or FE • Understand knowledge/behavior relationship • Understand behavior related to personal or household finances Capability • Determine what products people use • Understand reasons for limited use • Understand how people use information • Understand attitudes towards fin. issues Inclusion • Assess awareness of CP laws, mechanisms • Identify potential victims of fraud • Assess attitudes and trust in providers and regulators Consumer Protection

  7. 2. What do these surveys measure and how?

  8. Financial Capability Practical Know-how Knowledge of financial concepts Awareness of financial products and services Questions on… inflation compound interest budgeting returns on investment insurance money illusion Risk diversification

  9. Financial Capability Practical Know-how Knowledge of financial concepts Awareness of financial products and services Questions on… Awareness of product existence Basic product features Advantages of using products Risks and costs

  10. Financial Capability Practical Know-how Knowledge of financial concepts Awareness of financial products and services Questions on… How to make payments How to set up a budget How to keep financial records How to open a bank account How to seek for recourse

  11. Financial Capability Behavior Attitudes Questions on… Paying bills on time Budgeting Saving Making choices Overspending Planning for old age Borrowing Dealing with unexpected expenses/income loss

  12. Financial Capability Behavior Attitudes Questions on… Reasons for saving, borrowing, investing, budgeting, and choosing specific financial products Attitudes toward impulse purchases Attitudes towards the future Propensity to save Confidence in own retirement plans

  13. Financial Inclusion Behavior Attitudes Questions on… Types and number of financial products used Frequency and modality of use What products are used for Ways of accessing financial services

  14. Financial Inclusion Behavior Attitudes Questions on… Perceptions on service accessibility Barriers in accessing services Reasons for/for not using specific financial products Reasons for changing a product

  15. Financial Consumer Protection Behavior Attitudes Experience Questions on… Actions taken to resolve issues with fin. service providers Where complaints were filed Entities consulted in case of disagreement

  16. Financial Consumer Protection Behavior Attitudes Experience Questions on… Satisfaction with financial products and service providers Trust in service providers Confidence in resolving disputes Perceptions on financial regulators and supervisors

  17. Financial Consumer Protection Behavior Attitudes Experience Questions on… Experience with pyramid schemes Being billed for a service not received/product not requested

  18. 3. How can the data be analyzed?

  19. How to develop indicators Figure 1: % of respondents who answered FL questions correctly Frequencies and proportions of individual questions Figure 2: Discrete frequency distribution of FL scores. Combining data by creating simple scores 19 WB Tajikistan FCCP Survey 2013.

  20. How to develop indicators Figure 3: Average FC scores. Creating advanced scores (by utilizing factor analysis) WB Tajikistan FCCP Survey 2013. Due to the multifaceted nature of some topics, it may not always be meaningful to construct a single composite score or index! 20

  21. How to identify potential target groups Figure 4: Average FC score related to ‘saving’, in different regions. Use cross tabulations Figure 5: Average FC score related to ‘saving’, by household income. Figure 6: Average FC score related to ‘saving’, by respondent’s childhood savings behavior. 21 WB Tajikistan FCCP Survey 2013.

  22. How to identify potential target groups Regression analysis Cluster analysis Can improve the understanding of the relationship between socio-demographic characteristics and FC, FI, or FCP Can be used to segment populations and to identify groups that show similarities in their scores 22

  23. THANK YOU! Contacts: vperotti@worldbank.org szottel@worldbank.org 23

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