Bilal Zia (World Bank)
Shawn Cole (HBS)



Impact Evaluation in Indonesia-Results
Impact Evaluation in India - Ongoing
Impact Evaluation in South Africa-Plans
Shawn Cole (Harvard University)
Thomas Sampson (Harvard University)
Bilal Zia (World Bank)

Financial literacy is now a prominent feature
of financial reform across the globe:
◦ US: President’s Advisory Council on Financial
Literacy
◦ Indonesia: 2008 was “Year of Financial Education”
◦ India: RBC has established Financial Literacy and
Credit Counseling Centers

International and Private organizations are
also pushing heavily for financial literacy
programs:
◦ World Bank: $15 Million Russia Financial Literacy
Program
◦ Citi Foundation: 4 years into a 10-year $200 Million
global program on financial education, operating in
65 countries

Compelling survey evidence from developed
countries shows strong positive correlation. HHs
with low financial education:
◦ Tend not to plan for retirement (Lusardi and Mitchell,
2007a)
◦ Borrow at higher interest rates (Lusardi and Tufano, 2008;
Stango and Zinman, 2006)
◦ Acquire fewer assets (Lusardi and Mitchell, 2007b)
◦ Participate less in the formal financial system (Alessie,
Lusardi and van Rooij, 2007; Hogarth and O.Donnell, 1999).
 But
is this relationship
causal?
 But
is this relationship
causal?
 Our
paper addresses this
question with a randomized
evaluation

Piggy-backed experiment on a nationally
representative household survey in
Indonesia.

Unbanked households are our starting
sample

Provided financial literacy training in groups
at village level

Also provided financial incentives (to open
bank accounts) (range $3-$14).

Demand for financial services is low
because:
◦ Consumers rationally decide that value of
financial services is less than cost
Or
◦ Services are not well understood



We find effect of financial literacy training
only in subsets of sample.
We find significant effects of financial
literacy training on uneducated population
and those who possess low ex-ante
financial literacy.
We do find a very strong and significant
effect of financial incentives in the full
sample.
Full Survey Financial Literacy Summary Statistics
Data Type
Mean
Sd
0.74
0.44
Prop. Correct
Borrowed Rs. 100 at 10% per month
interest. Over 3 months, no payments
means, you owe >, < or = Rs. 102?
Need to borrow Rs. 500. Loan 1, Rs. 600 for Prop. Correct
one month, Loan 2: Rs. 500 + 15 % Interest.
Which is financially better choice?
If Rs. 100 in Savings account @ 1% and prices Prop. Correct
rise @ 2%, can you buy >, < or = as today?
0.78
0.42
0.44
0.50
0.61
0.49
One crop is safer than multiple crops?
Prop. Correct
0.28
0.45
Average financial literacy score
Cognitive / Math skills score
Prop. Correct
Prop. Correct
0.52
0.81
0.28
0.23
Interested in financial matters?
Prop. Yes
Experimental Results: The Effect of Financial Literacy Education and Incentives on Opening of Bank Accounts
1
2
-0.020
[0.027]
-0.022
[0.028]
3
4
0.054
[0.024]**
0.092
[0.026]***
0.048
[0.026]*
0.088
[0.029]***
0.035
[0.014]**
-0.447
[0.327]
Dependent Var: Opened Bank Account?
Financial Literacy Invite?
Incentive==75000
Incentive==125000
Constant
Household Controls
0.097
[0.020]***
-0.444
[0.319]
YES
YES

Financial literacy training has no effect on the
likelihood of opening a bank account

Financial incentives have a very large effect:
◦ Compared to the baseline of $3, a $14 incentive
increase probability of opening a bank account
from 3.5% to 12.7% -- an almost three-fold
increase
Experimental Results: Heterogeneous Effects of Financial Literacy Education and Incentives on Opening of Bank
4
5
6
Dependent Var: Opened Bank Account?
Financial Literacy Invite?
Incentive==75000
Incentive==125000
Below Median Financial Literacy * Financial Literacy Invite
Below Median Financial Literacy * Incentive==75000
Below Median Financial Literacy * Incentive==125000
Constant
Household Controls
Enumerator Fixed Effects
-0.049
[0.034]
0.060
[0.039]
0.100
[0.030]***
0.100
[0.044]**
-0.016
[0.060]
-0.024
[0.049]
-0.048
[0.036]
0.051
[0.040]
0.098
[0.034]***
0.087
[0.043]**
-0.008
[0.058]
-0.031
[0.055]
-0.051
[0.035]
0.036
[0.040]
0.100
[0.033]***
0.092
[0.043]**
0.008
[0.057]
-0.035
[0.054]
0.067
[0.027]**
-0.377
[0.331]
-0.409
[0.307]
YES
YES
YES


These results suggest financial literacy
programs should be carefully targeted
However…




Our literacy training cost $17 per head
Among below median financial literacy, effect was
5%, so cost per head of effectively delivering
program = 17/0.05= $340
In contrast, increasing incentives from $3 to $14
raises probability of opening bank account by 7.6%,
so cost per head = $11/0.076=$145
Hence, even if financial literacy programs are
carefully targeted, providing incentives instead
costs less than half to achieve same objective.



Financial education may have extra benefits
that households may reap in the future (such
as better internal savings, saving more
informally, etc.)
We do not measure these benefits – to do in
future follow-up survey
This paper focuses on extensive margin
Shawn Cole (Harvard University, J-PAL, IPA)
Jeremy Shapiro (Yale University, IPA)
Bilal Zia(WB)

Video-Based Financial Literacy:

Financial Counseling

Outcomes

Further Test Some Behavioral Theories:
◦ Detailed, engaging modules on savings, credit, insurance and budgeting
◦ Local actors and good production firm hired for these videos (though not
Bollywood!)
◦ Lab setup for screenings
◦ Low-cost, scalable intervention
◦ Unbiased consultation to discuss household budgeting, borrowing and savings
options
◦ Measured financial literacy
◦ Real-world type savings and investment questions with financial consequences
◦ Follow-up household survey
◦ Do people respond (financially) to deadlines?
◦ Do people (investors) respond to de-biasing ?
Shawn Cole (Harvard University, J-PAL, IPA)
Jeremy Shapiro (Yale University, IPA)
Kartini Shastry (Wellsley College, IPA)

Workers in mining houses in South African
exhibit low levels of financial literacy
◦ May make poor savings and expenditure decisions
◦ Financial stresses may hinder work performance
◦ Financial habits may contribute to absenteeism
 Avoid coming to work on payday, to avoid
moneylender
 May “celebrate” the evening after payday, and miss
work in subsequent days

Provide customized, two-day, experiential
financial education module emphasizing:
◦
◦
◦
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◦
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Financial planning
Savings choices
Lending choices
Insurance
Hire Purchase
Legal rights
Remittances

Financial Education Foundation
◦ Funding and technical support

Goldfields and AngloGold Ashanti
◦ Two of world’s largest mining firms

TEBA Bank
◦ Cooperative bank serving mine workers

Innovations for Poverty Action
◦ Technical support and research direction

Ikhumiseng Consulting
◦ Provide financial literacy education


Treatment assigned at individual level
Sample size
◦ 10,000 workers in treatment
◦ 10,000 in control

Administrative Data
◦ Financial data (Teba)
◦ Productivity and absenteeism (Mining Houses)

Survey data
◦ 1,500 household surveys
 Baseline
 Endline (one year later)

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Knowledge / awareness of financial tools
Numeracy and budgeting skills
More savings accounts, more savings
Decreased use of moneylenders
Reduced absenteeism
Improved debt management

Baseline surveying:
◦ Starting January 2010
◦ 30 individuals / week for one year

Financial intervention
◦ 200 individuals / week for one year

Administrative data collection:
◦ Periodically throughout study, and beyond

Endline surveying:
◦ Beginning January 2011

Study completion:
◦ December 2011

Non-profit/private partnership
◦ Mining houses contributing 20,000 person-days of
labor
◦ FEF funding training costs of 10,000 workers


If success demonstrated, mining houses may
scale up to all workers
Individual-level randomization and large
sample size allow detection of ‘small’ effects

Range of experiments designed to
understand importance of financial literacy
◦ India, Indonesia, South Africa
◦ Videos, Classroom, Community-Based

Taken together, along with a dozen other
experiments conducted by colleagues around
the world, will soon learn:
◦
◦
◦
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What works, what doesn’t
How financial literacy education works?
What is most cost-effective
Lead to: educational reforms, regulatory reform,
new private markets