Lessons from the
2012 Colombian and Mexican
Financial Capabilities Surveys
COLOMBIA-OECD-WORLD BANK CONFERENCE ON FINANCIAL EDUCATION
Rekha Reddy
The World Bank
October 2012
rreddy5@worldbank.org
The 2012 Financial Capabilities Surveys
o Surveys sponsored by the World Bank Russia Trust Fund for
Financial Literacy and Education and the World Bank Latin America
Region in conjunction with national counterparts
o
Colombia: Banco de la Republica
o
Mexico: CNBV and CONDUSEF
o Survey developed from qualitative research that began in 2010
o Nationally representative surveys: those 18 years and older
making financial decisions for their household or themselves
o
Colombia: 1,526 respondents
o
Mexico: 2,022 respondents
o Countries customized core Russia Trust Fund questionnaire
(ex: OECD-INFE financial knowledge module, financial education, use of
government programs)
2
Topics for Presentation
Challenges in Financial Capabilities
1. Imprecise Daily Money Management
2. Incomplete Planning for the Future
3. Decisions on Financial Products with Insufficient
Financial Knowledge
4. One Country’s Data Do Not Fit All
Financial Capabilities Interventions with Impact
3
1. For Most, Daily Money Management is Imprecise
Of those surveyed who have some responsibility for household expenses…
Most plan daily
expenditures
But fewer plan
regularly

95% in Colombia and 74% in Mexico said they planned their
daily expenditures in some way

Or precisely
Which could
exacerbate
already existing
resource gaps
79% in Colombia and 69% of Mexicans report that they
keep to these household budgeting plans

Less than a quarter of survey respondents knew exactly
how much they spent in the last week

In both countries, approximately 60% of respondents
reported having being short of money for basic
necessities at least once.
2. Planning for Future Expenses is Incomplete
Of those surveyed who had some responsibility for their household expenses…
Children’s
Future
Unexpected
Expenses

49% of Mexican
survey respondents
and 23% of
Colombian
respondents felt
they could cover a
major unexpected
expense without
borrowing
More than half of
the parents
surveyed in both
countries had plans
to support their
children’s education
 Plans to save for
children’s
inheritance were
less common (less
than 30%)

Old Age

A minority reported
contributing to a
future pension in
both countries: 10%
of those under age
60 in Colombia, 28%
in Mexico
3. Most Report Researching Financial Products
Of those surveyed who had some responsibility for their household expenses…
Look for information from
distinct sources
Consider various alternatives
before deciding
Colombia
Look to find the most
appropriate product for needs
Mexico
Verify terms and conditions
before contracting
Verify terms and conditions in
detail
0%
10%
20%
30%
40%
50%
60%
70%
80%
In both countries, men and those with higher levels of education are more likely
to make decisions about financial products.
3…But Limited Knowledge of Interest Rates
Hinders Decisions on Financial Products
Source: Colombia and Mexico data are from World Bank analysis of 2012 Colombia and Mexico survey data on financial capabilities .
Non-Mexico data are from Atkinson, A. and F. Messy (2012), “Measuring Financial Literacy: Results of the OECD / International Network on Financial Education
(INFE) Pilot Study. The samples for Colombia and Mexico were constructed including only those individuals who make financial decisions, which may affect
representativeness, while the INFE countries did not use that filter.
68% of Colombian respondents and 51% of Mexican respondents state that no
one--not a parent, a teacher or other—taught them to manage their money.
7
4. One Country’s Data Does Not Fit All:
Financial Capabilities Differ among Key Segments
Of those surveyed who had some responsibility for their household expenses…
Men/
Women
Consistent Product
Usage Patterns
Rural/Urban
Similarly Vulnerable
Formal/
Informal
Employment
Similarly Indebted
 Rural respondents were
 A higher proportion of the
more likely to report being
informally employed say
 Relatively more men use
short of money
they borrow more than
deposit accounts and credit
they can afford
cards than women
Differences in Planning
Differences in Surplus
Differences in Relative
 In Colombia, those in rural
Financial Knowledge
areas were more likely to  In Mexico, the informally
plan, while in Mexico it is
employed were far less
 Women scored similarly to
the reverse
likely to have disposable
men on financial knowledge
income, whereas the
in Mexico, but worse on
Colombian formal and
every question in Colombia
informally employed were
.
fairly similar
Topics for Presentation
Challenges in Financial Capabilities
1. Imprecise Daily Money Management
2. Incomplete Planning for the Future
3. Analyzing Financial Products with Insufficient
Financial Knowledge
4. One Country’s Data Do Not Fit All
Financial Capabilities Interventions with Impact
9
Product Design Can Support Improved Daily Money
Management and Planning for Future Expenses
Designs with Impact on Financial Capabilities
o Savings
o
Commitment savings accounts: After one year, individuals in the Philippines
who gave up access to their savings for a period increased savings 81% relative to a
control group (Ashraf et. al 2006)
o
Labels for savings accounts with specific goals: Treatment group in
Ghana with access to accounts in which individuals named specific savings goals
saved 31% more on average than the control group (Karlan et. al 2012)
o
Reminders to save: Letters or text messages from the financial institutions(FI in
Bolivia, Peru and the Philippines increased the likelihood of reaching savings
goals by 3% and the total saved in the reminding FI by 6%. (Karlan et. al, 2010)
o Automatic enrollment in pensions:
Under automatic enrollment, participation
in a United States firm’s 401K plan increased from a low base to between 86% and
96% of employees (Choi et. al 2004)
Financial Education and Consumer Protection are
Complementary Interventions for Financial Capabilities
Targeted financial education has shown impact:
o
Financial capabilities survey data showed desires and concerns can vary widely by
demographic group
o
Ex: Brazil financial literacy program for at students and their parents.
o
Where the student curriculum was provided in conjunction with the parent
financial literacy workshop, the program raised students’ savings rates by
24%, and increased the percentage of parents who track monthly
expenses by 17% (Bruhn et. al forthcoming).
o
New interventions planned for younger students, certain groups of women
Consumer protection-particularly consistent disclosure
requirements across financial products- can compensate for
limitations in financial knowledge:
o
(Anagol et. al 2012) found that 60-80% of Indian insurance agents recommended
unsuitable high commission products. Requiring commission disclosures for one
product led agents to recommend other products without disclosure requirement.
o
Forthcoming study (Gine, Mazer et. al) evaluating the effectiveness of Mexico’s
credit disclosure reforms on consumer understanding & financial decision-making
Muchas gracias!
For more information:
Colombia Team
Dairo Ayiber Estrada- destrada@banrep.gov.co
Nancy Zamudio Gomez- nzamudgo@banrep.gov.co
Mexico Team
Arturo Luna Canales-alunac@condusef.gob.mx
Luis Trevino-ltrevino@cnbv.gob.mx
World Bank
Rekha Reddy-rreddy5@worldbank.org