News

The MFC Financial Education Program promotes an important social change – improving financial capabilities and encouraging proactive financial behaviour of low-income households in Eastern Europe and Central Asia.

In 2008 different activities with a total value of more than 0,5 million USD will be implemented. Highlights of the first quarter 2008 are the following:
  • MFC has built financial education capacities of more than 110 trainers through 5 training of trainers (ToT) held in Poland (funded by Levi Strauss Foundation), Bosnia in the Upper Drina region (UNDP) and one regional ToT sponsored by Habitat for Humanity International - ECA.

  • MFC became part of a new project launched by the Central Bank in Poland to improve financial capabilities of rural households. The project includes both social campaigns and workshops.

  • Microfinance Opportunities requested MFC to pilot test its new risk-management module to build insurance culture of low-income households. The module is being tested with MDF-Kamurj in Armenia.

  • The first meeting of the FEVA partnership, initiated by MFC to share experience on improving financial capabilities of vulnerable adults, took place in Cracow in January and was attended by 8 leaders in financial education from European countries.
     
  • Two new studies on financial education were conducted: 1) funded by Open Society Institute, a demand study to identify key gaps in financial education of the Roma population in Macedonia; 2) funded by EFSE a supply study on responsible finance and financial education in Moldova.
 
Needs for financial education in Eastern Europe and Central Asia

Financial education is about teaching the knowledge, skills and attitudes required to adopt good money management practices for earning, spending, saving, borrowing and investing. It combines economic education with the promotion of entrepreneurial attitudes. Financial education creates an awareness of the benefits of financial planning and builds the capacity of the low-income households to gain control of their financial resources and better manage their scarce capital. In this way financial education enables people to combine information and resources to enhance their economic security and more effectively use financial services.

In transition settings of Eastern Europe and Central Asia (EE&CA), financial literacy levels of low-income households are low. This reflects the ingrained practices of communist times, when people were discouraged from managing their finances. Most low-income households still do not prepare long-term financial plans and rarely save in a regular way. In addition, the majority of the low-income population is still unbanked. Confronted with crises and lacking in financial reserves, these people are forced to borrow extensively from multiple sources to respond to life and emergency risks. This makes inclusion in the market economy difficult, bears a high risk of over indebtedness for many households and makes a path out of poverty bumpy for more than 250 million poor in EE&CA.

Financial education in EE&CA is timely. There is an increasing recognition that encouraging low-income people to become proactive is vital if these households are to emerge and stay out of poverty. Furthermore, by exposing people to new knowledge, skills and attitudes about effective management of financial resources, financial education increases the likelihood that low-income populations will adopt new and existing financial products and services.
 
MFC and financial education
In response to substantial needs, MFC is actively involved in promoting the financial education agenda in EE&CA. This focus is in line with MFC’s mission to facilitate the development of socially oriented and sustainable microfinance. MFC raises the financial literacy levels of low-income households by:
  • raising awareness of local stakeholders through organizing workshops in EE&CA countries
  • adapting and developing tools to enhance financial education in a unique transition context
  • facilitating the development of diverse and cost-effective models to deliver financial education services
  • training local stakeholders in delivering financial education
  • supporting creation of local organizations specialized in enhancing financial education

MFC's vision is that by 2010 a network of local financial education centres will be created in EE&CA, which will share lessons learnt and innovations and spread adapted financial education in their respective countries.

Within its financial education initiatives MFC draws on a strategic partnership with Microfinance Opportunities and an opportunity to develop and test regional solutions in Poland.
 
Strategic partnership with Microfinance Opportunities

Microfinance Opportunities (MFO) – www.microfinanceopportunities.org – is key strategic partner for MFC in the area of financial education. MFC innovations in the field of financial education for transition settings build on MFO resources and peer exchange. In 2006 MFO and Freedom from Hunger released the first-ever financial education package targeted at microfinance clients and other low-income households. The package is the result of a three-year action-research project which was undertaken with six partners worldwide. Funded by Citigroup Foundation, the package includes an implementation guide, and ToT and trainers manuals for five generic modules on budgeting, saving, debt-management, banking services, and financial negotiations.
 
MFC financial education laboratory in Poland

MFC has been involved in the financial education projects in Poland since 2004. Poland is used as laboratory for regional financial education initiatives. MFC develops and tests new solutions in Poland and then disseminates it in other countries in the region.

Within this global project MFC has developed a financial education curriculum for transition contexts – “Plan Your Future.” Developed and pilot tested in Poland, the “Plan Your Future” package contains materials for trainers to run financial education workshops. A central objective of the curriculum is to change people’s negative attitudes toward long-term financial planning and saving as well as broaden savings options. Read more about the package and the project in:
  • Towards Sustainable Future. Financial Eduaction for Low-Income People in Poland
    - describes needs of low-income households in Poland for financial education, shows potential of tools included in the "Plan Your Future" package, and discusses potential strategies to deliver financial education. (pdf en rus )

  • Priorities for Enhancing Financial Education Among Poor Households in Poland.
    - presents most important findings from the qualitative research conducted by MFC in 2004. (pdf en).

  • Financial education in Practice.
    - presents results from evaluation of the pilot test of financial education workshops conducted using materials from the "Plan Your Future" package in 2005. (pdf en)
To date, the response to “Plan for the Future” has been very positive and it is currently being implemented on a large scale by a Consortium of diverse institutions (from non-governmental and banking sectors). The Consortium (www.edufin.org.pl), under the direction of MFC, seeks to increase financial literacy of 5 million low-income households in Poland by 2015. Its activities focus on:
  • Supporting diverse organizations in realisation of high quality financial education initiatives
  • Managing innovations and partnerships to identify cost-effective delivery models
  • Raise awareness of public institutions, NGOs, financial institutions and other commercial companies with regard to the need for increasing financial literacy of low-income households.