Survey Finds Financial Literacy Leads to Better Off Households

July 15, 2009

A survey in rural Fiji shows that people who received training on managing money and who have bank accounts, are better able to manage their funds and their households are better off.

The survey was conducted in 2007 amongst 400 villagers from 14 villages in the Naitasiri Province. The objective was to measure the impact of financial literacy programmes that were conducted since 2004 in rural Viti Levu and VanuaLevu through the United Nations Development Programme (UNDP)/ANZ Financial Capability Initiative in Fiji.

Under this programme, between 8500-9000 villagers from 347 villages were trained on how to manage money, how to budget money, how to differentiate between needs and wants and other aspects of managing personal finance. Most of these villages are also serviced through the ANZ Rural Banking programme and some 50,000 bank accounts had been opened.

The 2007 survey was conducted by Massey University with support from UNDP Pacific Centre and the National Centre for Small and Microenterprise Development (NCSMED) to measure the impact of the financial literacy training.

“The survey revealed that villagers who attended the financial literacy training programmes had greater financial knowledge in matters like what is a budget and how to prepare one. This knowledge contributed to a change in their behaviour as after the training many people started keeping their financial documents,” said the lead researcher, Jonathan Sibley, citing one of the findings of the survey at the Financial Literacy workshop organized by the Pacific Financial Inclusion Programme (PFIP) as part of the Pacific Microfinance Week.

PFIP is a Pacific-wide programme helping provide sustainable financial services to low income households. It is funded by the United Nations Capital Development Fund (UNCDF), European Union and the United Nations Development Programme (UNDP) and operates from the UNDP Pacific Centre.

Another interesting finding of the survey was the way women handled money.

“Women accept a greater responsibility than men for the management of the household’s cash flows and appear to engage in a broader range of income generating activities,” said Mr. Sibley.

Fifty percent of men said they did not plan and spend money while only thirty percent of women behaved similarly.

“More women kept financial records, had household budgets and set financial goals for their households than men.”

The survey findings also showed that while many villagers used store credit to finance their purchases, many had limited understanding of how loans work.

“Villagers who had bank accounts and who had received financial literacy training kept their loan repayments in order. The same result has been obtained during a similar survey in Guadalcanal, Solomon Islands,” said Mr. Sibley.

The survey also revealed that villagers who demonstrated more competent financial behaviour focused more on investment like improving or extending their farms, thereby generating more income.

“What this survey has shown is that villagers with higher functional literacy tend to engage more with the money economy and to seek to enhance financial capability, which leads to greater financial competence and greater household wellbeing.”

“People can be taught how to manage money through financial literacy programmes, their increased financial capability leads them to become more competent at handling money matters and this leads to greater wellbeing of their households.”

The Pacific Microfinance Week ends on Friday. PFIP is one of the sponsors. Tomorrow PFIP will hold a learning event on microinsurance.