FINANCIAL LITERACY AS A MEANS TO FEMALE EMPOWERMENT IMPACT EVALUATIONS IN INDIA Bilal Zia (DECRG)

Introduction & Motivation  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: RBI has established Financial Literacy and Credit Counseling Centers  International and Private organizations are also very interested in financial literacy programs:  Citi Foundation: 4 years into a 10-year $200 Million global program on financial education, operating in 65 countries  World Bank

Why So Much Interest in Financial Literacy?  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).

 Similarly in developing countries, financial literacy:  Positively associated with financial sector participation, education, cognitive ability and wealth in Indonesia and India (Cole, Sampson and Zia, 2009).  Positively associated with financial participation and negatively associated with informal borrowing (Klapper and Lusardi, 2009).

Outstanding Question  Is this relationship causal?

Why is this Question Important?  Research on this question will help us understand:  Are financial literacy programs effective tools for improving financial sector participation?  Can financial literacy programs be used to “empower” women? By making them better financial decision makers By improving their bargaining position within the household  What kinds of behavior change can such programs elicit? Does this vary by gender? Identify mechanism of behavior change for women vs. men  v. useful for targeted policy  What kind of general equilibrium effects can such programs garner? Does this vary by gender? Do women invest more in children’s education and health from extra savings? Are women more likely to borrow for college expenses for children?

Savings, Credit, Budgeting and Insurance: Impact Evaluations in India  Largest mainstream issue is how to get individuals to save, budget, and use credit responsibly.  Interactive, Video-based financial literacy on savings, credit, budgeting and insurance in India  Locally produced videos using field tested content and local community actors. Followed up by interactive session with local staff.  Some individuals also get individual appointments with a financial counselor  Women vs. Men:  Test change in knowledge from attending the program  Test change in behavior, short-term and long-term  Test general equilibrium effects

Project Status  Video production is completed  Partner MFI and target groups have been identified  Baseline survey designed and pilot-tested  Implementation started in November. Expected to be completed my early/mid 2010