making sense of financial capability surveys around the world a review of existing financial...

Making Sense of Financial Capability Surveys around the World

A Review of Existing Financial Capability and Literacy

Measurement Instruments

The World Bank

Siegfried Zottel/Valeria Perotti

Russia-OECD-World Bank Conference

Moscow, 13-14 June, 2013

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Purpose of the Review

o Guide policy makers on existing measurement instruments

o Useful for policy makers who prioritize FC, FI, or FCP

o Describe and compare key instruments that are:

• Innovative

• Focused on demand-side (household vs. business)

• Well established

• Well documented

Consumer Consumer Fraud USFraud US WB FCCPWB FCCP

PortugalPortugal

Jump$tartJump$tart

Singapore

Eurobarometer

Survey of Survey of ConsumersConsumers

New Zealand

UK FSA

US Health & Retirement

Study

Ghana FSS

OECD/INFE

CP KenyaKenya FinAccess

FinScope

FijiFiji

WB/Russia FLITWB/Russia FLIT

Financial Diaries

Findex

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Surveys Reviewed

FSA Consumer FSA Consumer Awareness Awareness

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Content of the review

o Key questions addressed by the survey review:

1. How can a survey support policy making?

2. What do these surveys measure and how?

3. How can the data be analyzed?

1. How can a survey support policy 1. How can a survey support policy making?making?

• Baseline assessment of weak areas/targets• Identify potential channels for info or FE• Understand knowledge/behavior relationship• Understand behavior related to personal or household finances

• Baseline assessment of weak areas/targets• Identify potential channels for info or FE• Understand knowledge/behavior relationship• Understand behavior related to personal or household finances

• Determine what products people use• Understand reasons for limited use• Understand how people use information• Understand attitudes towards fin. issues

• Determine what products people use• Understand reasons for limited use• Understand how people use information• Understand attitudes towards fin. issues

• Assess awareness of CP laws, mechanisms• Identify potential victims of fraud• Assess attitudes and trust in providers and regulators

• Assess awareness of CP laws, mechanisms• Identify potential victims of fraud• Assess attitudes and trust in providers and regulators

Capability

Inclusion

Consumer Protection

2. What do these surveys measure and 2. What do these surveys measure and how?how?

Financial Capability

Knowledge of financial concepts

Awareness of financial products

and services

PracticalKnow-how

inflation compound interest

Risk diversification

returns on investmentinsurance

budgeting

Questions on…

money illusion

Financial Capability

Knowledge of financial concepts

Awareness of financial products

and services

PracticalKnow-how

Questions on…

Awareness of product existence

Basic product features

Advantages of using productsRisks and costs

Financial Capability

Knowledge of financial concepts

Awareness of financial products

and services

PracticalKnow-how

Questions on…

How to set up a budget

How to keep financial records

How to make payments

How to open a bank account

How to seek for recourse

Financial Capability

Questions on…

BudgetingPaying bills on time

Overspending

Saving

Borrowing

Making choices

Dealing with unexpected expenses/income loss

Planning for old age

Behavior Attitudes

Financial Capability

Questions on…

Reasons for saving, borrowing, investing, budgeting, and choosing specific financial products

Attitudes toward impulse purchases

Attitudes towards the future

Confidence in own retirement plansPropensity to save

Behavior Attitudes

Financial Inclusion

Questions on…

Types and number of financial products used

Ways of accessing financial services

Frequency and modality of use

What products are used for

Behavior Attitudes

Financial Inclusion

Questions on…

Reasons for/for not using specific financial products

Perceptions on service accessibility

Reasons for changing a product

Barriers in accessing services

Behavior Attitudes

Financial Consumer Protection

Behavior ExperienceAttitudes

Questions on…

Actions taken to resolve issues with fin. service providers

Where complaints were filed

Entities consulted in case of disagreement

Financial Consumer Protection

Behavior ExperienceAttitudes

Questions on…

Satisfaction with financial products and service providers

Trust in service providers

Perceptions on financial regulators and supervisors

Confidence in resolving disputes

Financial Consumer Protection

Behavior ExperienceAttitudes

Questions on…

Experience with pyramid schemes

Being billed for a service not received/product not requested

3. How can the data be analyzed?3. How can the data be analyzed?

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How to develop indicators

WB Tajikistan FCCP Survey 2013.

Frequencies and proportions of

individual questions

Combining data by creating simple

scores

Figure 1: % of respondents who answered FL questions correctly

Figure 2: Discrete frequency distribution of FL scores.

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How to develop indicators

WB Tajikistan FCCP Survey 2013.

Creating advanced scores (by utilizing factor

analysis)

Figure 3: Average FC scores.

Due to the multifaceted nature of some topics, it may not always be meaningful to construct a single composite score or index!

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How to identify potential target groups

Use cross tabulations

Figure 4: Average FC score related to ‘saving’, in different regions.

Figure 5: Average FC score related to ‘saving’, by household income.

Figure 6: Average FC score related to ‘saving’, by respondent’s childhood savings behavior.

WB Tajikistan FCCP Survey 2013.

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How to identify potential target groups

Regression analysis

Cluster analysis

Can improve the understanding of the relationship between socio-demographic characteristics and FC, FI, or FCP

Can be used to segment populations and to identify groups that show similarities in their scores

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THANK YOU!

Contacts:

vperotti@worldbank.org

szottel@worldbank.org