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Marusa Vasconcelos Freire

INEQUALITIES

&

FINANCIAL EDUCATION

2nd OECD-GFLEC Global Symposium to Advance Financial Literacy Paris, France - 6 November 2014

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- Context: Brazilian experience in tackling socio-

economic inequalities.

- Samples: How the National Strategy for

Financial Education & Banco Central do Brasil

have been addressing the needs of vulnerable

groups.

Agenda

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• One of the largest countries in terms of territory, population and GDP

• 7th largest GDP: US$ 2,243 billion (2013)

• Continental country: 5th largest area 8,515,767 km2

• 5th largest population: 201 million people (2013)

• Vast natural resources, including recently discovered large offshore oil fields

• Diversified industrial base, dynamic and sophisticated private sector, and well-structured public sector

• Strong institutions, social inclusion and democracy with stable political system

A Large and Diversified Economy

Sources: IBGE / BCB / IMF

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Table: A década Inclusiva: … Comunicados do Ipea, 155. Set. 2012

One of the most “unequal” Country [income distribution]

2012=> 0,496 2013=> 0,495

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Sources: BCB / IBGE

Geographic Coverage of Financial Institutions

2000 2010

0 (20%)

>0 to 2 (22%)

>2 to 5 (40%)

>5 to 10 (16%)

>10 (2%)

# of points per 10,000 adults (% of municipalities) 0 (0%)

>0 to 2 (0%)

>2 to 5 (6%)

>5 to 10 (29%)

>10 (65%)

# of points per 10,000 adults (% of municipalities)

82% of municipalities had less than 5 points per 10,000 adults in 2000.

In 2010, 94% were above this level

Bank branches, bank advanced outposts (PAA), credit cooperatives (headquarters and outposts) and correspondents

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Source: BCB

Access to Banking Services

2007 2011 2013 Sep 2014

Demand accounts 61.885.280 92.347.622 96.247.038 Nd

Savings accounts 82.109.763 97.984.262 125.253.731 Nd

Individuals with active relationship

with FIs 98.197.077 121.344.029 133.683.083 137.841.846

Bank branches 18.572 21.278 22.920 23.004

Personal services bank outposts 7.185 8.512 9.112 10.399

Electronic bank outposts 30.979 37.316 38.930 40.884

Correspondents 95.849 177.925 375.315 329.887

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Inequalities on Literacy INAF 2011 - Indicator of functional illiteracy [read, write and deal with numbers]

FUN

CTI

ON

AL

ILIT

ERA

TES

74% of the population do not understand the full implication or

consequences of signing a banking/financial agreement

6% Iliterate Some of them can “read” familiar numbers (telephone, prices)

21% Rudimentary Level Can find explicit information in a short and familar text “Read” and write familiar numbers Manipulate small amounts of money

47% Basic Level Read and understand medium texts Can find informations with small inferences

26% Full Level Read longer texts Compare and assess/evaluate information Distinguish facts from opinion Make inferences and synthesis Source: Solve problems that require greater planning and control Solve problems that involve percentages or proportions Interpret double entry tables, maps and graphs

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• The population as a whole has a low level of financial

literacy

• The financial cost of credit in Brazil is one of the highest in

the world. – Samples of annual interest rates:

overdraft - up to 302.85%

credit card - up to 490.50%

personal credit - up to 872.01%

• Small financial imbalances due to low level of financial

literacy have potentially multiplied effects that may lead

citizens to face major financial difficulties very quickly.

Vulnerability and inequalities within the financial system

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National Strategy for Financial Education

Financial Inclusion, Financial Education , Financial Consumer Protection Reduction of Inequalities

Sustainable Economic Growth & Development

Financial System Efficiency

More savings and investments

Effectiveness of Monetary Policy

Demand: access to and use of financial services as well as better quality of life

Supply: sound development of financial sector

10 ENEF’s Target Audiences -

• Youth and children shall be addressed first.

• Subsequently, according to vulnerability and urgency criteria, adults, divided into (i) women assisted by Bolsa Família, Brazil’s conditional cash-transfer programme; and

(ii) retirees, highly susceptible to over-indebtedness.

11 Financial Education Programme in High Schools

• A pilot project has been implemented in schools aiming to assess the adequacy of the material produced for high schools. It included 891 volunteering schools, trained 1,200 teachers, and reached nearly 27,000 students aged 14–17.

• The impact evaluation, made in partnership with the World Bank, concluded that the program increased students’ financial knowledge, led to improvements in financial attitudes, and changed participants’ financial behaviour.

• Students in the treatment group are more likely to engage in saver financial behaviour, talk to their families about financial matters, and help with organizing household budget.

http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2012/06/05/000425970_20120605160329/Rendered/INDEX/693250WP0P123702375400June02802011.txt

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Association of Financial Education in Brazil – AEF Ministry of Education

Financial Education Programme in High Schools • In the next two years the program

should reach from 2.962 to 4.000 public schools.

• Schools will be able to join the programme through a virtual platform that was created for this purpose.

Financial Education Programme in Elementary Schools

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Women beneficiaries of Bolsa Família Fundación Capital (Colômbia Lista) , Ministry of Social Development, University of Bahia

ITES – UFBA / Social Tecnology Incubator

Confesol

Community Banks - Associations

1 tablet 5 families

15 families

Não há distribuição ou doação de tablets,

mas circulação

10 Communities 5 Regions

Ambiente Virtual

– To develop/test FE methodology using self-instructional content (digital technology)

– To measure impact of the FE methodology and to develop/test methodology to monitor the financial inclusion evolution

– 10.000 women/families beneficiaries of Bolsa Família (5.000 & 5.000 in the group of control)

– 3 questionaires (before, after and after one year)

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Retirees

• The INSS 2010 report identifies retirees as major borrowers, especially through payroll guaranteed loans, and finds that many of them are over-indebted.

• This audience also suffers from low education and from family pressures to take loans since they have a secure income.

• Thus, for retirees the challenge is how to protect themselves mostly against payroll loans.

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Citizen’s Calculator

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Distance-learning course Ministry of Finance / School of Fiscal Administration

• Personal Finance Management (Basic)

– Financial education contents are presented in a ludic fashion manner by means of dialogues among the animated characters of a typical Brazilian family.

– Registrations are open to the public at large.

• 10.000 people – 1st year

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THANK YOU! marusa.freire@bcb.gov.br