microsoft word - finlit annexes_final_dc.doc

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FinMark Trust

Financial Literacy Scoping Study & Strategy Project

Annexes

March 2004

FINMARK TRUST: FINANCIAL LITERACY SCOPING STUDY & STRATEGY REPORT

ANNEXES

Prepared by ECIAfrica Consulting (Pty) Ltd Annex A 2

May 2004

ANNEX A: THREE COUNTRY CASE STUDIES: THE UNITED STATES, THE UNITED KINGDOM AND AUSTRALIA

1. OVERVIEW OF FINANCIAL LITERACY AND

EDUCATION IN THE UNITED STATES

1.1. BACKGROUND Research has revealed that financial illiteracy in the US is a nationwide problem among youth and adults. To address this problem, there have been initiatives by many organisations in the US, including government departments, financial institutions, community-based institutions, educational institutions and others. The Credit Union National Association (CUNA) contends that as far back as the early 1900s, credit unions were already offering financial literacy education. In the 1970s credit unions expanded their efforts to reach the youth. Credit union volunteers have been teaching in classrooms for decades and setting up branch offices in schools to encourage student interest and involvement in financial education. CUNA emphasizes that, in order to promote financial literacy, there is a need for legislation on financial education. Early intervention is considered the best and most effective way of addressing financial illiteracy. However, despite a plethora of activities on federal and state level, of private institutions and community based institutions, the picture does not seem to be improving in the US. A research study undertaken in 1997 by the Jump$tart Coalition among high school pupils revealed high levels of financial illiteracy among the American youth: the average score was a mere 57%, implying that most students failed dismally. The study was repeated in 2000 and 2002, and the results showed a worsening trend, with the average score decreasing to 51% and 50% respectively. Indicators of financial behaviour and planning in the US have also displayed alarming numbers and a worsening of certain trends. For example: debt ratios have steadily increased since the mid-1990s, reaching a record of 115% of disposable income in mid-2003.1 . It therefore, appears that despite a proliferation in the number of financial education programmes in the US, both financial literacy (among high school students) and financial behaviour (based on certain indicators) fail to show significant improvement.

1.2. STATE POLICY FRAMEWORK In the US policy makers have for a long time been advocating for legislature on financial education. Jacob K, Hudson D and Bush M (2000)2 state that since the 1960s, state legislatures around the US began adopting policies recommending or requiring the

1 Chris Faulkner- MacDonagh and Martin Muhleisen, ‘Are US Households Living Beyond Their Means?’, consumer spending, household wealth and real estate prices. 2 Jacob Katy, Hudson S. & Bush M., (January 2000), Tools for Survival: An analysis of financial literacy programs for lower income families.


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introduction of consumer and economic topics in public schools. They also confirm that 14 of the 37 states, that have consumer education policies, have a ‘personal finance mandate’ that requires coverage of topics relevant to household finance in schools. In 1967, Illinois was among the first states to pass a consumer education mandate, which required public schools to teach courses which included consumer education to pupils in grades nine to 12.

1.3. FEDERAL REGULATORY FRAMEWORK Congress has recently enacted a number of laws on financial literacy. These laws give substance to an initiative spearheaded by Alan Greenspan (Chairman of the Board of Governors of the US Federal Reserve System) and others over the last two years to address the issues of financial service access for the unbanked in the US. An important step in the process was the creation of “The Financial Literacy and Education Commission” under Title V, of the Fair and Accurate Credit Transactions Act of 2003. The Commission is composed of the Secretary of the Treasury and the heads of the government agencies dealing with financial services. The first meeting of the Financial Literacy and Education Commission was held on 29 January 2004. The Act that created the Financial Literacy and Education Commission calls for the development of a national strategy to promote financial literacy and education among all American consumers. This is to be achieved through the establishment of a website to serve as a clearing house on information about federal financial literacy and education programmes, grants, and other information the Commission finds appropriate. It will also include the establishment of a toll-free hotline available to members of the public seeking information on financial literacy and education. With representatives of all the leading government agencies involved in financial services, its key role is to ensure a common government vision and to provide a central vehicle for the dissemination of information and funding of financial literacy initiatives at the Federal level. The Commission will work to encourage government and private sector efforts to promote financial literacy, and coordinate financial education efforts of the Federal government, including the identification and promotion of best practices. The Treasury Department’s Office of Financial Education has been designated by Congress to lend its expertise and provide primary support to the Commission to assist it in fulfilling its functions and duties. The Office of Financial Education (OFE) was established in May 2002, as part of the Treasury Department’s long-term commitment to ensure that all Americans have access to financial education that will help them make informed financial decisions throughout their lives. Other Bills, which have been submitted and read before Senate, but not yet enacted, are: • The Financial Literacy Bill (H. R. 3294), introduced October 15, 2003 • A Bill (H.R. 2990) which would establish a Commission to Educate our Nation’s

Teachers and Students on Financial Literacy Skill (CENTS Act), referred to the House Education and Workforce Committee on September 3, 2003.


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• Financial Literacy and Education Community Outreach Bill of 2003, submitted in July.

• Financial Literacy and Education Coordinating Bill of 2003, submitted in July. • Proposed amendment to the Higher Education Act of 1965, the `Financial

Literacy in Higher Education Act', which seeks to enhance literacy in finance and economics and for other purposes (S. 1968), introduced into the Senate in November 2003.

In 2003 the Senate declared April to be national financial literacy month.

1.4. TYPES OF FINANCIAL LITERACY PROGRAMS AND TARGET AUDIENCES

The following examples are illustrative of some of the most common financial literacy programmes encountered in the US. School Programmes These programmes are mostly offered by community colleges and universities and are designed for all students. The rationale behind these programmes is based on the notion that early inventions and familiarity with financial management skills build a foundation for progressively and responsibly entering into financial transactions. School programmes reach the greatest number of people at an early stage in their lives. Credit Management and Rehabilitation Programmes These programmes are usually offered by credit counselling agencies in partnership with banks and community based organisations. They are designed for indebted families and individuals with financial problems. The focus is on basic budgeting and credit/debt rehabilitation. Social Service and Community-based Organisation Programmes These types of programmes are offered by NGO’s or community-based organisations through workshops. While these programmes may be limited in outreach, they have the advantage of a clear understanding of the specific needs of their communities and the ability to design programmes that address these needs. Employer-based/Workplace Programmes Examples of these are workplace seminars on pensions/retirement. Jacob, Hudson and Bush (2000)3 contend that the disadvantage of employer-based is that they are less likely to reach the lower-income employees and that the topics covered are geared towards retirement and investment choices. However these programs are important in educating workers to save for retirement.

3 Jacob Katy, Hudson S. & Bush M., (January 2000), Tools for Survival: An analysis of financial literacy programs for lower income families.


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Individual Development Account (IDA) Programmes IDAs are mainly used by banks and community based organisations as a mechanism for teaching low and moderate-income people how to save money. These are special savings accounts that are designed and structured to help low to moderate income individuals and families build savings and assets. Account holders save for specific purposes such as buying a car, a house, starting a small business or going to college or university. Funding for IDAs can come from the public, non-profit organisations, and/or private sources. The 2000 Fannie Mae Foundation study shows that some community and faith-based IDA programmes have been organised to help emerging populations understand basic banking services in the US. The study also states that IDAs have grown from three programmes in 1996 to more than 200, and are still increasing. Financial Institutions Banks and their trade associations play a significant role in promoting better financial skills for consumers. Banks’ financial education programmes are usually targeted at the unbanked and underserved communities, and are aimed at drawing these into the financial mainstream. To reach these markets, banks sometimes partner with community organisations. Financial literacy is either delivered through classroom based short courses or community workshops and seminars. Banks also use financial literacy to promote brand recognition and market share. They focus on early intervention, basic literacy, credit rehabilitation and asset building. There is also a strong effort within banks to advance personal financial skills among the youth. The study undertaken commissioned by Consumer Bankers Association in 2003 showed that 77% of the respondent’s banks indicated that they offer financial literacy programmes to students. Banks commit their staff to teach some financial courses at schools and others partner with organisations. The above mentioned study found that 57% of participating banks partner with organisations such as the Jump$tart Coalition. A nation-wide scoping study was commissioned by the Consumer Bankers Association in 2003 to assess the financial literacy programmes sponsored or supported by banks in the US. Key findings included the following: • Banks’ interest and commitment to financial education initiatives has increased. • Banks’ focus on financial education has expanded and now includes programmes

that specifically focus at combating predatory lending practices. • Banks offer financial support to consumer credit counselling services to deliver

services to indebted individuals. These may both banks’ clients and non-clients. • Banks have strengthened and broadened their efforts to address the financial

service needs of the unbanked and the lower end of the market. • In bank supported programmes, programme effectiveness is a priority and as such

programme evaluation is an important component of these initiatives. • Collaborative efforts led by state bank associations are highly effective. They

have a broad outreach by pooling resources, funding state-wide initiatives and leveraging political influence to support the incorporation of personal finance in


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public schools curricula. Furthermore, state banking associations are instrumental in helping teachers obtain the educational resources to help teach personal finance.

1.5. SELECTED PROGRAMMES The following provides a brief description of a few of the financial literacy programmes in the US, their objectives, target audiences and delivery mechanisms. Three of the major programmes are described in more detail, to provide the reader with in-depth understanding of these diverse programmes: Money Smart: Adult Financial Literacy Programme Money Smart, a cooperative venture on financial education between the US Department of Labour and the Federal Deposit Insurance Corporation (FDIC), is a training programme to help adults (outside the financial mainstream) enhance their money skills and create positive banking relationships. Its curriculum is designed and intended to help consumers understand the basics of banking, with modules on topics such as bank services, credit, budgeting, savings, credit cards, loans and home ownership. The programme can be taught in its entirety, or specific modules can fill in the gaps in other financial education programmes. Money Smart programmes are offered free of charge to banks and others interested in sponsoring financial education workshops to help banks and One-Stop Career Centres deliver financial education in their communities. FDIC’s alliance members are organisations that significantly promote and/or enhance the implementation of the Money Smart curriculum. Alliance members may include financial institutions, universities, military bases, extension service professionals, adult education providers, community colleges, community-based organisations, faith-based groups, the private sector, educational service providers, employment and/or training service providers, government agencies, and others. Members can assist in Money Smart efforts by teaching, hosting classes, facilitating programme implementation, promoting Money Smart, funding local efforts, evaluating Money Smart efforts and increasing Money Smart delivery. The programme is designed to take about 60 minutes of classroom time per module. The role of the Department of Labour is to educate and work with the state and local workforce investment system on Money Smart in order to help assure a platform from which this valuable community resource can be offered. This may include activities such as: • Facilitating communication between the FDIC, the state and local partners; • Responding to inquiries from private or community-based organisations who are

interested in the MS curriculum; and • Sharing strategies and best practices.


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The FDIC contacts banks nationwide to inform them about the programme, enlist their cooperation, and help them become ‘partnership-ready’ at the local level. The FDIC conducts orientation sessions, supply the curriculum and provide limited technical assistance. By November 2003, the FDIC had partnered with 626 organisations to offer the Money Smart programme; distributed 99,000 copies of curricula and by June 2003, had reached 50,000 consumers. Their target for 2006 is to reach one million consumers. The Trainers component has been incorporated into the programme. The National Endowment for Financial Education (NEFE) The National Endowment for Financial Education (NEFE) is a non-profit foundation dedicated to help all Americans acquire the information and skills necessary to take control of their personal finances. NEFE has been in operation since 1984. NEFE accomplishes its mission primarily by partnering with other concerned organisations to provide financial education to members of the public, in particular to underserved individuals whose financial education needs are not being addressed by others. These partnerships are perceived as an effective means of responding to the needs of many different groups within the general population. In all of its partnerships, NEFE functions as an active participant by providing funding, as well as the logistical support and financial planning expertise needed to create personal finance programmes and materials for the public. NEFE also underwrites grants, fellowships, and research projects; and facilitates the exploration of new ideas in the field of personal financial planning by sponsoring events for professionals throughout the financial services industry. NEFE is composed of four distinct areas that define its scope and guide its activities: Education Programmes, Collaborative Programmes, Multimedia Access and Innovative Thinking. The NEFE High School Financial Planning Programme (HSFPP) HSFPP uses contemporary materials to teach the basics of personal finance to young people while they are developing habits and attitudes about money. It is based on the philosophy that effective money management results from disciplined behaviour, which is most easily mastered if learned early in life. NEFE offers this programme to all American schools at no cost. HSFPP was initiated in 1984 as a public service to increase the financial literacy of America's youth. The six-unit programme provides high school students with a greater understanding of, and ability to, manage their personal finances in the areas of goal setting, budgeting, and saving. The programme uses unique games, simulations, case studies and interactive exercises to provide hands-on experience for students to test and apply the financial principles and concepts being taught.


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There are three main objectives of the programme: • To learn the financial planning process: what it is and what it can do for students; • To give students the opportunity to apply the process through stimulating

exercises and assignments provided in the programme; and • To take control of their finances, beginning now.

The HSFPP is offered by the National Endowment for Financial Education in partnership with the United States Department of Agriculture-Cooperative State Research, Education, and Extension Service and participating Land-Grant University Cooperative Extension Services; with the Credit Union National Association, Inc.; and with America's Credit Unions. To date, it has been taught to over three million students in all 50 states. Jump$tart Coalition for Personal Financial Literacy The Jump$tart Coalition’s direct objective is to encourage curriculum enrichment to insure that basic personal financial management skills are attained during the K-12 educational experience. Jump$tart's purpose is to evaluate the financial literacy of young adults; develop, disseminate, and encourage the use of standards for grades K-12; and promote the teaching of personal finance. It provides a broad range of resources for teaching financial literacy to school-aged children and youth. The resources will be used as curriculum enrichment material. This program stresses that children require more training in four areas: money management, savings and investment, income, and participation in the labour market.


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Table 1: Synopsis of Additional Selected Programmes Institution/

Programmes Name Target Objectives/Content

Focus Delivery

Mechanisms Source

1 Money Math: Lessons for life (Treasury Department in partnership with NGOs and private companies

Grade 7-9 students

Curriculum supplement that addresses mathematical concepts using real world financial scenarios.

Classroom-based

www.savingsbonds.gov

2 National Council on Economics Education

Teachers Teacher training reference source.

www.ncee.net

3 Teach Children to Save - American Bankers Association

School age children

A resource kit designed to teach the principles of saving.

Classroom- based

www.aba.com

4 Banking of the Future (BOTF) - Operation Hope, an NGO based in LA

Youth from underserved communities

A packaged curriculum comprising the basics of a checking and savings account, credit and investment.

Classroom/ community based organisations. Course taught by volunteer banker-teachers

www.operationhope.org

5 National Endowment for Financial Education (NEFE)

Disadvantaged & low-income youth, specific ethnic groups

(See earlier discussion for details)

www.nefe.org

6 Money Smart Unbanked adults

(see earlier discussion for detail)

www.fdic.org

7 Money Matters -Oregon State University Extension Service

Families and individuals with limited income

Basic financial programs focusing on budgeting, record keeping and developing a system for paying bills

Workshop, 24 minute video

www.eesc.orst.edu

8 National Community Reinvestment Coalition (NCRC) Financial Campaign NCRC is a national trade association representing more than 700 community-based organisations.

Low to moderate income individuals and communities – unbanked

Basic financial literacy programme aimed at bringing the target audience into financial mainstream. It comprises six topics that progress from how money works to the role of small business in economic development.

Train the Trainer courses & teaching material.

www.ncrc.org


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Institution/ Programmes Name

Target Objectives/Content Focus

Delivery Mechanisms

Source

9 You Can Do It: Managing Debt and Building Wealth

Consumers How to determine if whether your debt situation is manageable and advice on managing bad debt.

Off-the shelve resource

www.consumer-action.org

10 Investing for Success -Investment Company Institute

African-Americans

How to invest and build wealth

Nation-wide personal finance workshops; brochures.

www.ici.org

1.6. FINANCIAL LITERACY TESTS AND IMPACT ASSESSMENT A number of studies on financial literacy and education have been undertaken in the US. These range from studies aimed at assessing levels of financial literacy (e.g. Jump$tart Coalition 2000) to impact assessment and scoping studies (Fannie Mae Foundation, 2000). The Federal Reserve Banks of some states (e.g. Chicago, Illinois and California) have been instrumental in both the initiation and funding of some of these studies. The major surveys identified to assess levels of financial literacy (pre and post programme implementation) are: • Jump$tart Coalition– High School Students (1997, 1999, 2002); • National Council on Economic Education (NCEE), regular surveys of adult and

high school literacy; • Consumer Federation of America (CFA), 1990 study on consumer knowledge,

including some financial literacy components; and • An assessment of the impact of participation in financial education seminars

offered by TIAA-CREF on retirement goals and retirement savings behaviours.

1.7. KEY LESSONS Below is a summary of some lessons learnt from a review of programmes and studies undertaken in the United States. • Financial literacy is a process that begins with education and understanding and

eventually leads to a change in behaviour or basic habits. • Financial literacy must be treated as a long-term repetitive process; once-off

courses or workshops are of limited value. • Partnerships in the delivery of financial literacy programmes can improve

programme effectiveness and enable a broader outreach. • Financial literacy should be mandatory in schools, because schools provide the

best opportunity to reach the greatest number of people at a critical time in their lives.

• There is a need to continually update and refresh approaches to educating youth in financial education.


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• Language and terminology used in programme should be easily understood by the target audience.

• Workplace training needs to be more effective and reach more people; consider incentives and motivation for staff to attend courses.

• The dimensions of effective personal financial education programmes are: o Clearly defined mission and purpose; o Targeted outreach; o Commitment of adequate resources; o Evaluation tools and follow-up should be developed up front together with

the design of the programme; and o Programmes should be accessible and curriculum should be relevant to

learners’ needs. 2. OVERVIEW OF FINANCIAL LITERACY AND

EDUCATION IN THE UNITED KINGDOM

2.1. BACKGROUND There has long been general consensus that the United Kingdom (UK) faces the problem of insufficient financial literacy.4 Research on consumer financial literacy in the UK dates back to 1992, when the National Foundation for Education Research5 initiated studies on the topic. From this work came the widely accepted definition of financial literacy as: ‘the ability to take informed decisions and to take effective decisions regarding the use and management of money’. The research revealed rising levels of household debt associated with low levels of understanding about financial matters, particularly among low-income groups. It was also found that existing money advice centres were unable to cope with the volume of work due to lack of resources. This work served as a benchmark for subsequent research on the area, and in 2001 the National Association of Citizens Advice Bureau (NACAB)6 conducted a financial literacy study.7 The study found that, not only did financially illiterate consumers have difficulty choosing appropriate products and services, but were also more likely to become victims of abuse practices such as fraud and predatory lending. In recent years, there have been a variety of initiatives to improve financial literacy by Government and various other stakeholders. One of these initiatives is the introduction of

4 Bridging the financial literacy divide (2002), National Association of Citizens Advice Bureaux. 5 Financial Literacy in Adult Life: Research Summary (1996), National Foundation for Education Research. 6 Summing Up: Bridging the Financial Literacy Divide (2001), National Association of Citizens Advice Bureaux, November. 7 The CAB is an independent body created in 1939 as an emergency service during World War II. The bureau offers free, confidential, impartial and independent advice to consumers.


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financial education into the National Curriculum through the establishment of a bank of information and resources for teachers. All pupils now learn about personal finance from the age of five onwards. New initiatives on adult learning are being coordinated by the Adult Basic Skills Strategy Unit.8 By September 2001, the Citizen Advice Bureau (CAB) was engaged in more than 60 specific projects to improve the financial literacy of individuals and groups within their communities.

2.2. THE DEPARTMENT FOR EDUCATION AND SKILLS (DFES) In the past decade, financial education in schools has grown considerably. Today the schools’ are well developed and supported by a wide range of teaching resources. The education system in the UK is divided into England, Scotland, Wales and Northern Ireland, each of which has a central curriculum-setting system. In England, aspects of personal finance are embedded as a statutory part of the National Curriculum for Key Stages 3 (11-14 years old) and 4 (14-16 year olds), through the compulsory teaching of Citizenship under the Learning and Skills Acts 2000. In July 2000, the Department for Education and Skills (DfES) published a Guidance Note9 for schools to help teachers structure their course content to achieve the government’s objectives of including financial capabilities as a topic in all Key Stages. In Scotland, the Scottish Executive Education Department (SEED) is tasked with developing the curriculum for schools. Advice on relevant topics to include in the curriculum is given by Learning and Teaching Scotland (LTS). LTS is a national body sponsored by SEED, and has published a statutory document10 on the minimum entitlements in financial literacy education for students aged 5-18. In Wales, the Qualifications, Curriculum and Assessment Authority for Wales (ACCAC) is responsible for advising the Welsh National Assembly on all aspects of the school curriculum. ACCAC has produced a Personal and Social Education Framework, covering key Stages 1- 4, which makes reference to personal finance issues at all ages.11 In Northern Ireland, the school curriculum is currently under review and personal finance education will be included.

8 The BSA is an independent organisation mainly funded by the Department for Education and Skills (DfES) and the Welsh Assembly Government. They develop approaches for improving basic skills literacy and mathematical skills of all age groups. 9 Financial Capability through Personal Financial Education (2000), Department for Education and Employment, July, available at http://www.dfes.gov.uk/publications/guidanceonthelaw/fcg/KS12.pdf 10 Financial Education in Scottish Schools: A Statement of Position, available at http://www.Itscotland.com/resources/financial_ed_position-paper.pdf 11 Available at http://www.accac.org.uk/download_pdf/pse.pdf


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2.3. PERSONAL FINANCE EDUCATION GROUP (PFEG) The Personal Finance Education Group is an educational charity that aims to promote financial literacy among scholars. It is the only charity working within schools across the UK at a strategic level to promote the development of financial capability. PFEG arose from the practical concerns of some members of the financial industry about the failure of the education system to prepare children for dealing with personal finance issues. Its lobbying activities contributed to securing a place for personal finance education on the revised curriculum in schools in England in 2000. PFEG has maintained a very strong relationship with the Financial Services Authority (see below) and this has been a driving force behind the ongoing success of PFEG.

2.4. THE ROYAL BANK OF SCOTLAND (RBS) As part of the RBS Corporate Responsibility programme, the bank invests in community projects. In 2001 RBS took over National Westminster Bank (NatWest) in one of the larger take-overs in the banking history of the UK, and with that some financial education programmes of NatWest. In 2002, RBS invested around £GBP 33.7 million in community projects in the UK. Its five main focus areas are: • Understanding finance; • Into education; • Into jobs; • Into enterprise; and • Towards financial inclusion. Two of these focus in particular on financial literacy: understanding finance and towards financial inclusions. 2.4.1. Understanding Finance In terms of this programme, the bank aims at improving access to resources on financial education for every secondary school in the UK, by providing teaching materials and support to teachers in four ways: • Face 2 Face with Finance; • Facing up to Finance: Partnership with Learning and Teaching Scotland; • Institute of Citizenship; and • The University of Warwick – NatWest Financial Capability Centre. Face 2 Face with Finance. With the takeover of NatWest, RBS acquired the Face 2 Face with Finance programme of NatWest. The programme has been running since 1994 and it is especially designed to assist secondary school teachers to teach personal finance and enterprise skills within the curriculum. Achievements so far: over half of the secondary schools in England and Wales have participated; 4,000 NatWest staff are involved; and in


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2002, 60,719 students were involved, bringing the total number of students that participated since 1994 to over 300,000. Programme Components: • Basic banking: this component assists students to understand more about banks,

bank accounts and practicalities in managing an account. • Cards and Card Services: this assists students to learn how to use cards, the cost

of credit and the implications of debt and card security. • Credit Worthiness: this aims to assist students to manage their own money, work

out the cost of borrowing and plan a simple budget. • Tender: this component aims at promoting enterprise skills. Facing up to Finance. RBS has teamed up with Learning and Teaching Scotland to develop an interactive CD-Rom to assist in preparing young people aged 14-16 for their future dealings with financial matters. Size of RBS investment in this component: GBP 10,000. Institute of Citizenship. RBS has joined forces with the Institute of Citizenship12 to create a learning resource to understand the economy, business and personal finance. The University of Warwick, NatWest Financial Capability Centre. Established in 1995, the centre provides resources to promote money management and enterprise skills. The current main initiative is the Face 2 Face with Finance programme. 2.4.2. Towards Financial Inclusion RBS set up this programme against the backdrop of a survey that suggested that more than 2 million adults in the UK (7% of households), do not use any mainstream financial services, thus missing out on the benefits and savings opportunities of the financial industry. RBS therefore established five initiatives to improve its outreach: 1. Basic bank accounts aiming at ensuring that nobody over the age of 16 should be

denied a bank account. 2. Money advice trust: 90% of all free independent money advice in the UK is

provided by the 7 member agencies of the Money Advice Trust. RBS is one of the agencies supporting the trust. It has pledged GBP1.7 million.

3. One parent families: RBS has invested GBP 500,000 in a free-phone Lone Parent Help line. The Help line provides free and confidential information and advice to help lone parents overcome their practical and financial problems.

4. BBA business debt line: aimed at young businesses, provides advice for self-employed and small businesses in financial matters.

12 An institute in the UK that looks at policies; partly funded by Government.


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5. The National Debt line: this is a national telephone help line for people with debt problems in the UK. The service is free, confidential and independent. RBS’ support of this help line is part of the support to the Money Advice Trust.

Table 2: Summary of School Programmes

Institution/Program Name

Target Objectives/Content Focus

Delivery Mechanism

Source

pfeg (Personal Finance Education Group) pfeg’s Excellence and Access project Cultural diversity pack

School age children and teachers

Promote and facilitate the education of financial issues to school children; Produce a directory of teaching resources for each Key Stage; Illustrate to teachers how members of minority cultures in the UK may experience financial transactions and decisions

Class room based

http://www.pfeg.org.uk

Scottish Centre for Financial Education (Learning and Teaching Scotland)

Teachers, schools and education authorities

Promotes high standard of financial education

Provides professional advice and resources

http://www.ltscotland.org.uk

Financial Education Partnership (FEP)

Secondary school pupils

Provides facilitators from the four major banks in Scotland to run financial literacy workshops in secondary schools

Workshops http://www.fep.org.uk

NatWest Financial Literacy Centre: Face 2 Face with Finance programme

Secondary students, further education students and the community

Teach personal money management and enterprise skills within the curriculum

Classroom and community based

http://www.natwestf2f.com/

Proshare (supported by Treasury & Stock Exchange)

National schools, employees, private investors

Promotes investor education at school, work and in the private sector

Classrooms and on-line

http://www.proshare.org/

2.5. ADULT FINANCIAL LITERACY ADVISORY GROUP (ADFLAG) AdFLAG was established in February 2000 by the Secretary of State for Education and Employment with the purpose of making recommendations on improving financial literacy of the adult population, with emphasis on disadvantaged individuals.13 13 Report by Adult Financial Literacy Advisory Group to the Secretary of State for Education and Employment, December 2000.


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The group is represented by the Association of British Credit Unions, Association of British Insurers, Association of Unit Trust and Investment Funds, Basic Skills Agency, British Bankers Association, Department for Education and Employment, Department of Social Security, Financial Services Authority, Department of Treasury, National Association of Citizens Advice Bureau and University for Industry. Establishment of AdFLAG was necessitated by the Secretary’s concern that the need for advice, support and financial education for people in the lower end of the market were not addressed based on the fact that 1.5 million people were not using financial services, while 3 million were unbanked. Furthermore, the rapid development of financial products and new delivery channels catalyzed a need for financial literacy. The objectives of AdFLAG are:14 • To collate relevant research and identify gaps; • To investigate examples of good practice in financial literacy, analyse reasons for

their success and the best means of replication; • To identify gaps in the existing and planned provision of adult financial education

and present proposals with the maximum impact to address these gaps; • To make recommendations on financial education to ensure adults are sufficiently

confident and competent to make financial decisions, which may include an understanding of basic financial products and services, with specific attention to the most disadvantaged groups;

• To consider whether targets in this area are appropriate and possible, given the information available; and

• To advise the most appropriate bodies to take forward each recommendation, taking into consideration the resource implications, and report the outcomes to the Secretary of State for Education and Employment.

AdFLAG accomplished the above through consultation with organisations with a specific interest in access to financial services across all communities. AdFLAG invited interested parties to contribute to the debate and visits were made to projects and organisations providing financial education. A review of existing research was also undertaken and information on current examples of adult financial education was investigated.

14Ibid.


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Their findings were: • Education for adult financial literacy had not been addressed in a systematic

manner. • There was no curriculum or defined objectives. • There had been a limited amount of research undertaken to assess the financial

literacy needs of consumers. • The best way to address the financial training needs of disadvantaged

communities was to work through respected and trusted local groups. • There is a close relationship between levels of basic education and the use of

financial products and services. The key lessons are: • Increased competition and more complex products in the financial services

industry call for continuing financial education. • Financial literacy should be treated as inclusive. This means that financial literacy

should not be viewed as only necessary for low income or disadvantaged communities, but for all population groups.

• There is a need for clear learning objectives and national standards. They recommended the following: • Lessons should be learned from school targeted financial literacy programmes,

and shared with adults. • Some initial research into the financial literacy needs of the adult population

should be conducted. • Financial service providers should form partnerships to offer products to

financially excluded groups. • The Financial Services Authority has an objective to promote public

understanding of the financial system. Other agencies are to work with the FSA to ensure that its educational initiatives reach a broad audience.

• Institutions should work in partnership with the media to ensure the broadest possible outreach of financial literacy.

• In consultation with the Financial Services Authority, the Department for Education and Employment (DfEE) should ensure that the definition for financial literacy is formalised, standardised and agreed.

• National standards should be produced to define adult financial literacy. This is not considered as an attempt to assess the population’s level of financial literacy, but to provide those delivering training with a tool to measure their success.

• Once national standards are defined, the DfEE, in consultation with FSA, BSA and other agencies, should ensure that a programme of research is undertaken to measure and evaluate progress in the development of financial skills and to assess comprehension against the agreed national standards.


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2.6. ADULT FINANCIAL CAPABILITY FRAMEWORK Following the recommendation of the AdFLAG report, the Financial Services Authority (FSA) and Basic Skills Agency (BSA) developed a framework that outlined the skills and competencies deemed necessary for adult financial literacy. It is for use by those involved in financial education including money advisers, teachers and trainers. The framework covers a broad range of money management and consumer issues and aims at bridging the gap between personal finance education, which is taught within the school curriculum, and the FSA adult learning programme. The latter includes a web-based independent learning programme: ‘Learn Online’ summarised in Table 3. Framework Structure The framework comprises three levels of financial literacy: • Basic understanding and developing confidence: for adults not engaged in the

financial mainstream and requiring skills to make informed financial decisions; • Developing competence and confidence: aimed at adults with basic understanding

and competent money management skills; and • Extending competence and confidence: for adults with basic skills and

competencies, but requiring higher level skills and knowledge to understand the wider range of services.

The framework also has three interlinked sections that do not imply a sequential learning process. The sections do not necessarily have to be completed in order, but should be dealt with to address the learners’ needs. These sections are: • Financial Knowledge and Understanding: the ability to understand money and its

different forms, uses and functions; • Financial Skills and Competence: the ability to apply knowledge and

understanding across a range of contexts including predictable and unexpected situations; and

• Financial Responsibility: the ability to appreciate the wider impact of financial decisions both on personal circumstances, family and community, and to consider social and ethical issues.

2.6.1. Basic Skills Agency (BSA) BSA is an independent organisation mainly funded by the Government through grants from the Department for Education and Skills (DfES) and the Welsh Assembly Government. BSA has a long history of campaigning that priority should be given to raising standards of basic skills. They work across sectors and age groups. They develop approaches for improving the basic skills of children, young people and adults, often in partnership with other organisations. Basic skills mean the ability to read, write and speak English/Welsh and use mathematics at a level necessary to function and progress at work and in society in general.


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The Basic Skills Agency has a programme of financial literacy, which includes: • Work with financial institutions to raise awareness and develop training materials

on literacy and numeracy skills for the financial sector; • Partnership development projects with the voluntary sector in disadvantaged

regions. Projects have been developed with the National Association of Citizens Advice Bureau (NACAB), Association of British Credit Unions (ABCUL) and community and voluntary organisations working with the homeless, with offenders and with substance abusers;

• Developing learning activities and materials for adults with low literacy levels linked to the new standards in adult literacy and numeracy;

• Developing guidance material for literacy and numeracy skills for teachers; and • Developing a basic skills awareness training package for money advice workers. 2.6.2. The Financial Services Authority (FSA) FSA is an independent non-governmental regulatory body for the financial services industry in the UK. Its objectives are: • To maintain confidence in the financial system; • To promote awareness and understanding of the financial system; • Consumer protection; and • To reduce financial crime. The FSA has participated in and promoted various financial literacy programmes: Table 3: FSA Financial Literacy Programmes Programme

Name Target Objective / Content

Focus Delivery

Mechanism Source

Teaching & Learning

Primary & secondary school teachers

Provides information and resources to develop financial capability

Classroom basis

http://www.fsa.gov.uk/consumer/learning

Learning Bytes

General public

Helps with better understanding of daily calculations (e.g. interest on credit card)

Online http://www.fsa.gov.uk/consumer/learning

Learn Online General public

To stimulate interest and give in-depth information on basic financial products and services (e.g. savings, pensions, borrowing, investments).

Online http://www.fsa.gov.uk/consumer/learning

Using a bank account

General public

Gives information and demonstrates how to perform basic bank transactions (e.g. paying bills).

http://www.fsa.gov.uk/consumer/learning


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3. OVERVIEW OF FINANCIAL LITERACY AND EDUCATION IN AUSTRALIA

Financial literacy and education have received much attention in Australia over the past few years. Firstly, the Australian Securities and Investment Commission (ASIC)15 released a discussion paper on consumer financial education in July 2000 which later led to the development of the ASIC’s Consumer Education Strategy for 2001-2004. In addition, the ANZ Bank16 released the results of an adult financial literacy survey in May 2003. This triggered a host of activities in the sphere of financial literacy and education from government and regulatory bodies, including the launch of a Financial Education Project in schools by the Financial Planning Association (FPA)17 and the planned initiative of the Department of National Treasury: The National Strategy18 for Consumer and Financial Literacy’. The latter resulted in a taskforce, which was appointed to present a discussion paper in May 2004 on raising financial literacy standards in Australia. These initiatives are discussed in more detail in the sections below.

3.1. DEFINING FINANCIAL LITERACY The ASIC discussion paper on financial literacy in schools proposes the adoption of a definition of financial literacy that was developed by the National Foundation for Education Research in the UK in 1992: “Financial literacy may be defined as the ability to make informed judgments and to take effective decisions regarding the use and management of money”.

3.2. THE IMPORTANCE OF FINANCIAL LITERACY The recently formed Consumer and Financial Literacy Task Force endorsed the above definition, and added that consumer and financial literacy is a vital skill for all Australians. Consumers’ financial knowledge reflects how well personal finance decisions are made. Financial education programmes also promote better understanding of financial services and products, enabling consumers to make informed personal financial decisions. Informed consumers are more likely to make confident decisions regarding all aspects of their budgeting, spending and savings on a daily basis. Consumers are taking more responsibility and therefore financial knowledge is essential. The following six factors were found to influence the level of financial knowledge required: 1. Greater consumer participation in the financial system due to privatisations and

demutualisations;

15 http://www.asic.gov.au/asic/asic.nsf/byheadline/About+ASIC?opendocument 16 Adult Financial Literacy in Australia (2003), ANZ Banking Group, 100 Queen Street Melbourne VIC 3000. http://www.anz.com 17 http://www.fpa.asn.au/home/news 18 http://cfltask.treasury.gov.au/content/trms.asp?NavID=2


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2. Increased expectations of consumers to manage their own retirement plans (e.g. pension fund, life insurance);

3. Changes in consumers’ working patterns – jobs are not guaranteed for life any more, hence increasing financial risks;

4. Increased access to credit and expansion of credit sources; 5. The impact of technology on financial products and services (e.g. increased

privacy and security risks for consumers); and 6. Markets are more volatile after long periods of investment growth and double

figure returns. Over the past decade, Australians have accumulated historically high levels in household debt. Concerns have been raised on whether households have become more economically fragile. A Household Expenditure Survey using data from 1998/99 found that the probability of a household being constrained is significantly affected by demographic and economic variables such as: age, marital status, home ownership, weekly household income, the proportion of income earned from interest, and the share of income going to repayments of mortgage debt, La Cava and Simon (2003).19 Australian’s total debts are now reaching the $400 billion, and the Australian Reserve Bank claims that many Australians own more than one credit card and do not pay their credit balances at the end of each month. Financial scams and fraud have been on the increase in Australian, deepening the concerns of financial institutions and government towards ensuring a more financial literate Australian population. In the past three years alone Australians have lost up to $800 million on financial scams due to the inability to identify risky investments and scams. The following sections will provide brief summaries of how government and private institutions have aced upon the need to introduce financial education programmes for school children and adults.

3.3. DEPARTMENT OF NATIONAL TREASURY On the 23 February 2004, The Department of National Treasury introduced The National Strategy for Consumer and Financial Literacy. The strategy is another pledge by the government to participate in the education of Australians to create a more financially literate nation. The strategy aims at developing an overarching national strategy to reduce poverty, increase economic opportunity, bolster national savings and create well-informed consumers.20 . The Treasury has since created a Taskforce responsible for: the evaluation of the current consumer and financial literacy programmes in Australia; identifying gaps and better ways of effectively delivering the existing programmes; and for developing a national strategy to

19 La Cava, G. and Simon, J. (2003) A tale of two surveys: Household Debt and Financial Constraints in Australia. Research Discussion Paper, August. 20 The Treasury, Government of Australia, http://cfltaskforce.treasury.gov.au/content/terms.asp?NavID=2


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raise the levels of consumer and financial literacy in Australia. The 15 member taskforce is comprised of stakeholders from the different sectors ranging from the financial services industry to the consumer sector, and is expected to present a discussion paper in May 2004. National Strategy Objectives These are: • To clarify the roles and responsibilities of the various public, private and

community sector organisations delivering consumer and financial information and education;

• To provide an assessment of the current availability and effectiveness of suitable programmes;

• To facilitate a national approach to the provision of consumer and financial literacy programmes and information. The National Strategy should establish the means for organisations involved in consumer and financial information provision to work together on joint or individual initiatives in nationally consistent ways;

• To foster best practice. The National Strategy should identify best practice principles for consumer and financial information and education provision based on successful domestic and international approaches;

• To identify areas of priority. The National Strategy should provide focus for organisations involved in consumer and financial literacy and dissemination of consumer and financial information by identifying areas of priority; and

• To ensure effective implementation. The National Strategy should ensure that any recommendations have ongoing support (both in a policy and financial sense) from key stakeholders. The National Strategy should engender ownership by appropriate stakeholders and ensure appropriate targets are met.

3.4. THE AUSTRALIAN SECURITIES & INVESTMENT COMMISSION (ASIC) The Australian Securities and Investments Commission (ASIC)21 enforces and regulates company and financial service laws to protect consumers, investors and creditors. In 1998 it was also tasked with consumer protection in superannuation, insurance, deposit taking and, from 2002, credit. ASIC works with other financial and law enforcement agencies in Australia and internationally, and reports to the Commonwealth Parliament, The Treasurer and the Parliament Secretary of the Treasurer. One of ASIC’s statutory aims is ‘to promote the confident and informed participation of investors and consumers in the financial system’. ASIC contends that improved financial literacy will encourage consumers’ participation in the financial system in an informed way.

21 http://www.asic.gov.au/asic/asic.nsf/byheadline/About+ASIC?opendocument


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ASIC has published a paper entitled Consumer Education Strategy (CES)22 for 2001-2004, which sets out the implementation strategy for ASIC’s long-term objective of creating a financially literate community. Consumer education is seen as a tool to promote consumer confidence and to equip consumers with the necessary knowledge to choose suitable products and services; identify scams and traps; and to understand their options and take appropriate steps whenever problems arise. The CES was developed from input obtained from the release (2000) of the discussion paper on: Educating Financial Services Consumers; ASIC’s Annual Stakeholder Forum in 2000 which focused on consumer education; and informal discussions with interested stakeholders on ASIC’s consumer education plans. The main priorities identified in the creation of CES were to address the following: • Retirement planning, and general investment; • Superannuation; • E-commerce; • Insurance; • Dispute resolution; • Financial literacy and financial exclusion; • Consumer rights; and • Credit The delivery mechanisms to be used in the implementation of the strategy are as follows: • Internet; • A media advertising campaign; • Fact sheets, in English and also in community languages; • Liaison with, and providing information for, community and government courses;

and • Consumer brochures and other publications. In June 2003, ASIC released a discussion paper on the need to introduce financial literacy programmes at school level to promote the interest of the youth in financial issues and better equip them to take charge of their personal finances from an early age. One of the key projects identified is the facilitation of the provision of financial services education in schools. The project’s goals are to: • Ensure that students leaving school are equipped with basic knowledge and skills

on financial issues; to become confident and informed adults regarding their personal finance;

• Assist Australian education jurisdictions to enhance and build on existing financial education programmes in schools, especially on Years 8, 9 and 10;

22 Consumer Education Strategy 2001-2004, ASIC (2001).


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• Provide resource support to teachers with updated financial information, as well as train teachers for effective teaching of Financial Literacy; and

• Develop a coordinated approach to the supply and sharing of information on financial literacy for teachers across Australia.

A survey conducted by ASIC at school level found that the existing Australian curriculum allows for the introduction of financial literacy as a subject. The survey results show that many schools are already teaching financial literacy but not in a structured way. The lack of resources to teach financial literacy is another challenge experienced by many of the surveyed schools. ASIC recommended that more attention should be given to financial literacy in subjects such as commerce and maths, and/or that financial literacy should be introduced as a personal development course. Financial literacy could also be included as part of life-skills courses. ASIC identified key stakeholders to participate in the introduction process of financial literacy at school level, including: principals, teachers and teachers’ associations, parents, the financial services industry, and community bodies. ASIC also proposed the formation of an institution tasked with addressing the needs of financial literacy on national level to address the needs of school going children as well as adults. ASIC believes that financial literacy programmes implemented in the school curriculum (primary and secondary) would provide a foundation for financial literacy, reducing the probability that the youth could make inappropriate financial decisions that may have a long-term impact on their lives.

3.5. THE FINANCIAL PLANNING ASSOCIATION OF AUSTRALIA (FPA) The FPA is the professional association for qualified financial planners in Australia. Some members of the public, such as college students, can also join the association. The FPA provides a range of services to members and consumers, including: • Building public awareness of the need for objective and professional advice in

making secure financial decisions; • Providing members with education, training, and information to enhance their

ability to deliver objective and professional financial advice; • Developing and maintaining high ethical standards for members; and • Representing FPA views to the government, media and key stakeholders to ensure

effective input into major policy and regulatory issues affecting the financial planning industry.

In August 2003, the FPA launched a project: Financial Education in Schools, to address the lack of financial literacy of Australia’s youth. The FPA requested the consulting company Communi(k) to rewrite the United States’ Financial Planning in High Schools workbook, which was developed by the National Endowment for Financial Education.


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The FPA is working closely with ASIC on finding ways to introduce a financial planning education programme for high school students (year seven to ten). The FPA is committed to publish the Dollarsmart workbook, while the Federal Minister of Education has supported and promoted the work of the FPA by agreeing to send the FPA’s Dollarsmart workbook to all the schools in Australia. Dollarsmart is a financial tool kit for teenagers designed to facilitate their learning of financial concepts and how to manage their finances. The FPA Education in Schools project aims at educating pupils on financial literacy and discourages the culture of credit abuse and bad debt. The project has three key components, namely: • The development of financial literacy as part of the national curriculum; • The development of financial course content; and • The promotion of financial planning as a career.

3.6. THE ANZ BANK SURVEY The Bank of Australasia was founded in London in 1835 under the Royal Charter. The Bank of Australasia has since changed its name to ANZ Bank and is now found in several countries, including New Zealand, France, the USA, Indonesia, Malaysia, Thailand, France, and Australia. The ANZ Bank’s survey on consumer and financial literacy was the first of its kind in Australia. It adopted the framework used in the UK to measure financial literacy. Consumer knowledge of financial products and services were tested against individual needs and circumstances. The survey provides financial service providers with information that facilitates product development on how to best address consumer needs. Regulators and policy makers are informed on the levels of financial literacy of the different population segments. Objectives of the study were to identify: • Benchmarks of financial literacy across the adult population; • The segment of the population with the lowest level of financial literacy; and • Aspects of financial skills, products and services that are causing the greatest

problems. The study was completed in three major stages, namely a stakeholder survey, a telephone survey, and an in-depth interview survey. The Australian Framework for Adult Financial Literacy23 was adopted from the UK and some adjustments made to fit the Australian circumstances. Categories such as mathematical literacy and standard literacy were added to the original framework. The different concepts in the framework and its categories of

23 ANZ Survey of Adult Financial Literacy in Australia: Final Report. May 2003, ANZ Banking Group, 100 Queen Street, Melbourne VIC 3000. http://www.anz.com


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basic and advanced knowledge levels are described below. Table 4: Australia’s Adult Financial Literacy Framework* CONCEPT 1: Mathematical Literacy and Standard Literacy

Basic requirements Advanced competence Essential mathematical, reading and comprehension skills • Ability to add, subtract,

multiply and divide (with or without a calculator)

• Ability to understand and calculate percentages (with or without calculator)

• Ability to read and comprehend basic English

• Understanding of financial terms

• Ability to understand compound interest

• Ability to understand averages

CONCEPT 2: Financial Understanding

Basic requirements Advanced competence Understanding of what money is and how money is exchanged • Understanding of the range of

ways to pay for goods and services including: cash, cheques, money orders, credit cards, debit cards, store cards, EFTPOS, direct debit, loans, lay-bys

• Ability to compare the advantages and disadvantages of different forms of payment

• Understanding of the implications and key features of unsecured credit and debt, including both fixed: personal loans, lease, hire purchase, etc., revolving: credit cards, store cards, overdrafts, and other ‘line of credit’ facilities.

• Understanding of ways to compare interest rates and the effects of fees and other charges

• Understanding that some loans and purchase agreements are secured whilst others are unsecured, and the implications for default

• Understanding of the concept and implications of personal guarantor and co-borrower arrangements

• Understanding of how credit records are generated and the implications of bad records for future borrowing

Understanding of where money comes from and where it goes

• Ability to read a pay-slip • Recognition of household

expenses and regular financial commitments

• Understanding of how companies and other organisations are financed, including shares.


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CONCEPT 3: Financial Competence Basic requirements Advanced requirements Understanding of the main

features of basic financial services

• Awareness of the availability of basic features: o Basic banking o Electronic banking (e.g.

ATMs; EFTPOS; telephone banking; Internet banking)

o Superannuation o Other investments (e.g.

shares; term deposits; managed investments; life insurance with an investment element)

o Risk insurance products (e.g. house and contents insurance, including coverage and exclusion; health insurance)

• Awareness of the sort of fees that apply to these services

• Awareness of the trade-off between fees and return

• Awareness that one should shop around before purchasing financial products

• Ability to make strategic use, to maximise personal financial advantages of: o Basic banking o Electronic banking (e.g.

ATMs; EFTPOS; telephone banking; Internet banking)

o Superannuation o Other investments (e.g.

shares; term deposits; managed investments; life insurance with an investment element)

o Risk insurance products (e.g. house and contents insurance, including coverage and exclusion; health insurance)

Understanding of superannuation

• Understanding that superannuation sets aside money for retirement, and involves compulsory employer contributions.

• Understanding that personal contributions can be made to superannuation as an option

• Ability to check that an employer has been making compulsory contributions to superannuation

• Ability to check records (e.g. Annual Statements)from superannuation funds to determine whether current contributions levels and percentage returns are appropriate for anticipated needs

• Knowledge concerning what constitutes an adequate level of insurance for total and permanent disablement or death benefit, and ability to check that a superannuation fund is providing it

• Understanding that taxation can be minimised through personal contributions to superannuation vs. other forms of investment

Understanding of mortgages • Understanding of fixed interest rates vs. variable interest rates

• Understanding of terms and conditions for early termination and other variations

• Ability to use property for personal financial advantage (e.g. purchase investment property)


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Ability to understand financial records and appreciation of the importance of reading and understanding them

• Ability to check accuracy of official records such as: Bank statements; ATM service statements; credit card statements; superannuation statements; insurance policies and renewal notices (e.g. understand coverage; exclusions and duty of disclosure); loan documentation

• Understanding of the need to keep records

• Ability to reconcile a bank statement to allow for items yet not reconciled

• Ability to read an Annual Statement from a superannuation fund to see the asset classes invested in and percentage return over time.

• Understanding of official financial records, such as prospectuses and Annual Statements for investment products

• Understanding of the need to monitor performance of investments over time

Attitudes to spending money and saving

• Understanding of the purpose of saving

• Understanding of why you need to save money for retirement

• Understanding that there are a variety of places and ways in which to save money

• Understanding of how to use budgets to plan and control personal spending

• Ability to forecast and recognise the impact of irregular major financial outlays (e.g. vehicle registration; holidays)

• Ability to budget strategically to make payments as late as possible and keep money earning interest as long as possible

Awareness of risk associated with some financial products and appreciation of relationship between risk and return

• Understanding of the purpose of insurance

• Awareness that both savings and borrowing are offered on differing terms and interest rates that vary over time

• Awareness that high return investments are also likely to involve high risk

• Understanding that market values can fall as well as rise

• Awareness that if it sounds ‘too good to be true’, then probably it isn’t true

• Awareness of the dangers of underinsurance

• Awareness that individuals are responsible for debts of spouses/other family members with whom they have a joint financial product

• Understanding of the value of diversification when investing

• Ability to identify potential financial risks and determine whether they need to be eliminated or mitigated against

• Understanding of managed investments

• Understanding of guarantees on investments

• Understanding that short-term ups and downs in value are less important for long-term investments

• Understanding of currency issues, including the impact of fluctuations in exchange rate for the Australian dollar


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CONCEPT 4: Financial Responsibility

Basic requirements Advanced requirements Ability to make the appropriate personal life choices about financial issues

• Understanding of the difference between long-term and short-term needs

• Ability to prioritise different needs to balance income and expenditure within financial capacity

• Understanding of the difference between good (manageable and planned) debt and bad (unmanageable and unplanned) debt

• Ability to make informed choices when experiencing a drop in income

• Ability to assess the financial implications of personal life choices in terms of career choices and life-long learning opportunities

Understanding of consumer rights and responsibilities

• Understanding that consumers do have rights

• Understanding that consumers have a right to clear information about products both pre-purchase and ongoing post-purchase

• Awareness of and ability to access independent dispute resolution schemes for financial products

• Understanding of consumer responsibilities and the implications of not meeting them, including: duty disclosure for risk insurance; safeguarding of PIN for transaction banking

• Understanding and ability to check, before handling over money for an investment, that: financial products should only be purchased from licensed financial businesses; advice should only be sought from person employed by licensed advisory businesses; Prospectuses must be lodged with ASIC; Persons providing advice about financial products must disclose any commissions, important side-benefits and potential conflicts of interest

• Awareness of 14-day cooling-off period for insurance

Ability and confidence to access assistance when things go wrong

• Understanding that the finance sector is regulated

• Understanding of who one can call on to help with more complex issues (e.g. advisers; accountants)

• Awareness of where to go/whom to contact if things go wrong (e.g. consumer complaints department of financial institution; consumer association; financial counsellor; ombudsman)

• Ability to make complaints effectively

• Awareness of distinction between financial advisers charging fee-for-services vs. taking commission, and understanding of its implications

• Broad understanding of the level of regulation of the finance sector

• Understanding that regulation of the finance sector is no guarantee of the safety of all financial products

• Ability to access and compare different sources of financial advice and information

• Understanding of the process and procedures for resolving disputes


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*All tables were obtained from the ANZ survey document mentioned above. Key Findings The survey revealed that most Australians have a reasonable level of financial literacy, with 97% of the population surveyed having a current account. Eighty-five per cent could read and understand financial statements and most of the population had basic mathematical knowledge. However, 21% could not understand their superannuation statements (regular payments towards pension fund). A strong correlation was found between financial literacy and socio-economic status. The assessment of financial literacy differentiated among various population segments. Lower financial literacy was associated with: • Lower education (Year 10 or less); • Unemployed or unskilled labour; • Low income (household income under $20,000); • Low savings levels (under $5,000); • Single people; and • People at both age extremes (18-24 years old and those aged 70 years and over). On budgeting, savings and investments the survey found that: • 16% of the adult population immediately spends all their income and make no

provision for the future; • 26% of the population have problems in saving for major financial outlays; and • 92% of the population understands the concept of short-term investments, while

only 39% understand appropriate long-term investments.


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Prepared by ECIAfrica Consulting (Pty) Ltd Annex B 31

May 2004

ANNEX B: DEVELOPING COUNTRIES CASE STUDIES 1. FINANCIAL EDUCATION PROGRAMME FOR SEWA

BANK MEMBERS, INDIA This case study was extracted from the Financial Education for SEWA Bank Members: A Facilitator’s Guide (2003), and from SEEP NETWORK 2003 AGM: Presentation by Pallavi Panchal on SEWA Bank India.1

1.1. BACKGROUND Shri Mahila SEWA Sahakari Bank Ltd was established in 1974 in India as a cooperative bank formed by poor and self-employed female workers. They each contributed R10 of share capital. The Bank provides an integrated set of banking services, and as such has become a multi-service organisation that has deviated from the common pattern of cooperative banks. In June 2002 SEWA Bank introduced Project Tomorrow, aimed at providing its members with skills in financial planning. With this programme, the Bank wants to ensure that its members are capable of making informed decisions when choosing its services and products. This will maximise financial return and protect against future risk. SEWA Bank is one of five implementing institutions of the Financial Education for the Poor programme, implemented in partnership with Citigroup Foundation and Microfinance Opportunities.

1.2. PROJECT TOMORROW The intended goal of the financial education programme is to equip the SEWA Bank members in rural and urban areas with the necessary knowledge to become better financial planners, and enable them to achieve financial security. After participating in the programme, participants are expected to have: • Stated the importance of financial planning; • Analysed their money management, recognised life cycles, financial needs and

managed future risks; • Analysed trade-offs between various financial options; • Recognised how SEWA Bank and other financial products can help them improve

their financial situation; and • Made a financial plan for their household.

The training programme is offered in seven sessions, and over the past three years it has reached 35,230 SEWA Bank members. The content of each session is:

Also available at, http://www.seepnetwork.org


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• An introduction to financial planning; • Money management; • Planning for future events; • Savings and investments; • Borrowing and loan management; • Insurance and risk management; and • Making a financial plan.

1.2.1. Project Impact An impact analysis was conducted to determine the improvement of financial management capability among the female participants of the programme. The findings were: • Increased participation by women in household financial decisions (from 54% to

78%); • Increased understanding of interest rates (from 45% to 65%); • Improved awareness of income/expenses and capacity to save (from 68% to

90%); and • Improved ability to articulate the concept of financial planning, (from 24% to

100%).

2. FINANCIAL PLANNING FOR SAFE MOTHERHOOD

IN NEPAL The summary below has been extracted from ‘Financial Planning for Safe Motherhood in Nepal: A Market Research and Tools Development Report’ by DAI, March 2001.

2.1. BACKGROUND In 2001, a consulting company in Washington, DC, Development Alternatives International (DAI), conducted market research and developed a financial planning tool (FPT) that could be used by female community health volunteers to help Nepali women and their families prepare financially for the birth of their child. The FPT formed part of the larger Birth Preparedness Package, which was prepared by the Maternal and Neonatal Health Programme in Nepal for pregnant women.

2.2. THE BIRTH PREPAREDNESS PACKAGE The Birth Preparedness Package is used to encourage women and families to prepare for safe motherhood activities, with about 25% of the time and resources focused on the FPT. No such initiative previously existed in Nepal. The innovation of the FPT has been useful in terms of informing the health sector, as well as for use within other organisations in the region.


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2.3. DEVELOPMENT OF THE FPT The FPT was developed in a way that reflected socio-cultural roles and status, values and attitudes of the target market. It is a very specialised and target specific intervention which can be viewed as a highly effective method of training delivery. The FPT: • Motivates not only expectant mothers, but entire families to plan for the costs of

safe motherhood; • Contains costs of health services (that are freely available) by providing financial

products and resources that are within the reach of the target audience; • Encourages participatory and interactive dialogue between clients and volunteer

trainers; • Supplies information needs that were gathered through research; and • Makes use of illustration, story telling and text that is short, accurate and relevant;

content and examples are relevant to the culture and environment of the target audience

The FPT content and material were also pre-tested to ascertain whether messages were understood and acceptable to the target audience, before it was finalised and distributed for delivery.

The FPT can be considered a highly effective method of financial education delivery, and presents much learning, which can be applied in the development of similar programmes targeted at low-income groups. The programme could be particularly useful in ante-natal clinics by alerting pregnant women to the financial implications of pregnancy and birth, and by introducing concepts on HIV/Aids and the financial implications for families.


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Prepared by ECIAfrica Consulting (Pty) Ltd Annex C 34

May 2004

ANNEX C: SUMMARY OF SA PROGRAMMES

A. GOVERNMENT: Government

Department & Parastatals

Programme Description Target Delivery Mechanisms

Formal Research Measure/ Assessment

Duration and Funding

Comments

Department of Education (DoE)

• ABET The curriculum contains elements of financial literacy within the ABET programme

Adults with less than 9 years of schooling

Classroom UNISA research and development

Standard outcome based

Launched in 1994, funded by Government, UNISA ABET Institute, DfID and DANIDA

ABET should consider introducing more elements focused on financial literacy.

• SANLI This initiative is aimed at establishing a voluntary teaching service for illiterate adults. The pilot programme contained elements of financial and consumer literacy

Illiterate adults with no schooling

Through NGOs, community based organisations, provincial departments of education.

UNISA ABET Institute

No Launched in 2002; Funded by DfID

Important learning from this project is use of volunteers, available infrastructure

• Schools: Outcomes-Based Education

Components of financial literacy in Economic and Management Science Learning Area; DoE prescribes outcomes but not content - Content depends largely on resources available and selected by teachers.

Initial focus on grades 5 to 7; Planned up to grade 12

Class room National curriculum development

Outcome based Launched in 2002. Funded by DoE – Also private sector support (See SBSA Foundation),

Effectiveness depends on teacher skills and resources: large discrepancies among schools. Most schools lack resources and teachers not adequately skilled. Opportunity for privates sector support

Department of Labour

• BankSeta Targeted skills training and development for the micro-lending industry

SMEs, Borrowers, and Micro finance

Accredited service providers

Yes, with assistance from external

Not defined Launched in 2003. Funded through skills

Potential impact not yet known as this is still a new programme.


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Government Department &

Parastatals




Comments

institutions consultants development levies

• InSeta Financial literacy of industry staff is essential when ensuring sound advice to clients. Financial literacy standard accredited through SAQA in addition to other SAQA required Fundamental Unit Standards.

Employees in the insurance industry

Accredited learner providers

InSeta together with external consultants

Not defined

Launched in 2002. Funded through skills development levies

Mostly targeted at employees of financial sector.

National Treasury: Mongi Mali

Debt counselling campaign aimed at reducing indebtedness of public servants (PS). Assist and advise PS on how to comply with new regulations (financial planning, debt counselling, independent advice and help services).

Government employees highly indebted through payroll deductions.

Pamphlets, posters, newsletters, booklet, call centre

No

Outreach and distribution of materials; Reduction in nr of indebted public servants

July 2001 to January 2002. Funded by LOA, SAISA, BC

Highly successful once off initiative - should consider expanded ongoing service

Department of Housing

Home Loan Guarantee Company (HLGC) contracted to develop a coherent housing consumer education programme, aimed at empowering consumers to make more informed decisions on their housing options.

People that are eligible to receive a housing subsidy

Classroom- based to be presented by trained municipal staff

Yes - Consultation with various stakeholders in the housing industry

No Currently in pilot phase. Funded by Department of Housing

Education programmes planned to be delivered by different service providers. Content is broad, covering different housing options.

Department of Trade and Industry (DTI)

Provides information and advice at Provincial Consumer Affairs offices. DTI also involved with the

All consumers nationally

Trained staff at Consumer Affairs Offices – individual advice.

None None Launched in 2004. Funded by DTI

They work on various campaigns together with various partners.


ANNEXES


May 2004


Parastatals




Comments

Banking Council debt campaign and with MFRC’s debt relief programme.

Department of Social Development

None - - - - - They have structures in place to reach the very poor, and should consider partnering with someone in the provision of financial literacy as a potential poverty alleviation tool.

Department of Agriculture

No known programme - - - - -

Parastatals

• Landbank

No known programme - - - - - The LandBank has broad outreach across various socio-economic segments, and is also better represented in rural areas than most institutions. They should therefore consider launching a programme.

• Postbank Not own programme, but working with consortium: The Banking council and DTI debt campaign will use the Post Office infrastructure for distribution of pamphlets.

- - - - DTI and the Banking Council

The Postbank has broad outreach, particularly under lower income segments, and should consider launching a comprehensive ongoing financial education programme.

• Khula No CFL programme, only a mentorship for businesses

- - - - - -


ANNEXES


May 2004

B. REGULATORY BODIES Institution Programme description Target Delivery

Mechanisms Formal

Research Measure/

Assessment Duration and

Funding Comments

Regulatory Bodies

South African Reserve Bank (SARB)

SARB is committed to helping South Africans save. In response to the pyramid schemes in the 1990s, SARB contracted the Educational Support Services Trust to produce and develop booklets as part of a National Community education project intended to bringing financial know-how to all South Africans.

All South Africans

Distribution of two booklets

Yes None 1997 and 2002. Funded by SARB

The booklets are the only two initiatives we came across. They should in future consider supporting the banking industry in the development of financial literacy programmes.

Micro Finance Regulatory Council (MFRC)

Empowering borrowers through consumer education to make informed financial decisions. Multifaceted approach using different communication tools, media, hotline, workshops. They are also running a debt relief programme

Service providers, borrowers, lenders, government, NGOs, trade unions and employers.

Workshops, counselling, multimedia, booklets, media briefings and interviews

Informal through client queries and complaints

None to date - Looking at introducing impact assessment

Launched 1999. Funded by Ford foundation, MFRC, SABC.

Excellent and very comprehensive programme. Borrower knowledge has improved but more could possibly be done to encourage responsible borrowing and lending.


ANNEXES


May 2004

C. INDUSTRY BODIES - CHARTER Institution Programme description Target Delivery

mechanism Formal

Research Measure/


Funding Comments

Banking Council

The Banking Council is currently involved in a campaign aimed at educating the public about the consequences of over-indebtedness, and the risks and costs involved in opting for debt administration.

South African population

Pamphlets, posters, print media, radio

Yes None Feb. 2004 for 6-12 weeks. Funded by DTI and Banking Council

We anticipate the Banking Council will increase their level of involvement in CFL under the Charter.

South African Insurance Association (SAIA)

Ad hoc exposure in media through editorials, etc Developing a Q&A information page which has the most commonly asked questions and answers to explain some issues about insurance to policy holders.

Policy holders Q&A through brokers

No None Still in inception phase. Own funding

Individual insurers seem to prefer working through SAIA. Limited activities to date, but strong support for FSB is encouraging and could make a difference to FSB programme.

Life Offices Association (LOA)

Informative articles in above the line (ATL) media. Different theme every year, 2004 focus on HIV/Aids and assurance. Goal to educate public on assurance related matters

Current and potential assurance clients

ATL – Mostly newspapers; Branded LOA

None None On-going. Self-funded

Excellent programme on HIV/Aids. Media provides limited frequency of message. Target market and message limited to insured.

Association of Collective Investments (ACI)

Involved in newspaper articles and adverts as well as sponsored some industrial theatre. Also supporting FSB initiative.

Clients Print media None None Ad hoc. Own funding

Limited impact of own initiative - would achieve more by becoming part of bigger initiative like FSB.


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May 2004

D. INDUSTRY BODIES (NON-CHARTER) Institution Programme description Target Delivery

Mechanism Formal

Research Measure Funding Comments

National Stokvels Association of South Africa (NASASA)

No known programme - - - - -

Microlenders Association (MLA)

They are currently restructuring and consumer financial literacy is part of their proposed strategies. Currently they have poster and pamphlet campaigns giving advice to potential and current clients.

Current and potential micro lender clients.

Posters and pamphlets; Advice and counselling.

None None Launched 1995. Membership fees

MLA has large membership and more comprehensive initiative should be considered, possibly through partnering with other financial institutions.

National Co-operative Association of South Africa (NCASA)

Burial Society organisation and Management training

Burial society members

Classroom based None None Funded by burial societies

Focus of training is not CFL but focused more on burial society management.

South African Savings Institute (SASI)

The institution aims to educate the SA public on importance of savings. Financial literacy programmes are co-coordinated in association with other organisations.

All sectors and segments of society

Workshops in collaboration with other organizations; Media

None Measure savings behaviour

Launched in 2001. Funded by IDC, IPC and membership fees

Future of SASI uncertain, as the executive officer recently resigned.

SACCOL No focused financial literacy programme to date; Some info through quarterly newsletter; Also developing “Your SACCO Handbook’” focusing on various financial issues (housing, funeral insurance, etc).

Members Booklets through CUs

Gen. annual members survey (not CFL specific); Some core problems identified: managing finance indebted-ness; lack of banking knowledge

None Part of business communication

SACCOL should encourage member organisations to introduce financial education programme, as they have large outreach particularly under lower income groups


ANNEXES


May 2004

E. FINANCIAL INSTITUTIONS: BANKS, FOUNDATION AND INSURANCE HOUSES Financial Institution


Formal Research

Measure/ Assessment


Comments

BANKS ABSA: • Busine

ss Mass Marketing: product usage focus – evolving programme. Started in 2000 with focus on ATM usage (safety). Evolved to product usage; useful tips to broad-based radio on various CFL-related topics. Mostly ABSA product focus.

Mass market: Current and potential customers

Product pamphlets; ATL such as CommutaNet and radio

No – based on analyses of usage of products, client queries, etc

Monitor usage of product (e.g. increase in ATM usage?) and client queries

Evolving programme since 2000. ABSA Mass Marketing

Programme still limited and very marketing oriented often with branded product info. ABSA would like to engage with other banks on a coordinated approach.

• ABSA Foundation

No known programme - - - - - Financial education is important for society and banking industry, and the Foundation may want to consider involvement in this area.

SBIC: • SBSA

Business

Mass Marketing – product usage focus. Future marketing strategy to include educational component in all mass marketing communication. Own housing education programme

Mass Market; current and potential clients

Product pamphlets; Radio comedy; TV through soapy

Analyses of MIS and client queries. Considering primary research

Impact of radio activities researched.

Started 2003 – On-going. Marketing

Interested in engaging with other banks to complement own activities.

• SBSA Foundation

Flagship national programme providing training and training material to teachers for financial literacy outcome.

All schools; already rolled out to Gr 7 in 2000

Development of content and material: workbooks & CDs for learners and teachers. All material available on web

Some limited content research

None Started development in 2000. Foundation already committed R9 million.

Incredible programme in terms of objectives, outreach, commitment and content. They have ready access to schools and government contacts – Willing to share information and lessons with others.

Nedcor Group • Nedba

nk CFL viewed as being in collective space - banks need to engage.

- - - - - Not much has been done formally to date. Would like to engage


ANNEXES


May 2004

Financial Institution


Formal Research

Measure/ Assessment


Comments

Currently conducting best practice review and internal audit for engagement with other banks around the Charter.

with other banks once internal audit complete.

• *

People's Bank

Has co-funded various initiatives driven by Old Mutual; future initiatives will form part of Nedbank mass- market segment.

- - - - - See Old Mutual

• Nedba

nk Foundation

Limited activities to date, but intend more focused/formal CFL activities in future; Inherited NBS, BOE and People’s foundation activities. Looking at how to synergise. The foundation will continue to fund limited NBS school-based programme in areas around branches (KZN).

Schools (limited programme) – KZN

Classroom based - - - Strong fund with massive potential to launch a strong programme and support exist in community-based education initiatives. Can also leverage current involvement with low- income schools.

First Rand Group

• FNB

Comprehensive classroom-based programme modelled along Royal Bank of Scotland approach. Tiered approach accredited by NQF and includes RPL assessment Looking at other additional initiatives in mass market segment

FNB staff (all levels); Future: packaged as employee-based training at large companies; in talks with DET on possible roll-out to schools

Class room based – learners can receive certificates Mass market initiative delivery approach not yet defined

Content largely influenced by feedback/ questions at S. Orman workshops; Primary research in progress under mass market

No Development started 2002. Funded by business; Employers to pay for employee-based programmes

Appears well-developed; Proprietary nature will limit outreach. Training package viewed as competitive tool.


ANNEXES


May 2004



Formal Research

Measure/ Assessment


Comments

• RMB Foundation

Provides in-house education and training to staff and clients. Works closely with the RMB academy to offer programmes ranging from financial management, public management and introduction to commerce studies.

Community and Individual Development Associates (CIDA) City Campus students, staff, and the general public

Short-term courses to 4 year long courses

Content influenced by the course presenters who are active role players in the industry

Of the 53% of Foundation Funds allocated to education, 17% is geared to financial literacy programmes

CIDA programmes are enriched with the expertise of professionals from different consulting companies – Excellent example of working with existing community structures

African Bank Foundation

Their Money School is dedicated to empower consumers through education. Focus on: personal money management; how to be financially successful; savings; budgeting; loans and interest. Debt issues are being added to content. Planning further initiatives.

LSM 4- 7, employees, clients and potential clients

Classroom based sessions. Considering community radio shows and community forums. Working with CIDA City Campus.

None None Money School launched in 2000. Funded by Foundation

Won MFRC Consumer Education Award for various financial education initiatives.

TEBA Bank: Financial Education for the Poor

Two related programmes being developed: 1. On request of mine unions: training on indebtedness; 2. Initiated by Micro finance Opportunities: broad-based financial education programme including: Savings, budget, debt management, cash flow.

Clients and communities from which mineworkers migrate: mines and rural LSM 1-5

Workshops classroom based and other media for on-going messages

Yes – primary research

Plan to develop some measures that will be linked to changes in behaviour

In development. Funded by: Teba CSR funding - mineworker indebtedness programme CitiGroup Foundation- MF Opportunity initiative

One of the few programmes where intensive research is being undertaken upfront to establish needs and the most appropriate form of approach to education. It is objective and will be run by the CSR with little marketing and sales influence. .

Capitec No known programme - - - - - - Sanlam No dedicated broad-based

programme; View: Current and potential customer CFL activities should be branded; Potential role for corporate social

Current & potential customer base

Sales, PR, Marketing: Financial advice through brokers and agents; ad hoc editorial;

No n/a On-going. Funded by marketing

No comprehensive programme – current initiatives more marketing oriented


ANNEXES


May 2004



Formal Research

Measure/ Assessment


Comments

investments (CSI) in LSM 1-3 – should be broader than CFL and include Life Skills (Currently no CFL Foundation activities)

participation in radio talk shows; local radio stations: “Sound Financial Advice”

Old Mutual (in partnership with People’s Bank)

Comprehensive strategy throughout business (various business units and marketing different forms of involvement); Broad-based CFL incl. budgeting; focus on assurance related issues. View: See role for government – specifically to control credit.

Current and potential clients – biased towards lower end; Piloted schools programme

Major multimedia campaign (primarily radio) – moving into TV. Also employee-based seminars; Editorial; Booklets (distribute through People’s Bank); Workshops with women’s groups; moving into TV

Yes; also adjust ATL content on on-going, based on primary research.

Yes – assess effectiveness of ATL

Launched around 2000. Funded by various business units and marketing; Co-funded by People’s Bank)

A comprehensive campaign delivered through various means; Various business units involved; Excellent content and delivery.

Liberty Life Plan to develop Trustees training on pension funds and provident funds.

All trustees Through workshops.

None None Own funds

Liberty Life Foundation

Mindset Networks creates, sources, and delivers free educational material via satellite. Covers on maths, English and science to date. Plans to include fin lit are being made

Grade 10, 11, and 12 learners and educators

Via satellite TV and publications through the Sunday Times.

None None

2003

Outreach of Satellite TV limited and biased to upper end of market.

Metropolitan Life

Mostly ATL and seminars – focus on assurance info. Asset Management involved in training Trustees of Pension Funds. View: Role of government critical, unbiased. More focused/comprehensive financial education plan being considered.

Current and potential clients; Bias to women and lower end of market. Pension fund trustees

Workshops, seminars and editorial in various ATL – all activities branded

No No On-going. Funded by marketing and business units

Limited programme – marketing biased.


ANNEXES


May 2004

F. MICRO-FINANCE INSTITUTIONS Institution Programme Description Target Delivery

Mechanisms Formal

Research Measure/

Assessment


Comments

IEMAS Trade Cooperative

IEMAS places a high value on ethics and educating consumers. Training focuses on how to escape the debt spiral, budgeting, the role of money, savings and investments, how to buy a vehicle, how to buy a house, estates and wills. They are in the process of getting accreditation through BankSeta. They also have a HIV/Aids workplace programme for staff.

Targeted at potential clients before they access loans. Company employees, potential clients. Blue-collar workers, admin. and clerical staff.

Classroom based Yes None Started 2000. Own funds

Limited outreach.

Marang No known programme - - - - - - Beehive Group lending methodology and

training is provided before loan is approved. Content covers product and organisation information but it includes client rights, recourse and contractual obligation.

Potential clients applying for a loan

Classroom based None None Own funds Focus is more on group lending and on consumer rights for borrowers, than on financial education.

Small Enterprise Foundation

HIV/Aids training delivered through Health System Development Unit of Wits University

They could consider introducing financial literacy training: a core requirement for small businesses.


ANNEXES


May 2004

G. NGOS, CONSUMER BODIES, UNIONS & TRUSTS Institution Programme Description Target Delivery

Mechanisms Formal

Research Measure/


Funding Comments

National Urban Reconstruction and Housing Agency (NURCHA) provides low cost housing finance

Promotion of savings to contribute towards home ownership. CFL focus on: savings, banking relationship, home ownership, managing financial affairs

Low-income people

Workshops with discussions, Q & A sessions and presentation from banks

None

None

Jan 2001 – April 2002. Dept of Housing and Open Society Institute of NY

Programme on hold for the moment.

Rural Loan Housing Fund (RLHF)

Empower rural people to maximize home ownership – focus on: Loans, costs, building advice, planning, etc. Currently reviewing their manual to include more financial information

Rural people in non-metro areas

One-on-one advice and manual

None None

1999. Funded by the German development agency KfW

Manual may not be effective among low literacy clients.

Home Loan Guarantee Company (HLGC)

HLGC programmes educate potential home loan guarantee clients with the aim of reducing the risk of the HLGC. They work through banks that provide guaranteed loans.

All potential loan guarantee clients

Classroom based through banks; Presented by HLGC staff

None None Funded by HLGC

Experienced trainers with a good track record and highly regarded in the housing industry.

Black Sash Main focus is on debt avoidance and management. Involved with MFRC on debt relief programme as well as with campaign sponsored by DTI and Banking Council. Also offer paralegal services to the public

Grant recipients in SA as well as the general public

Advice and counselling

None None


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May 2004

Institution Programme Description Target Delivery Mechanisms

Formal Research

Measure/ Assessment


Comments

SA National Consumer Union

Aim to help consumers make appropriate decisions and to know their rights. Focus on: budgeting, rights of the consumer, debt management; how to be a smart consumer

The unbanked and under banked

Workshops organised through municipalities and consumer bodies. Produced booklet but has no clear distribution channel yet.

None

None

On-going since 1989. Private funding

Financial constraints limit the extent of involvement in CFL

National Consumer Forum

Provide skills and knowledge to empower consumers. Focus on: Credit, you and your bank, cost and fees, budgeting, insurance

Low income groups

Radio, workshops

None, but looking into short-term insurance industry together with Consumer International – a representative on sustainable consumption by governments and NGOs. Involved in workshops, research and publications.

None

On-going since 1998. Funded through membership fees. They do not accept funding from corporate organizations

Have been involved in the establishment of a Credit Bureau Ombudsman. Limited CFL because of financial and resource constraints.

You & Your Money (Started as volunteer group; developed into small NGO. Based in Wynberg, CT)

Different programmes: • Debt advice centre.

6-month counselling programme in workshop form.

• Seminars over 5 months: to employee based programmes &

Low end of the market - Debt advice: people off the street; Other NGO ‘clients’, pensioner’; Some large corporations employee-

Classroom based – workshops or seminars; 5-6 month programmes

No – work directly with people in need of help. Adjust programme accordingly.

Work with people until out of debt

Started 2001. Undisclosed foreign donor and corporate contributions; Some self-financing through employee programmes

Excellent example of community-oriented programme. Provides opportunity for partnerships or funding by corporates.


ANNEXES


May 2004


Formal Research

Measure/ Assessment


Comments

community groups. • Work closely with

Black Sash and other debt activist groups – also train debt activists in rural areas.

Content adjusted based on group – focus on debt management, budgeting and saving

based training (incl. SARB staff)

Vuka Trust: FIT Financial Intelligence Training

Ensure mass information distribution of education on financial services and simple economics. Focus on: Concept of money and exchange, transactions, debt responsibility, savings andsavings union. HIV/Aids focus within their savings union

PDI and financially challenged

Class-room based - 8 sessions of 45 minutes each

Looking into poor attendance at job creation workshops, the financial position of the breadwinner and access to financial services for the unemployed or informally employed individual

None

1998. Abha Trust Prosperity Network Pty Ltd NUCOF,

FIT covers savings and savings union in light of high levels of indebtedness.

Mine Workers Development Agency - MDA

Used to provide business skills, financial management training and ABET. No longer providing training themselves. They have sub-contracted this function out

Rural communities, ex –miners

Classroom based Yes No Mines Recognises the importance of financial literacy but is not planning on getting involved.


ANNEXES


May 2004


Formal Research

Measure/ Assessment


Comments

SACP/COSATU

Train Trustees of Pension, Retirement and Provident funds themselves Focus on: Understanding the different funds, impact of HIV/Aids on funds, regulatory implications. The trustees are responsible for giving feedback and educating members.

Trustees Classroom based

No No Own funding Unions have a significant role to play in the delivery of financial education programmes in the workplace, albeit through placing pressure on employees to undertake workplace financial literacy training.

FEDUSA No CFL programme but they are keen to be part of FSB initiative

The support of FEDUSA to a national initiative can lend strong credibility to the programme under employees and also provide possible information distribution channels.


ANNEXES


May 2004

H. PRIVATE/CONSULTING COMPANIES (SUPPLIERS OF CFL PROGRAMMES) Company Programme Description Target Delivery

Mechanisms Formal

Research Measure/


Funding Comments

Business Education Design

Active reflective learning, which enable sustained learning to occur. Content focus: Business literacy - understanding income statement. (Consulting company involved in the design and implementation of business literacy programmes)

Employees

Experiential learning, application phase and applied project

None

None

Since 1995. Employers pay for training

The business related concept could be translated to personal circumstances.

Summit Financial Partners

Specialising in providing superior financial solutions to employees. These include home and term loan, credit life insurance and funeral cover benefits. Also: clever spending, maximise profits, savings, borrowing.

Employees Classroom based, computer based training, guide

Yes - into debts, interests rate charges

None

Since 2000. Employers pay for training.

Innovative and well-developed programme. We anticipate that their programmes will grow and target different sectors of the South African population as effectively.

Vukani Africa Investment Management Services

Seeks to transform the African client from a consumer to an investor, capable of making informed financial decisions. Content focus on: Personal financial control, personal risk management. personal wealth creation.

Emphasis on PDI but cover entire population

Classroom based

None

None

Started 2000. Employers pay for training.

Interested in targeting burial societies and Stokvels but constrained by the lack of financial resources. An opportunity for a corporate partner?

Ikhumiseng Consulting

Content focus on: Financial environment, financial planning, expenditure, pay slip, debt and credit, interest, bank statement, insurance, investment, budgeting.

Employed Classroom based - 2 days

Yes

None - Proposed to do survey of participants after workshop

Started 2002. Employers pay for training.

Investment Wise Focus on training of financial Workshops to Seminar/Talk No No Ad hoc since


ANNEXES


May 2004

Company Programme Description Target Delivery Mechanisms

Formal Research

Measure/ Assessment


Comments

(Small private consulting company based in CT)

adviser; Also do some workshops and seminars to selected audiences on invitation; training of Trustees of Pension Funds. Workshops focus intended on investments, but found need for managing debt as starting point

date: LSM 7+ women’s groups

2002

I. MEDIA Company Programme Description Target Delivery

Mechanisms Formal

Research Measure/


Funding Comments

Kagiso TV

Focus on: micro business training. No financial literacy programme. HIV/Aids campaign used by Soul City.

Low income women groups.

Still need funding to develop financial literacy programmes.

J. UNIVERSITIES Government

Department & Programme

Name

Programme description Target Delivery Mechanisms

Formal Research

Measure/ Assessment


Comments

UCT: Diaries Independent programme funded by Ford Foundation: income and expenditure of 146 households

LSM 1-5 n/a Yes – Primary research

n/a Started 2004. Ford Foundation

Not directly relevant to CFL, but may provide input into CFL needs

UNISA No CFL Programme per se; Only training of ABET trainers

- - - - - -

UWC Programme developed for Saambou; has not been used. Focus on: General CFL: Budgeting; debt management;

Potential Saambou clients – Lower LSMs,

Classroom based with game

No, but did conduct some informal research

None Never launched. Saambou

Valuable programme – requires an institution and funding to move forward


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May 2004


Programme Name

Programme description Target Delivery Mechanisms

Formal Research

Measure/ Assessment


Comments

savings – Focus on housing but employed; Intended to target employers

CIDA (City Campus – Johannesburg)

CIDA City Campus is a higher education institution offering affordable education to the historically disadvantaged. First year students are trained in the African Bank Money school Management programme. Afterwards students volunteer to be facilitators and offer training to their communities when they return home on their holidays.

Low income communities

Classroom based organised by students in their home towns

None None Started in 2001. African Bank

Innovative and cost-effective way of involving community members to improve outreach.

University of Stellenbosch

No known programme - - - - - -


ANNEXES

Prepared by ECIAfrica Consulting (Pty) Ltd Annex D 52

May 2004

ANNEX D: SUMMARY OF SELECTED PROGRAMMES IN SOUTH AFRICA

1. THE SOUTH AFRICAN GOVERNMENT The change in political dispensation in South Africa brought about a change in approach in the educational system. Today Outcomes Based Education (OBE) forms the foundation of the educational curriculum in South Africa. OBE strives to enable all learners to achieve their maximum ability by setting the outcomes to be achieved by the end of the process. This encourages a learner-centred and activity-based approach to education. In this section we will address the programmes of the Department of Education that cover financial literacy, as well as assess the reach and impact of these programmes. We base our analysis on the formal documentation of the Department and discussions with educators that apply to these programmes.1 The Revised National Curriculum for primary and secondary education consists of eight Learning Areas. These include: languages, mathematics, natural sciences, social sciences, arts and culture, life orientation, economic and management sciences and technology. Specific attention to financial literacy is evident in only one learning area, namely Economic and Management Sciences. However, OBE takes an integrated approach to teaching financial literacy. For example, an educator could also focus on financial literacy issues in mathematics, but as examples and application rather than core content. It is important to note that OBE implementation relies heavily on skilled and informed educators that can drive the process. This is indeed a challenge in a country such as South Africa where the majority of the population received substandard education. It is further highlighted in the DoE’s special programmes that focus on building educator capacity in schools, and thereby acknowledging the differences in the capacity of educators between schools. Indeed, the DoE states clearly the kind of teacher that is envisaged: “This Revised Curriculum statement envisages teachers who are qualified, competent, dedicated and caring. They will be able to fulfil the various roles outlined in the norms and standards for educators”.2

1.1. CONTENT The Economic and Management Sciences Learning Area comprises the following learning areas: 3 • The nature, processes and production of goods and services;

1 Informal discussions with primary school educators. 2 Revised National Curriculum Statement Grades R-9 – Life Orientation, p3. 3 Revised National Curriculum Statement Grades R-9 (Schools), Economic and Management Sciences (ref RSC grade R-9EMS.pdf)


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May 2004

• The South African economy and socio-economic systems in different countries; • Financial management and planning skills for private, public or collective

ownership; and • Entrepreneurial skills and knowledge needed to manage self and the environment

effectively. These provide learners with outcomes that cover the economic cycle, sustainable growth and development, managerial, consumer and financial knowledge and skills, as well as entrepreneurial knowledge and skills. The most important cue to the detail content of these areas can be found in the assessment standards for these learning outcomes. Though it differs for the three phases of education (foundation, intermediate and senior phases)4 it is clear that during the school years it is expected of learners to develop consumer and financial skills and to manage his or her life and business activities responsibly and effectively. Learners graduate from basic information about financial issues to: • Analysing the information and presentation of rudimentary statements (more

advanced in the senior phase), • Learning how to open accounts and compare different financial service and

product offerings, and • Planning and budgeting for yourself and a household. This necessitates a level of financial literacy as an outcome during the different phases. It is important to note that the DoE prescribes the outcomes and assessment criteria, but does not provide content. Content is the responsibility of the teacher and the school, which is where we encounter the first obstacles - availability of material and skills to compile appropriate material. In reality this translates into varying levels / quality of education due to the difference in the levels of education and the experience of teachers among different schools. The reality is that the outcomes achieved in schools are a function of the input of teachers, and can vary considerably between schools. Schools that receive assistance typically provide a better level of financial literacy education than similar schools without outside assistance. The Standard Bank Foundation recognised the problem of capacity and materials, and has launched an extensive financial literacy programme through which they provide material and training to teachers. The programme has been developed in conjunction with GIED and is implemented in coordination with, and with support from, the Department of Education. The focus to date has been on Grades 7-9, and will be extended to other grades over time, as well as possibly FET (2006 curriculum) and other adult education structures. Their intent is to roll the programme out to all 28,000 schools in the country (5,000 per

4 Foundation, Grade 0 to Grade 3, Intermediate Grade 4 to grade 6 and Senior Grade 7 to Grade 9).


ANNEXES


May 2004

annum). By the end of 2004 they should have reached 15,000 schools. This programme is discussed in more detail elsewhere in the report.

1.2. ADULT BASIC EDUCATION AND TRAINING (ABET) ABET, as defined by the Department of Education in its Policy Document (October 1997),5 is the general conceptual foundation towards lifelong learning and development. It comprises knowledge, skills and attitudes required for social, economic and political participation and transformation applicable to a range of contexts. ABET is flexible, developmental and targeted at the specific needs of particular audiences and, ideally, provides access to nationally recognised certificates. It covers the rudimentary areas of financial literacy - very similar to the foundation and intermediate phases of the school system.

1.3. DEPARTMENT OF LABOUR In 2001 the Department of Labour implemented its National Skills Development Strategy (NSDS). The National Skills Authority oversees the implementation of the Strategy. The Strategy is based on the Skills Development Act and the Skills Development Levies Act of 1998 and 1999 respectively. The purpose of the strategy is to facilitate skills for productive citizenship for all, implying the right of people not only to vote and participate in our democracy, but also to contribute to, and make decisions about, their own work life. Furthermore, the NSDS aims to address the structural problems in the labour market inherited from the past. In addition to a National Skills Fund and Provincial Offices, 25 Sector Education and Training Authorities (SETAs) were established to implement the strategy. The SETAs are responsible for developing sector skills plans, approving, registering and promoting learnership and assuring training quality, administering levies and grants. Specific targets were also set for the strategy that must be reached by 2005 as part of the first phase. The SETAs are also responsible for contributing to the support and implementation of the National

5 Ref Policy doc on Abet.pdf

What does our NQF look like? NQF Level Band Qualification Type

8 7 6 5

Higher Education and Training

• Post-doctoral research degrees • Doctorates • Masters degrees • Professional Qualifications • Honours degrees • National first degrees • Higher diplomas • National diplomas • National certificates

Further Education and Training Certificate (FETC)

4 3 2

Further Education and Training

National certificates

General Education and Training Certificate (GETC)

1 General Education and Training

Grade 9 ABET Level 4

National certificates


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Qualifications Framework (NQF)6. This provides the formal link and synchronisation of the activities of the Departments of Education and Labour, with respect to education and skills development in South Africa. Based on information obtained, a need exists in most of the SETAs to formally promote and support literacy programmes around life skills, basic business administration, HIV/Aids and health and safety. At present most SETAs do not have accredited programmes for financial literacy and will consider discretionary support for such programmes. The 25 different SETAs are each focused on a specific sector or sub-sector. Though we did not study the activities and content of all SETA programmes in detail, it is clear that the insurance SETA (INSETA) and the banking sector SETA (BANKSETA) both cover areas of financial literacy in their respective programmes and projects. InSeta registered Financial Literacy Standards (i.e. use a personal budget to manage own money, and investigate credit in own circumstances, etc.) with SAQA. This is targeted at workers in the industry, as they have to give clients sound financial advice. BankSeta implemented the Micro Finance Skills Project (MFSP) that also covers aspects of financial literacy in the component that focuses on micro finance institutions’ clients. This component is being implemented and the first evaluation of results will only be available at the end of 2004. Nonetheless, the MFSP developed the appropriate staff courses and individual borrower modules covering banking accounts, budgeting, how to handle debt, how to obtain loans, how to save and the importance of saving, and your rights with respect to access and disclosure.

1.4. COMMENT ON THE GOVERNMENT PROGRAMMES The programmes launched by the government are indeed impressive in terms of the content, approach and objectives. It has the potential to improve financial literacy over a broad front with its focus on children as well as adults. The content is quite appropriate in terms of empowering citizens to manage their own finances, and to inculcate an understanding of financial issues required for personal and business functioning. The Outcomes Based Education approach of the Department of Education covers financial literacy issues in the learning area on management and economic sciences. In addition, the NQF and the ABET approaches also incorporate standards and content on financial literacy. In the case of the Department of Education, the challenge is to ensure adequate content to their programmes and the skills and experience to implement these programmes. As argued earlier it is clear that major differences exist between different schools in the

6 The National Qualifications Framework (NQF) is the framework, based on eight levels, onto which any qualification or learning outcome can be registered. The National Qualifications Framework is being developed under the guidance and oversight of the South African Qualifications Authority


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ability to generate or obtain the relevant material and to implement the programme. A huge effort is needed to build the capacity of teachers that can implement OBE. The Department of Labour publishes an impressive account of the number of learnerships achieved through the National Skills Development Strategy. It is clear that the Government is indeed succeeding in alleviating the initial growth pains of the NSDS. However, the backlog is immense and many SETAs find it difficult to implement the level of assistance required to address the skills problems in South Africa. In terms of financial literacy, it is not clear whether all SETAs emphasise, or cover, this type of learning. Our cursory analysis shows financial literacy to be covered by the InSeta and BankSetas. The NSD’s implementation report does not indicate any performance measurements in terms of financial literacy or consumer literacy. It is, therefore, difficult to assess the Government’s achievements with respect to financial literacy at this stage. It is clear that areas of support to the government programme could include assistance with developing a specific focus on financial literacy, expanding this focus to be included in the basic work of all the SETAs, ensuring that adequate material is available for the learning areas in the OBE system, as well as attending to the capacity building of the educators that must implement the OBE system. 2. FINANCIAL SERVICES BOARD

2.1. OVERVIEW OF THE FSB The Financial Services Board (FSB) is an independent statutory body, which oversees the South African non-banking services industry. The FSB’s mandate is to promote sound and efficient financial institutions and services, as well as mechanisms for investor protection. The functions of the board include: • Supervision of the compliance of financial institutions with laws and regulations, • Advising the Minister of Finance on matters concerning financial institutions and

financial services, either of its own accord or at the request of the Minister, and • Promoting programmes and initiatives of financial institutions and industry bodies

to inform and educate users and potential users of financial products and services. In line with international developments aimed at investor and consumer protection, the FAIS (Financial Advisory and Intermediary Services Act) legislation was promulgated on 15th November 2002. FAIS is intended to regulate intermediaries in both the established financial industry and the emerging market sectors. The legislation was drafted to ensure that consumers of financial services and investors are protected against unscrupulous financial advisors. The legislation is also aimed at ensuring the protection of consumer rights and interests. FSB has expanded its role of consumer protection under FAIS legislation to include a consumer education component.


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2.2. PROGRAMME OVERVIEW In 2000/1 the FSB started with the development of a consumer education strategy and programme. The strategy is viewed as a national initiative and not an FSB or industry-specific initiative. A broad spectrum of stakeholders has been consulted throughout the process. A Trust will be set up to manage the funding for the programme, while the FSB is currently seeking funding for the programme. The FSB established an internal unit responsible for coordinating the development and implementation of the strategy, and also a Review Committee with representation from a broad set of stakeholders: the Association of Collective Investments, the Banking Council, the Black Brokers Forum, COSATU, FIFSA, Investment Management Association of South Africa, Institute of Retirement Funds, Johannesburg Stock Exchange, Life Officers Association, MFRC, National Consumer Forum, National Union of Food Beverage, Wine, Spirit, and Allied Workers, DTI, South African Insurance Association, South African Institute of Financial Markets, United National Public Servants Association of South Africa, South African Reserve Bank, SASI and the Council of Churches. The goal is to complement, strengthen and support current activities, rather than to duplicate. The FSB views itself as the facilitator of the programme, rather than the owner. The programme will therefore also have independent branding. The strategy has several components:

• Launching a multi-media campaign (TV, radio and print);

• Distribution of educational booklets through outlets of member organisations;

• Establishing a databank of information to be used by stakeholders (with their own branding);

• Engaging with current supplier of financial education programmes to identify synergies; and

• Engaging with the Department of Education on the financial literacy component of OBE.

Through widespread consultation, the content of the FSB programme will comprise the following three themes:

• Savings and effective debt management;

• Recourse rights and responsibilities; and

• Knowledge of financial service products.


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2.3. RESEARCH Research is currently being undertaken by the FSB and seeks to evaluate levels of consumer awareness of the financial services industry as well as to assess the impact of the FAIS legislations on the industry. The FSB indicated that it is looking at establishing national benchmarks on consumer financial literacy through this survey, as well as to further refine their strategy and intended programme content. Findings of the survey are intended to distinguish among different LSM levels. The FSB aims at repeating the study every three years, to assess changes in financial literacy over time.

2.4. COMMENT The approach of the FSB in formulating their financial literacy strategy is in line with the trends identified in the UK, Australia and the US, where individual sector and institutional programmes are being supported and complemented by national initiatives. These national programmes also collaborate closely with their governments, particularly in the spheres of school-level education. Such a coordinated national approach can substantially increase outreach, strengthen impact, and facilitate consistency in content in the market place. However, the FSB has been working on the development and implementation of the strategy for close to four years. While many stakeholders in the marketplace are looking towards the FSB to provide direction in the domain of financial education, many are sceptical as to the capability of the FSB to bring the proposed strategy to fruition. On closer scrutiny of the proposed research, it also became evident that the initial proposal contains limited reference to financial literacy and will not succeed in setting national benchmarks in financial literacy. The target market is also a holder of products affected by FAIS, and not the population as a whole, and no LSM segmentation appears to be included. As such the study will not succeed in setting national benchmarks in financial literacy, or to differentiate among literacy levels of various LSM groupings. The research approach is currently under review by the FSB to address some of these identified shortcomings. The FSB is well positioned to play the role of national facilitator and has also come a long way in the design of a national financial education strategy. However, the FSB lacks resources, and without the commitment of resources – skills and financially – of the stakeholders involved, the FSB will be unable to achieve its overall programme goals. 3. BANKING COUNCIL CONSORTIUM

3.1. OVERVIEW OF THE BANKING COUNCIL The Banking Council is an industry body tasked with establishing and maintaining the best possible platform on which banking groups can do responsible, competitive and profitable banking.


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3.2. PROGRAMME DETAILS The Banking Council has recently launched a campaign aimed at educating the public about the consequences of over-indebtedness, and the risks and costs involved in opting for debt administration. The campaign was initiated following bank reports that some of their defaulters were under administration and that the administrators were not paying their clients’ debt. The banks were getting judgments against clients that were already under administration. There were also cases where administrators have approached employees and suggested that their debt be administered through their payrolls. The Banking Council approached DTI and the Department of Justice to discuss ways in which they could raise awareness of malpractices by administrators, and inform consumers of their rights and the appropriate procedures to be followed by administrators. The Banking Council and the DTI have both contributed one million Rand each. The campaign is backed by the Department of Justice and Constitutional Development, the banks, the SA Law Reform Commission, Johannesburg Magistrate’s Court, National Community Paralegal Association, the MFRC, University Law Clinics, Black Sash, the National Consumer Forum and the SA Post.

3.3. CONTENT OF PROGRAMME The campaign has two core components: The first component seeks to advise consumers on how to be a responsible borrower, paying debts on time and avoiding over indebtedness. The second component centres on people who are already over indebted. It warns citizens about unscrupulous practices that target vulnerable indebted people and offers assistance to get out of debt - at an exorbitant price. The organisations working with the Banking Council on the project will assist mainly through facilitating the distribution of pamphlets through their outlets and promote consumer financial literacy. It is hoped that the different organisations involved will institutionalise these issues and communicate them on an on-going basis once the project comes to an end. Because of cost constraints, the media campaign will be limited to a six or twelve week period. The campaign will include interviews with print media, TV, radio as well as the national distribution of pamphlets and posters. To date no attempts have been made by the Banking Council to assess or measure the impact of the campaign. They intend reviewing impact together with their partners after a six-month period, by reviewing reports on bad practices from administrators.

3.4. COMMENT The efforts of the Banking Council are honourable in light of the current high levels of indebtedness and unscrupulous practices of administrators. This initiative is, however, short-lived, reactive and attempts to address the symptoms rather than the root cause of the


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problem. Raising awareness will have limited overall impact on financial behaviour of South Africans as they continue to be caught up in the debt spiral. We anticipate that as signatories of the Financial Sector Charter the Banking Council will increase the level of its involvement in financial literacy programmes. The Banking Council is also well placed in terms of influencing the banking industry to adopt a cooperative approach to support financial education in line with the Charter commitments. 4. THE MICRO FINANCE REGULATORY COMMITTEE

(MFRC)

4.1. OVERVIEW OF THE MFRC The MFRC was mandated in terms of the Exemption Notice of the Usury Act to control registered microlenders in the micro lending industry, and to protect the rights of consumers when borrowing from microlenders. The MFRC has the following responsibilities: • The registration and accreditation of micro money lenders with the council, in

accordance with the accreditation criteria approved by the Minister of the DTI; • Ensuring that all accredited money lenders are acting legally and are complying

with the Usury Act Exemption Notice and the Council's rules; • Handling of complaints lodged by consumers on microlenders; • Inspections of accredited lenders and enforcement of the Exemption Notice and the

Council's rules; and • Informing borrowers, lenders and the general public on the MFRC, its function and

roles. The Education and Communication Division undertake the latter. The primary aim of the MFRC is to promote sustainable growth of the micro lending industry and particularly in un- or underserved markets, while ensuring that consumer rights are protected. The MFRC has a strong financial literacy programme managed by their Education and Communication Division. The Ford Foundation and the SABC fund some of these initiatives.

4.2. PROGRAMME OVERVIEW The MFRC views consumer financial literacy as technical concepts, which need to be broken down into ‘chewable chunks.’ Their content and definition of consumer financial literacy is broad, and includes consumer protection. The MFRC acknowledges that people have a certain existing level of knowledge, and aims at raising or enhancing these levels. The MFRC has a broad target audience, namely: borrowers, lenders, the government, NGOs, trade unions and employers. They have a multifaceted approach to consumer


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education and awareness, use different communication tools to reach the various target audiences, and optimise impact within each group. Media Different messages are communicated via printed adverts, radio and television interviews, media briefings, consumer adverts, talk shows on community radio stations, and so on. A multiple channels approach has been adopted, as the MFRC believes it will help to reinforce the central ‘borrow wisely’ message. This approach includes the following: • Newspapers and magazine coverage is used to create understanding and awareness

among borrowers of their rights and how they can best protect themselves. • Discussions on (mostly) vernacular radio stations have significantly increased

awareness levels of the MFRC, and have informed listeners on common contraventions in the industry and how consumers can protect themselves.

• TV coverage has enabled the MFRC to reach multiple target audiences and to expand on complex issues.

• The MFRC website has been revamped and is accessible for information on the micro lending industry.

Hotline The MFRC complaints officers and call centre serve as a tool to disseminate information to the public. Officers interact with borrowers as they make enquiries and lodge complaints about different microlenders. Workshops The Education and Communication division conducts capacity building workshops for educators and advisors on micro lending information. These educators and advisors are called “Consumer Intermediaries” and represents various ‘intermediary organisations’, such as: church organisations, shop stewards, employee assistance programmes, advice centres and consumer offices. The MFRC aims to educate these intermediaries so that they can, in turn, provide information and assistance to consumers with whom they interact. The goal is to build capacity within different organisations and, at community level, to enable organisations to cost-effectively deliver financial education to their community members. The capacity building workshops cover: law and regulations, national loans register, signing a contract, paying your debt, over-indebtedness, budgeting and saving, complaints handling procedure, other useful organisations, common complaints, and so on. The rationale behind this approach is, firstly, that education is viewed as a process and that these intermediaries are better positioned to facilitate the process through regular interaction with their interest groups or community members. Secondly, the country’s literacy levels are low and offer a challenge in terms of how one initiative can effectively


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target a wide range of people. To optimise reach, the MFRC therefore, employs diverse approaches for the delivery of financial education. Debt Relief Programme In a bid to assist over-indebted consumers, the MFRC initiated a project to establish a network of Debt and Financial Counsellors and Mediators. The programme is using intermediaries such as NGOs, University Law Clinics, DTI Provincial Consumer Affairs offices and the Black Sash. This programme seeks to give advice and counsel people who are in debt and cannot manage their debt. The different intermediaries interact and are involved with consumers, giving advice and information and helping borrowers with complaints and queries. This project will train and capacitate the educators, advisors and paralegals working with consumers, to effectively counsel and advise consumers. They are also using the READ Trust to develop a booklet for financial literacy for over-indebted consumers, which will be made available to consumers through these intermediaries. The intention is to: • Improve personal financial management skills of the consumer; • Provide consumers with information, support and options in dealing with financial

difficulties and any infringement of their rights in the recovery of debts by creditors; and

• Negotiate with creditors for reduced payment instalments, on behalf of consumers. The content of programmes is mostly formulated based on client comments and feedback through the call centre, and public opinion. For example, at the time that the MFRC was established, there were negative perceptions and public outcry on the abusive practices of lenders. The initial focus of the MFRC educational campaign was therefore directed at ensuring illegal activities were reported, and that public awareness was raised on these practices. Over time, the MFRC has identified marked improvement in borrowers’ financial knowledge on these issues, and have partially attributed this change to their awareness and education campaigns. The MFRC closely monitors client complaints and queries coming in through its call centre. This largely directs the content focus of their educational programmes, and also acts as ‘barometer’ on changes in knowledge levels and perceptions in the market place. They also track sources of information to identify the most effective distribution channels. The MFRC is currently looking into ways in which they can more accurately measure the impact of their programmes.


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4.3. COMMENT The MFRC is very active financial education and has played a prominent role in developing and delivering education programmes. The strategic approach of utilizing existing structures and organisations located and operating at local community level goes a long way in terms of maximizing limited resources. However, this approach could be undermined by resource capacity of the different organisations and the sustainability of community based organisations. The escalating levels of indebtedness also remain a challenge, which calls for more action. The thinking within some quarters is that it requires a curb on the extension of credit and more rigorous regulation and supervision of lenders by the MFRC. 5. STANDARD BANK FOUNDATION7

5.1. BACKGROUND Several years ago the Standard Bank observed a very successful and impressive NatWest Bank sponsored, school based Financial Literacy programme operating throughout the UK. At the same time, the Department of Education (DOE) was introducing Financial Literacy as a component of the Economic and Management Science (EMS) learning area but with very limited resource materials. The Standard Bank Foundation decided to support the DOE in the implementation of Financial Literacy with appropriate resources and consequently launched their current school-based programme. The project is presently funded by Standard Bank, with limited in kind support from the Provincial Departments of Education. By the end of 2004 the Foundation would have invested approximately R16 million, with a reach into 15,000 South African schools.

5.2. PROGRAMME OVERVIEW In line with the introduction of OBE, the Standard Bank programme initially focused on Grade 7 working closely with the Gauteng Institute of Education (GIED) and the DOE in the development of the content. Discussions were held with various stakeholders and focus groups were undertaken to refine the content and delivery. A highly successful pilot was launched in 2001 reaching 1,000 Gauteng schools The success of the project in Gauteng led to the signing of working agreements between the Standard Bank and National/Provincial departments of Education. The plan is to reach all schools in all the provinces. The programme comprises a comprehensive set of materials, including: booklets for pupils; an instruction manual for teachers; a CD; and posters. The full programme is also

7 The Gauteng Institute of Education Development, initially called the Gauteng Institute for Curriculum Development is an institute established by the Gauteng Department of Education specifically for curriculum development and was funded jointly by the department and GIED.


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available for download from the internet: www.finlit.org. The content covers basic principles of economics, personal finance, savings and investments, money matters, banking products and business finance. As the material has been developed in support of the current curriculum, no SAQA accreditation is required. The materials are free and the programme is introduced in all schools - public and private. The provincial offices of the DOE assist in the implementation of the programme by arranging for relevant Economic and Management science teachers, and Regional/District officials to attend training sessions at a central location. Materials are distributed to the provinces and then handed over to the teachers/pupils. The initial focus of the programme has been to reach the schools in disadvantages communities first. Table 5: Standard Bank Foundation Financial Literacy Modules Material available on www.finlit.org Module 1 • Introduction to Personal Finances • An opening move • Your ATM card • Be careful around me – I’m an ATM! • Deposits and withdrawals at a bank teller • Receiving cheques • Caring for a cheque book • Electronic banking • Why do people use a bank? • Managing bank service fees • A question of balance • Personal budgeting • Household budgets • Personal taxes • Introduction to Contracts

Module 2 • The origin of money • The history of banking • The importance of banking • Banking services and products • Banking facilities • Electronic banking (e-banking) • Banking responsibilities • The South African Reserve Bank • More about the South African Reserve Bank • The Economic Cycle and the flow of money

Module 3 • Why save? • Making your money grow • More about saving and investing • Insurance – protecting what you have • Budgeting to manage your lifestyle • The cost of borrowing money • Investing – creating real wealth • Some good and bad financial decisions • Playing the investment game

Module 4 • The need for new businesses • The entrepreneur in you • Planning a successful business • Preparation for starting a business • Joshua’s SWOT analysis • Choosing a form of ownership • Calculations for the Business Plan • The results of Joshua’s feasibility study • The Business Plan • From a Business Plan to securing finances • Sources of capital • Managing business finances


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The programme started with a focus on Grade 7 pupils, and is now rolling out to Grades 8-9. During this year they hope to also finalise the programme preparation for roll-out to Grades 10-12 (FET level). However, the materials are fairly flexible, and at times used by other Grades and older learners. The material can also easily be adjusted for adult use, and the Foundation is working on launching the programme as part of the 2006 curriculum of Further Education and Training (FET). Other adult-based education structures will also be considered, such as Adult Basic Education and Training (ABET). The bank has already, on an ad hoc basis, made some material available to NGO’s, universities, business schools, technikons and some ABET centres. There are approximately 28,000 schools in South Africa. The Foundation aims at introducing the programme to 5,000 schools per annum, and by the end of 2004 should have reached 15,000 schools. To date, about 1, 650, 000 learner guides and 11,000 teacher packs have been distributed. Given that between two and eight classes of learners make use of the resources in each school, it is estimated that at least 3.3 million learners have already used the resources. However, the programme is not without its challenges. Roll-out and outreach is largely dependent on the co-operation of the DOE and particularly the provincial educational structures, as they have to arrange training sessions and other logistics. To overcome some of the problems of reaching schools in disadvantaged communities, the bank has also entered into twinning agreements with some of the private schools, who in turn facilitate the outreach to rural and township schools. They are also looking at the introduction of a multi-media programme, to include TV, video, web and print supplements. The intention is to distribute the material to optimise outreach and frequency of exposure. The bank is now also bonding with the Mindset LearnNetwork (sustainable poverty alleviation through technology-based education) in order to increase its educational reach throughout the country.

5.3. COMMENT It is most encouraging to note that the private sector has decided to provide full support to the government in the much needed area of basic educational resources. Working within existing structures optimizes the efforts from all parties. The outreach has been impressive, especially considering the relatively small budget and few hands on team members. It can be assumed that exposure to the content goes beyond that of the actual learners as part of the workbook content calls for inclusion of family and friends at a broader educational level. What is clear is that there is an enormous need for a life skill such as Financial Literacy and these public/private initiatives need to be replicated throughout the country, reaching as many learners’ as possible.


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6. OLD MUTUAL

6.1. BACKGROUND Old Mutual views financial literacy as a fundamental requirement for the functioning of society, and for the optimal functioning of financial markets. Financial institutions have both a moral obligation and a business imperative to promote financial education and responsible marketing practices. Old Mutual has developed and implemented a Central Financial Education Strategy, which is integral to their business and supported by all business units. The programme has wide outreach, but with a bias towards lower income segments of the market. Old Mutual has developed a set of core objectives, as part of their Central Financial Education Strategy. These objectives set the guideline for all their activities in this area, and include the following: • Support of larger brand objectives (this is in line with Old Mutual’s brand strategy

that they must live their brand throughout all aspects of the organisation – internally and externally);

• Educate current and potential policy holders (not conditional); • Teach people to become financially independent and responsible (empowerment); • Align with the government financial literacy programmes; • Satisfy requirements and expectations of the government and other stakeholders;

and • Educate our own employees first.

6.2. PROGRAMME OVERVIEW While all business units are tasked with financial education, the two main drives come from Group Marketing and the Group Schemes business unit. Group Marketing The Marketing Department has implemented a comprehensive programme utilizing various forms of financial education and various delivery channels. These have been executed in partnership with People’s Bank and include the following: • Since 1995 Old Mutual has been producing a ‘Money management Handbook

Series: Six of the Best!” comprising six booklets and a video on the following topics: o Take control! o Bank on it! o Getting Covered! o Get out of Debt! o Laying the Foundations o Savings for the Future


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These booklets have been distributed through People’s Bank branches, at workshops and could also be ordered through the Sowetan or from Old Mutual branches. The most sought after booklet remains: Get out of Debt!

• A radio talk show, which has been hosted in partnership with People’s Bank for the past four years. It is aired for an hour once a week on each of 9 national vernacular radio stations from April to September each year. The show comprises 24 scripts with guest speakers alternating from People’s Bank and Old Mutual. The public can dial in with questions to informed spokespeople.

• For the past couple of years Old Mutual and People’s Bank have also been running a weekly editorial in the Sowetan. They try to link the topics with those on the radio station to reinforce the message.

• The Sowetan articles will be discontinued and replaced by a TV slot on SABC shortly where different modules will be aired, in line with the ‘Six of the best’ video.

• The Marketing Department also dabbled with schools and introduced a pilot school workshop programme. However, this will not be continued and another business unit within Old Mutual (Entrepreneurship) may continue with a schools initiative.

In addition to content research for development of “Six of the Best”, Marketing has also undertaken in-depth research on the impact and effectiveness of the radio programme (notice, liking, perceptions, content, and so on.)

Group Schemes Group Schemes focus on the lower end of the market through employee groups, unions, and so forth. They conduct workshops with a focus on the basics of budgeting and savings, and also distribute leaflets on financial topics at the workshops. To avoid a conflict of interest and prevent the workshops from become a marketing/sales drive, the presenters are non-commissioned staff. In addition, Old Mutual has published informative articles in the newsletters of the Military, Police and Eskom. They have also published informative articles in various newspapers and magazines such as Sarie, True Love, and Drum. In January and February, 2003 they distributed four of their booklets through Drum magazine. Achievements The following facts show the level of outreach through the Old Mutual/People’s Bank programme:

• During 2003 alone, 42,000 people attended 713 workshops.

• Some 250,000 ‘Six of the best’ booklets were distributed during the year.

• Weekly articles in the Sowetan with readership of 1.8 million.


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• Weekly hourly radio interviews were broadcast on nine vernacular stations.

6.3. COMMENT The programme of Old Mutual is remarkable both in size and execution, and nowhere has a programme of its kind been recorded. A multi-media campaign has certain limitations in terms of depth of content and lack of participation. However, there is no comparison in outreach of a classroom-based programme to that of a multi-media programme such as Old Mutual’s. Through a focused approach in terms of target market and consistency of message, as well as the use of various complementary media such as radio, print, booklets and workshops, Old Mutual has optimized frequency of exposure - which will in turn enhance learning. Call-in shows also enable individual problems to be dealt with. However, most important is outreach to segments of the community that would normally not be reached through employee and client-focused programmes, - such as rural communities and the unemployed. In a sense, Old Mutual has taken the classroom to the people. 7. THE HOUSING SECTOR The Housing Loan Guarantee Company (HLGC), the Rural Housing Loan Fund (RHLF) and the National Urban Reconstruction and Housing Agency (NURCHA) all have different initiatives aimed at educating their clients and prospective clients on information pertaining to housing and housing finance. The National Department of Housing has, together with the HLGC, developed a Housing Consumer Education programme for all South Africans. Details of the different initiatives are listed below.

7.1. NURCHA 7.1.1. Overview of NURCHA NURCHA was formed through a partnership between the South African Government and the Open Society Institute of New York in May 1995. NURCHA is a low-income housing finance company that packages funding and takes considered risks to fulfil its mandate of contributing to the national efforts to provide adequate housing for all South African. It is a Section 21 company. NURCHA offers the following products:

• Bridging finance and guarantees. NURCHA offers guarantees to banks or lending institutions that finance housing contractors and developers. They also offer up to 70% of the finance required by housing contractors and developers with the balance provided by the contractor/developer upfront.

• Loans through financial intermediaries. NURCHA has arrangements with financial intermediaries that provide bridging finance as well as project and


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financial management to contractors. These loans are for low-income housing and infrastructure projects.

7.1.2. Programme Overview The education programme focused on informing possible beneficiaries about the value of owning a house, as well as encouraging them to save towards buying their own house. This formed part of NURCHA’s National Savings Scheme that promoted the principle of savings first. NURCHA conducted workshops for up to three hours. These were interactive workshops beginning with short information sessions, leading into a discussion of the relevant concerns by participants. The banks attended these workshops and discussed their cost structures and products with participants. The workshops targeted low-income communities that were keen to see the development of safe and affordable housing in their areas. The workshops were aimed at educating potential savers, about:

• The benefits of saving;

• Being clients of a bank - for many savers their first banking experience;

• The benefits and responsibilities of home ownership; and

• Managing their financial affairs. Through this initiative NURCHA believes it managed to positively influence banking requirements for people without regular income. The number of people opening accounts successfully was positive. In April 2002 the government introduced a new policy requiring most subsidy beneficiaries to contribute R2 479 to the cost of their own houses. This led NURCHA to change the basis of their savings programme, as the R600 savings target was no longer sufficient. All potential subsidy beneficiaries were now required to save a total of R2 479 in order to qualify. NURCHA has not begun recruiting again but new recruits will be linked directly to the new qualifying criteria. NURCHA is currently in discussion with the government about administering certain aspects of the R2 479 scheme. The organisation could run a database of people accumulating the necessary contribution and work with banks on their role as deposit takers. Achievements of the Programme By March 2003 they had arranged financing for 550 projects. As many as 49,000 people attended the workshops and about 44,000 people opened savings accounts for the first time, saving a total of R15 million within a year. About 12 400 became regular savers accumulating funds towards their housing needs. However, of those who opened accounts, only a few had a substantial balance (that is in excess of R1,000). Some did not realise that they needed to service accounts and at some point their accounts became inactive. .


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7.1.3. COMMENT NURCHA should be lauded for promoting the fundamentally important concept of ‘savings first.’ Though taught in the context of housing finance, this lesson is one that is applicable and useful across different scenarios. The potential offered by this approach is potent, as it attempts to increase the level of involvement of banks within under-serviced markets. The programme should be relaunched and run on a continuous basis. Savings could be extended to needs beyond housing.

7.2. RURAL HOUSING LOAN FUND (RHLF) 7.2.1. Overview of RHLF The RHLF is a Section 21 company founded by the Department of Housing in 1996 to utilise a grant of DM50 million for rural housing through the German Government’s development finance agency, KfW. Over the years they have funded more than 45,000 home improvements - mostly built by home-owners or small local builder. The National Housing Finance Corporation first managed RHLF. In 2002 it became an independent and freestanding entity, charged with managing its own risk and mandate. 7.2.2. Programme Overview The RHLF has developed a building advice handbook, which has been translated into Zulu and is in the process of being translated into Setswana. They are also currently upgrading the content of the manual, re-branding it and reviewing the content and look of it. The manual was developed on realisation that clients were not building their houses properly. Poor construction and numerous reports from clients, indicated that people did not know how to build good houses. The handbook is a guide for building a house and repaying a loan and covers the following topics:

• What can I do with my loan? How can I get the most out of my loan? Planning my new home? What do I need to buy? What will it all cost me? ordering building materials, storing building materials; and

• Getting the right builder, what to look for in a builder, issues to be discussed with the builder, payments to the builder, the building contract and avoiding common building problems.

The manual is made available to potential loan clients of retail financial institutions that RHLF lends to. These retail financial intermediaries are granted loans by RHLF and in turn, lend to people in the different rural communities they operate in. The manual is branded as a product of RHLF and perceived as a form of marketing because it enhances the company image. The principal aim of developing and distributing the manual remains educating and informing clients. Educating their clients is perceived as


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a risk management tool as educated clients are able to use loan funds properly resulting in fewer defaults. Once a year, the RHLF reports on the impact of its lending activities. To produce this report, they visit their retail financial intermediaries to establish whether the funds were used for the intended purposes. They also look into the impact on the lifestyle of the loan beneficiaries and obtain comments and feedback on the services provided by the retail financial intermediaries. The RHLF has received reports that the manual is both useful and helpful, providing relevant information and useful references to the different service providers. The RHLF plans to develop a consumer financial education programme targeted at a broader audience, in addition to the builder’s manual. However, adequate resources remain a problem. The RHLF feels that not enough is being done in the rural market, especially on financial literacy. Feedback from clients indicates that they need assistance with building plans, solar energy (where there is no electricity) and financial management. 7.2.3. Comment The manual is perceived as a useful on-going reference and consulting guide. However, the low literacy levels of rural people may limit its usefulness.

7.3. THE HOME LOAN GUARANTEE COMPANY (HLGC) 7.3.1. Overview of HLGC The Home Loan Guarantee Company is a non-profit company created in 1989 under Section 21 of the Companies Act, in response to the reluctance of the financial sector to lend to the high-risk housing market. Originally established with a combination of grant and loan funding, the HLGC have repaid all loans and have a freestanding capital base. The HLGC facilitates access to housing finance for lower income people through the mobilisation and management of guarantees to institutions that fund affordable housing. The HLGC provides guarantees where the risk cover is not ordinarily or affordably available from the commercial market, usually because there is insufficient data to empirically determine the risk. The HLGC manages risk through active participation and intervention with borrowers and lenders. All services and guarantees are provided at a fee. The guarantee premiums are used only to create a provision from which claims are paid. Overheads and operational costs are funded through income from investments and fees from non-guarantee business. 7.3.2. Programme Overview The HLGC provides housing finance-related education and training to the lower income housing market. The main target market is potential home loan clients of retail banks. The


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programme is run mainly using HLGC. The underlying motivation for HLGC in running the education programme is that they believe informed customers carry a lower risk. The main objective of the training is to provide potential borrowers with valuable information related to a home loan and to help applicants make an informed decision when taking up a loan guarantee. The HLGC guarantee training is compulsory for all beneficiaries. HLGC is currently working with all the participating banks that are making use of the loan guarantee. HLGC staff does most of the training, with experienced trainers, fluent in all official languages. Banks such as Standard Bank have their own training programme for their mass-market clients whom they lend to with or without an HLGC guarantee. HLGC assisted Standard Bank in developing its training programme and provided quality assurance. The training is classroom-based with groups of up to 20 people, and takes about 5 hours. HLGC utilises specific education styles to ensure maximum participation and value. Various methodologies are applied to facilitate interesting and informative adult learning, including discussions, case studies, role-play and practical exercises. Content and topics covered by the programmes include:

• General information on the nature and extent of a mortgage loan, and its associated responsibilities;

• What is a mortgage? How do you repay a loan? How does the bank make sure they get their money back? Does it cost you to use mortgage finance? And deposits, repayment periods and interest;

• Affordability: current and improvement; employers housing schemes, savings and government subsidies;

• Deposits; assessment fees; transfer fees; bond registration cost; stamp duties; insurance; mortgage protection; monthly instalments; electricity, water and municipal rates; other expenses such as maintenance and repairs;

• Budget exercise;

• What happens at the bank? application forms, letter of grant, repayments;

• Breach of contract; non-payment of instalments;

• Choice, price and conditions;

• Basic information about the building process;

• Ownership, trustees, agents and costs; and

• General information related to a bond and repayments. Though the programme is compulsory and HLGC believes that it is contributing to lowering their risk, they have not done a cost benefit analysis. Some incidents have been


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experienced where potential borrowers have decided against taking a home loan after attending the course and learning more about what home ownership and having a mortgage entails. The training is not yet accredited but HLGC is busy working with the NQF for accreditation at level 1. 7.3.3. Comment HLGC has gained experience over the years in delivering training. They have an excellent team of trainers that is capable of delivering training in all the official languages of South Africa. The HLGC is highly regarded in the industry. They are dedicated and committed to the provision of quality client education.

7.4. THE NATIONAL DEPARTMENT OF HOUSING: CONSUMER EDUCATION FRAMEWORK

7.4.1. Programme Overview The National Department of Housing has contracted the HLGC to develop a housing consumer education programme. This programme is aimed at empowering consumers to make more informed decisions on improving their living conditions and on issues that can impact on their housing options. This coherent approach is a response by government to the numerous housing problems faced by South Africans. For example, people who have lost their house because of non-payment of their bonds; who do not value and maintain their RDP houses; or who do not understand the importance of paying their rates and so on. A training manual has been developed by HLGC through consultations with all the different housing industry players. The development and delivery of the manual is still in the pilot phase and will be delivered in the following provinces: Gauteng, KwaZulu Natal, Western Cape and the Free State. During the pilot phase, the training will be undertaken by municipal staff that have been trained on the programme. The initial target audience will be South African citizens eligible for housing subsidies, although the target may be broadened depending on the outcome of the pilot phase. During the pilot programme, the delivery mechanisms and content will also be tested and HLGC will develop recommendations on a proposed way forward. The programme will consist of two modules: a generic module and a topic specific module. All beneficiaries of the training will be encouraged to attend the generic course which comprises information on housing options, such as tenure options, housing subsidies, housing finance and savings, contracts, consequences of default, buying, selling, renting, HIV/Aids, roles and responsibilities, and where to go for help with housing problems. The topic specific module includes: rental, social housing and individual ownership. Following attendance of the generic module, participants will select the specific topics they would like to receive further training in.


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7.4.2. Comment The stakeholders perceive this manual a good initiative, yet limited in content with the focus only on housing matters. A broader set of topics should be considered to include the management of household finances in general.

7.5. CONCLUDING COMMENT ON HOUSING EDUCATION Most of the organisations interviewed appeared committed and keen to increase the level of their involvement in financial education. The efforts of the National Housing Department with the development of a training manual is one way of increasing collaboration in delivery of financial education programmes. The different institutions can utilize this manual as a fundamental introductory module to ensure consistency. It should, however, be accommodating and allow for institutions to add additional information if required. 8. CONSUMER BODIES

8.1. BACKGROUND Both the National Consumer Forum and the South African National Consumer Union have some level of involvement in consumer financial literacy. Educating consumers on financial matters and empowering them to manage their finances, is perceived as important to enable consumers to make the right decisions when purchasing products and services. Consumer bodies are also involved in educating consumers on broader issues such as their consumer rights, responsibilities and recourse, in order to settle their disputes and not fall victim to unfair business practices.

8.2. THE SA NATIONAL CONSUMER UNION 8.2.1. Overview of SA National Consumer Union The South African National Consumer Union is a voluntary autonomous body that today represents millions of consumers. Its membership extends from women's organisations such as the Women's Agricultural Unions and the National Council of Women of South Africa, to influential bodies such as DENOSA, the Association of Retired Persons and Pensioners, and KONTAK. As an independent organisation, the Consumer Union speaks with authority on behalf of all consumers. 8.2.2. Programme Overview A booklet: The Consumer’s Guide to Personal Budgeting and Money, was developed by Ina Wilken (Vice Chairperson of the SA National Consumer Union)8. The guide covers the following topics: how to budget; ways to financial freedom; the rights of the consumer; 8 Ina Wilken is currently doing her PhD on over-indebtedness in South Africa, and how this could be addressed.


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and what to do about debt. The booklet was distributed nationally through various structures. Currently it is made available at workshops and presentations where Ms Wilken is invited as guest speaker. Ms Wilken would like the book to be published in bulk and made available to people on a national level, but does not have the necessary resources. She is also currently in discussions with the Provincial Government of the Western Cape Consumer Affairs, who is considering translating the book into Xhosa and Afrikaans. In addition to the booklet, Ms Wilken and representatives of the Consumer Union have made public appearances on national television, and have featured in local newspapers.

8.3. THE NATIONAL CONSUMER FORUM (NCF) 8.3.1. Overview of the NCF NCF was established in 1994 as a body dedicated to the protection and promotion of human rights and interests in South Africa. NCF is an umbrella body with a number of affiliated bodies as members, such as the Black Sash, SA Paralegal and other autonomous bodies. 8.3.2. Programme Overview The NCF has been instrumental in mobilising campaigns against the Credit Bureau (CB), because of the problems consumers experience with being unfairly blacklisted and difficulties in getting de-listed. To date they have had a hand in the following developments:

• Establishment of the office of an Ombudsman; and

• Establishment of a call centre, which will manage all queries and complaints regarding the CB, and get assistance on how to settle those issues.

They are also planning a consumer education programme to inform people on the CB, how it operates and the rights of consumers with respect to the CB.

The NCF is planning to get involved with SASI to further the objective of inculcating a culture of savings in this country. SASI is perceived as not being active in low-income groups. It would be a good initiative for NCF to partner with SASI but target specifically low-income groups. The NCF is also involved with the FSB consumer education programme. In 2003 they broadcast radio programmes on Lukhozi FM for 10 weeks on Thursdays from 14h00 to 14h30. This talk show covered topics such as credit, you and your bank, cost and fees, budgeting and insurance. The programme ran at no cost within a limited time period. According to the station presenter, listenership grew by 40% during this period. NCF also witnessed an increase in the number of queries and calls to the station with reference to the talk show and issues discussed.


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In order to roll out more financial education programmes and increase their involvement in this area, the NCF is actively trying to recruit representatives with a financial background within the different provinces. This will enable them to develop and manage campaigns at provincial level, expanding the current Gauteng focus. There is a huge demand for this programme, but its expansion is limited by resource constraints. 8.3.3. Comment Both consumer organisations are passionate about financial literacy. However, their level of involvement in financial education programmes, is limited due to their lack of financial resources. As consumer organizations, their interests are primarily rooted in consumer protection, dedicated towards resolutions of consumer complaints, unfair business practices and lobbying support for the protection of consumer interests. Though they are not principally involved in financial literacy, they have gone to great lengths in ensuring that they address the financial education needs of the South African consumers.

8.4. SUMMIT FINANCIAL PARTNERS 8.4.1. Overview of Summit Financial Partners Summit Financial Partners is a private consulting company that has been in operation for the past four years with offices in Cape Town, Johannesburg and Durban. The company employs some 26 staff and more than 200 trainers. The founder and CEO is a chartered accountant, and when previously employed he witnessed the negative impact of payroll lending where employees were at times left with almost no income to take home. Sometimes money lenders were waiting for employees outside their work premises. Initially this led him to start a money lending business with reasonable interest rates, but he soon realised that people were simply taking on too much debt. A cheaper source of credit did not minimise the burden of over-indebtedness. What was needed, was financial education to teach people how to budget and manage their finances. This led to the formation of Summit. 8.4.2. Programme Overview Summit’s consumer financial literacy programme is called: M-POWER Financial Wellness Programme, and it is aimed at promoting the general wellness, over-indebtedness and financial abuse of employees. Summit believes that lower indebtedness positively influences an employee’s working behaviour and results in a reduction of business costs associate with highly indebted staff:

• Reducing both mental and physical levels of absenteeism related to financial stress of the employees;

• Reducing stock losses, petty theft and internal fraud;


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• Reducing staff turnover levels resulting from employees needing to realise pension/provident funds to settle outstanding debts or to escape the burden of garnishee deductions; and

• Reducing the number of garnishee orders by challenging their validity. In their research, Summit discovered that out of a total of over 3,000 debt judgments issued per day, almost 80% had irregularities. They also noticed that the interest/debt relationship often contravened the in duplum rule. Summit has developed interesting comparisons between different lenders and the total cost of credit.

The M-POWER Financial Wellness Programme comprises three strategies: first, a prevention strategy; second, a general financial wellness strategy; and third, a specific distress strategy. The programme is presented in various forms: • Multi-lingual Presentation: A 20-minute presentation, which, with discussion,

normally lasts about 3.5hours. It starts with visits to the company to conduct an analysis into issues such as the language(s) being used; the socio-economic profile of employees; and general literacy levels. The presentation is then tailored to their specific needs. Groups of about 20 employees attend a presentation, to facilitate discussion between participants.

• Money Management Guide – A comprehensive Money Management Guide with the above course material, is provided to learners. It contains practical examples of effective personal financial management to facilitate ease of learning.

• Computer Based Training (CBT) – This comprises an outcomes-based training programme accessible on the Internet or the company’s intranet with CBT software. Summit administers the programme and provides technical support. The programme covers the same material as the presentation, but requires learners to answer questions at the end of each module in order to proceed to the next module. The progress and the status of each employee logged onto the programme, are reported to the employer on a monthly basis. CBT is targeted at semi- and skilled employees.

• Train the trainer: This is a four-day course available to in-house training departments.

Other activities include:

• The financial web zone: electronic access to advice and information geared towards assisting and empowering managers and staff members to handle all personal financial matters; and

• Personal financial consulting and counselling.


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Prevention Strategy The prevention strategy takes the form of a once-off training and education programme to bring employees up to speed with the basic principles of personal finance. Topics include:

• Be your own business and make a profit;

• Practice clever spending;

• Budget to maximise profits;

• The power of savings; and

• The dangers of borrowing.

General Wellness Strategy The general financial wellness strategy aims to empowering individual employees and their supervisors, to resolve their own financial problems. It provides information and advice through different mediums. Distress Strategy The distress strategy includes personal financial counselling. Employees receive one-on-one advice and counselling sessions to address their specific personal financial problems. 8.4.3. Comment The Summit programme represents a very comprehensive and innovative approach. As with all employee-based programmes which have to be paid for by employers, smaller businesses can seldom afford such programmes and outreach is therefore generally limited to the formally employed in large corporations. Summit is looking at expanding the reach of the programme, and is currently in discussions with the Ministry of Justice about developing a training programme for the clerks of the court. This programme will enable them to identify irregularities within the system regarding garnishee orders.


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Prepared by ECIAfrica Consulting (Pty) Ltd Annex E 79

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ANNEX E: ECONOMICS OF SAVINGS, INDEBTEDNESS AND HIV/AIDS An analyses of the relationship between HIV/Aids and financial literacy, requires a review of the link between HIV/Aids and consumption (in the case of an individual) or production (in the case of a firm). To understand this concept we need to follow six steps: 1. Studies have provided some evidence that exposure to HIV increases with

educational attainment, however: (i) this effect is partly off set by a higher probability of safer sexual practices. (ii) excess infection levels seen among more educated groups may disappear as the epidemic progresses because educated people may adopt less risky lifestyles quicker than other groups (Cogneau and Grimm, 2002)1. Hence education, depending of the level, has an impact on individual’s exposure to HIV; later on in the recommendations the issue of literacy level in terms of finance and HIV/Aids will be explored in more detail.

2. Education yields returns in the future, thus investment in education has to be seen

as expanding the individual’s time horizon and preferences. 3. Subjective or individual’s time preferences are indicative of the value placed by

someone on the future as compared to the present. In economic terms, the problem can be constructed by examining the individual’s decision between consumption today (C1) and consumption tomorrow (C2), i.e. savings. The decision problem assumes that the individual maximizes a utility function:

U = f (C1, C2 / [1+ρ])

s.t. C1 + C2 / (1 + r) = Y*

where ρ is the subjective discount rate or subjective time preference2 and C2/[1+ρ] is the net present value of C2, subject to a total earnings constraint Y*, where r is the real interest rate. We can then solve for C1 and C2 and divide the two to find the optimal ratio of savings to current consumption as:

C2/ C1 ≈ 1+ r – ρ;

Where r – ρ is also thought of as the measure of our impatience.

1 Cogneau, D. and Grimm, M., “The distribution of Aids over the population in Africa. Hypothesis building from individual answers to a DHS with an application to Cote d’Ivoire”, Document de Travail, DT/2002/02, DIAL. 2 High ρ indicate an individual preference for current consumption.


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4. A realistic assumption in Southern Africa is that ρ > r. That is why increases in interest rates do not necessarily curb spending (a headache for the monetary policy committee of central/reserve banks). This is assumed to be the case for lower income groups: consumption today is preferred to savings.

5. The progression of HIV infection exacerbates the ‘risk of death argument’3, which states that a preference for current consumption rather than savings is partly based on the fact that one may not be alive in the future to enjoy the benefits of savings. This brings two important points:

• In case the individual is HIV positive (and knows his/her status): savings is definitely not the preferred choice, hence C1 preferred. Since the progression of HIV infection is (or can be) slow, this preference may also entail risky sexual behaviour.

• In case the individual is HIV negative: depending on the education level and of his/her awareness of HIV/Aids, C1 may be preferred to C2 at low income scale. As the level of education and awareness on HIV/Aids increases we expect individuals to adopt safer sexual behaviour. There is some indication from the recent Behavioural Survey (2002) in Gauteng Province that awareness and education on HIV/Aids amongst the youth is having some positive impacts.4

6. Following from point 5, not only is the value placed on C1 greater than C2, resulting in potential indebtedness, but there exists a cause-effect relationship with sexual behaviour and consumption behaviour.

The question arises: what does all this mean? It provides an alternative way of examining the relationship between education level and literacy, and risk of HIV infection but also on the relationship between people’s consumption and sexual behaviour. Educating people on personal finance has the potential to be a very powerful tool for changing behaviour in general and behaviour with respect to HIV/Aids in particular.

3 Pearce, D., Barbier, E. and Markandya, A. (1990), Sustainable Development: Economics Environment in the Third World, Earthscan Publications Ltd: London. 4 Personal communication with the Inter-sectoral Aids Unit, Gauteng Provincial Government.


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Prepared by ECIAfrica Consulting (Pty) Ltd Annex F 81

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ANNEX F: LITERATURE REVIEW

UNITED STATES OF AMERICA America Saves: A Coalition between Ford Foundation and Consumer Federation of America Foundation (CFAF), <www.americasaves.org>. Banker’s Guide to Financial Literacy Resources; Federal Reserve Bank of San Francisco <www.frbsf.org>. Braustein S & Welch D, An Overview of Practice, Research and Policy. Division of Consumer and Community Affairs, Federal Reserve Board. Washington D.C. November 2002. Carr James & Schuets Jenny (August 2001), Financial Services in Distressed Communities: issues and answers. Fanie Mae Foundation. <www.fanniemaefoundation.org>. Clark R & d’Ambraiso BM, (December 2003), Ignorance is not bliss: the importance of financial education. TIAA-CREF Institute. <www.tiaa-crefinstiture.org>. Cohen, M & Sebstad J (April, 2003), Financial Education for the Poor. Financial literacy working paper Number 1. Consumer Bankers Association 2002 Survey of Bank-Sponsored Financial Literacy Programs; April 2002. Conway T et al (June 2000), Social Protection: New directions for donor agencies. Faulkner-MacDonagh and Muhleisen Martin, Are U.S. Households Living Beyond Their Means? Finance & Development, March 2004, Volume 41, Number 1. Financial Exclusion: A literature and research review. Financial Services Authority. July 2000. Financial Literacy and Education Coordination Act <www.cuna.org/gov>. Financial Literacy Community Outreach Act, <www.theorator.com/bills>. Financial Literacy Enhancement Act <www.cuna.org/gov>. Financial Literacy For Kids <www.prosperity4kids.com>. Federal Reserve Bank of San Francisco, 2003, Guide to Financial Literacy Resources Financial Literacy: A Simple and Complex Idea <www.fairlending.com/finlit>.


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Gramlich Edward M. Remarks at the Financial Literacy Teacher Training Workshop, University of Illinois at Chicago, May 2, 2002. Greenspan Alan, the importance of financial education and literacy, remarks before the National Council on Economic Education, Chicago, 26 October 2001. Gross Karen, Consumer spending , debt and bankruptcy. Hilgert A. Marianne & Hogarth M. Jeanne, 2003, Household Financial Management: The connection between knowledge and behaviour. Jacob Katty, Hudson S. & Bush M., (January 2000), Tools for Survival: An analysis of financial literacy programs for lower income families. Lyons A., Hogarth J, et al; Evaluating Outcomes of Personal Financial Education, Consumer Interests Annual, volume 49, 2003, special panel session held at the 2003 conference of the American Council of Consumer Interests. Medium and long term retail saving in the UK: A review. July 2002. <www.hm-treasury.gov.uk>. Montana State University Newsletter, March 2002, volume 1, issue 3. Family financial literacy. National Community Reinvestment Coalition; Financial Literacy Campaign. <www.ncrc.org>. National Bureau of Economic Research <www.nber.org/papers/>. Personal finance and the rush to competence: financial literacy and education in the US . Fanie Mae Foundation, 2000. Institute for Socio-Financial Studies, Middlebrug, Virginia. The Credit Union Commitment, 2002, Financial Literacy in Schools: <www.cuna.org>. Toussaint-Comeau M & Rhine S.L., (December, 2000), Delivery of Financial Literacy Programs. Federal Reserve Bank of Chicago. 12 Steps to good money management <www.bankrate.com>.

UNITED KINGDOM Adult Financial Capability Framework. Basic Sills Agency. Financial capability through Personal Financial Education (2000), Department for Education and Employment. <www.dfes.gov.uk/publications/>.


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Financial literacy-Money Matters Birmingham Settlement; A case study of Basic Skills Agency. Financial Literacy in Adult Life: research Summary (1996), National foundation for Education research. Financial Services Authority Summary Annual Report 2002/03. Johnson Paul, CAT Standards and Stakeholders; their role in financial regulation. FSA Occasional Paper 11. Summing Up: bridging the Financial Literacy Divide (2001), National Association of Citizens Advice Bureaux. Vass Jane (September 1998), A guide to the Provision of Financial Services. A report commissioned by the Personal Investment Authority. www.pfeg.org www.basic-skills.co.uk www.bba.co.uk www.rbs.co.uk www.fairbridge.org.uk www.dfes.org.uk www.fsa.gov.uk www.nacab.org.uk www.fep.org.uk www.ltscotland.com/resources/financial_ed_position-paper.pdf www.accac.org.uk/download_pdf/pse.pdf www.natwestf2f.com www.proshare.org/


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AUSTRALIA Adult Financial Literacy in Australia (2003), ANZ Banking Group, 100 Queen Street Melbourne VIC 3000. <www.anz.com>. La Cava, G. and Simon, J. (2003) A tale of two surveys: Household debt and financial constrains in Australia. Research Discussion paper, August. Reserve Bank of Australia Bulletin (2003) Household debt: What the data show. March <www.netec.wustl.edu/woPec/data/Papers/rbarbardprdp2003-08.html>. www.fpa.asn.au/home/news www.asic.gov.au/fido/fido.snf www.asic.gov.au/asic/asic.nsf/byheadline/About+ASIC?opendocument www.cfltaskforce.treasury.gov.au/content/trms.asp?NavID=2 www.abs.gov.au/ausstats www.afr.com/articles/2003/09/26/

SOUTH AFRICA African Bank. Money School Modules. Banking Explained (2000), Educational Support Services Trust for the South African Reserve Bank. CIDA City Campus Summary: A Human Asset Strategy for Africa. Government Gazette, Vol. 442, No. 23123, 2 April 2002. Ina Wilken, 2002. The Consumer’s Guide to Personal Budgeting and Money Management. IW Consumer Services. MFRC. Education Manual. Money; How to Make it Grow- 2000, Educational Support Services Trust for the South African Reserve Bank. Mongimali Persal Management Campaign Final Report. NURCHA. 2003 Annual Report.


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NURCHA. 2003. Newsletter 3rd Quarter. READ, 2001. Investing in Shares. Sponsored by The Department of Public Enterprises and JSE. Rural Housing Loan Fund. Making Your Housing Loan go as far as your dreams. A building advice handbook. Rural Housing Loan Fund. 2003 Annual Report. SETAs: Sector Education and Training Authorities. South African Qualifications Authority Act, No. 1521. 4 October 1995 No. 58 of 1995: 1995. Office of the President. Summit Financial Partners. MPower, Be Your Own Business. www.africanbank.co.za www.blacksash.org.za www.fsb.co.za www.hlgc.co.za www.housing.gov.za www.iob.co.za www.loa.co.za www.mfrc.co.za www.mindset.co.za www.reservebank.co.za www.rmb.co.za www.saccol.org.za www.standardbank.co.za www.tebabank.co.za


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www.savingsinstitute.co.za

BRAZIL www.financenter.terra.com.br/ www.citigroup.com/citigroup/corporate/foundation/finedu.htm www.microfinanceopportunities.org www.sobresites.com/financaspessoais/fpessoais.htm www.bancoreal.com.br

INDIA www.rbi.org.in


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Prepared by ECIAfrica Consulting (Pty) Ltd Annex G 87

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ANNEX G: CONTACT LIST Table 1: Government Departments, Parastatals and Academic Institutions Institution Name Telephone

Department of Education Tloubatla Phumelele 011 3550000 Department of Education Edson Williams [email protected] School Principals Anton van Wouw

Gerhardt Meyer 012- 460 3024

ABET Aubrey Mathole 012 3125493 SANLI Vernon Jacobs 012 312 52 97 SAQA Eddie Brown 012 4315000 UNISA Prof Rachel Barker

Liesel van der Walt Norle Schoonraad Prof Mc Kay Mario Sales

012 429 6772

UCT Daryl Collins 021 650 2470 UWC Andre Stolz 021 959 3714 CIDA City Campus Teddy Blecher

Tracy Bourn Pepse Pokane

011 833 8825 083 3001536 083 228 2895

Department of Social development

Selweyn Jehamo Reana Ally Rudie van Loggerenberg

0123127748/6 0123127808 012 3127531

Department of Agriculture Rector Rapoo Joe Kgobokoe

012 3197323 012 3197189

DTI Nweti Maluleke Maghuta Mthalele Mxolisi Maome Nozipho Buthelezi

012 310 93 15

National Treasury Mongimali Persal State Employees

Gavin Hatford Jay & Jay Group

082 903 1725

National Treasury Kuben Naidoo 012 315 53 85 InSeta (Insurance sector) Glen Edwards/Cheryl

Penny MacKrory Sheana Cambleton Shirley Steenkamp Saber Pattel

011 484 0722 011 6161496

FasSeta (Financial and accounting services)

Cheryl James Evon Sawyer

011 476 8570

ETDPSETA Stella 011 807 5621


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Education, training and development BankSeta Frank Groenewald

Ass Dalene Mans 011 805 9661 082 4985161

PAETA (Primary agriculture)

Fanie Petla 012 3251655

Land Bank Martin Matutu 012 3123657 Home loan Guarantee Company

Rudolph Willemse 0117263150

SA Post Office Sadi Segwapa 012 401 7809 Khula Moeketsi Mofukeng – Marketing

Manager 011 807 8464

Table 2: Statutory and Self-Regulatory Bodies Institution Name Telephone

FSB Gerry Anderson Olivia Davids

012 422 2821

MFRC Peter Setou Mpho Thekiso- Project Manager for Debt Relief Program

011 647 4400

Table 3: Industry Bodies – Non Charter Members Institution Name Telephone

MLA Hennie Ferreira CEO 083 572 1214 SACCOL Wafaa Abdurahman 021 418 7258 NASASA National Association of Stokvels of SA

Stephen Japp

082 552 8977

SASI Yvonne Benn 082 556 4485 Table 4: Industry Bodies: Charter Members Institution Name Telephone

Banking Council Cas Coovadia 011 370 3500 SAIA Vivian Pearson 011 726 5381 LOA Connie Motshumi 082 375 6710 ACI Bonnie Mincher 011 325 6223


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Table 5: Signatories to Financial Sector Charter: Banks Institution Name Telephone/e-mail

Nedcor FSC Representative Colin Donian

SBSA Joan Ratone [email protected] Bank Foundation

Ricky Buwalda [email protected]

ABSA Kenneth Clark FNB Martina Langa

Benny Anderson 011 352 9891

Teba Sam Yona (CSR) Henry Pistorius

011 203 1500

African Bank Marylene Budow Winnie Kunene

011-256 9055

Table 6: Signatories to Charter: Life Assurance Companies, Short Term Insurance Institution Name Telephone/e-mail

Sanlam Deon Lessing: Marketing Director [email protected] Old Mutual Lilian Mazebenza [email protected] Metropolitan Life Vuyisani Sikobi & Liezel [email protected]

Table 7: NGOs, MFIs, Donors and Trusts Institution Name Telephone/e-mail

Black Sash Lauren Knott 044 382 4458 SA National Consumer Union

Ina Wilken

083 268 9071

National Consumer Forum Thami Bolani 083 679 9489

NURCHA Ms Nonhlanhla Mnjoli-Mncube Sitembele Mase

011 469 4079 011 229 1024

You and Your money Melanie Horne or Liesel Stewart 021 761 3287 READ Educational Trust Val Verwer 011 646 3000 Marang Ntokozo Kwane 012 320 1745 NGO: Beehive Wessel Venter 082 452 9306 NGO: Small Enterprise Foundation

John de Wit Khalipe Mashaba - HSDU

015 307 5837 073 133 0590

LENDCO John Aitken 031 305 3030 IEMAS Mr PS van Dyk 012 674 7074


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Mine Workers Development Agency (MDA)

Mamello Masipa 011 403 0277

Table 8: Trade Unions and Employee-based Programs Institution Name Telephone

SACP/COSATU Jara Mazibuko Niva Moketla Jan Mahlangu

011 339 3621 082 563 6968 011 339 4911

NAFCOC Johannes Khoale Isaac Moroeng

083 683 3163 082 667 3286

Table 9: Private/Consulting Companies Institution Name Telephone

Business Education Design Andy Hoffman Ian Clarke

082 600 7341 011 447 7712

Pearson Fatima 011 315 3647

Summit Financial Partners Clark Gardner 011 807 7866

Vukani Africa Modise Motloba Sandile Njilo

082 775 0860 082 377 0373

Investment Wise Joanne Miller 021 422 2701 Ikhumiseng Consulting Rags Poppleton 082 224 5343 Vuka Trust Natalie-Ann Powell 072 396 5623 Investment Wise Joanne Miller 021 422 2701 Table 10: Media Institution Name Telephone

SABC Education: Soul buddyz

Fiona and Marcia 011 714 61 79

KagisoTV Bertha Dlamini Leora Rajak

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