1. Making Sense of Financial Capability Surveys around the World A Review of Existing Financial Capability and Literacy Measurement Instruments The World Bank Siegfried Zottel/Valeria Perotti RBI-OECD-World Bank Regional Conference on Financial Education New Delhi, 4-5 March, 2013

2. 2 Purpose of the Review o Guide policy makers on existing measurement instruments o Useful for policy makers who prioritize Fin. Capability, Fin. Inclusion or Fin. Consumer Protection o Describe and compare key instruments that are: Innovative Focused on demand-side (household vs. business) Well established Well documented

3. Consumer Fraud US WB FCCP Portugal Jump$tart Singapore Eurobarometer Survey of Consumers New Zealand UK FSA US Health & Retirement Study Ghana FSS OECD/INFE CP Kenya Kenya FinAccess FinScope Fiji WB/Russia FLIT Financial Diaries Findex 3 Surveys Reviewed FSA Consumer Awareness

4. 4 Content of the review o Key questions addressed by the review: 1. How can a survey support policy making? 2. What do these surveys measure and how? 3. How can a survey be implemented properly? 4. How to analyze and present the data to inform policy?

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

6. Baseline assessment of weak areas/targets Identify potential channels for info or FE Understand behavior related with personal or household finances Understand knowledge/behavior relationship Baseline assessment of weak areas/targets Identify potential channels for info or FE Understand behavior related with personal or household finances Understand knowledge/behavior relationship Determine what products people use Understand reasons for limited use Understand how people use information Understand attitudes towards fin. issues Determine what products people use Understand reasons for limited use Understand how people use information Understand attitudes towards fin. issues Assess awareness of CP laws, mechanisms Identify potential victims of fraud Assess attitudes and trust in providers and regulators Assess awareness of CP laws, mechanisms Identify potential victims of fraud Assess attitudes and trust in providers and regulators Capability Inclusion Consumer Protection

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

8. Financial Capability Knowledge of financial concepts Awareness of financial products and services Practical Know-how inflation compound interest Risk diversification returns on investment insurance budgeting Questions on… money illusion

9. Financial Capability Knowledge of financial concepts Awareness of financial products and services Practical Know-how Questions on… Awareness of product existence Basic product features Advantages of using products Risks and costs

10. Financial Capability Knowledge of financial concepts Awareness of financial products and services Practical Know-how Questions on… How to set up a budget How to keep financial records How to make payments How to open a bank account How to seek for recourse

11. Financial Capability Questions on… Budgeting Paying bills on time Overspending Saving Borrowing Making choices Dealing with unexpected expenses/income loss Planning for old age BehaviorAttitudes

12. Financial Capability Questions on… Reasons for or for not saving, borrowing, investing, budgeting, and choosing specific financial products Attitudes toward impulse purchases Attitudes towards the future Confidence in own retirement plans Propensity to save BehaviorAttitudes

13. Financial Inclusion Questions on… Types and number of financial products used Ways of accessing financial services Frequency and modality of use What products are used for BehaviorAttitudes

14. Financial Inclusion Questions on… Reasons for/for not using specific financial products Perceptions on service accessibility Reasons for changing a product Barriers in accessing services BehaviorAttitudes

15. Consumer Protection BehaviorExperienceAttitudes Questions on… Actions taken to resolve issues with fin. service providers Where complaints were filed Entities consulted in case of disagreement

16. Consumer Protection BehaviorExperienceAttitudes Questions on… Satisfaction with financial products and service providers Trust in service providers Perceptions on financial regulators and supervisors Confidence in resolving disputes

17. Consumer Protection BehaviorExperienceAttitudes Questions on… Experience with pyramid schemes Being billed for a service not received/product not requested

18. 4. How can a survey be implemented properly?

19. 19 Main approaches for survey implementation o Who should be interviewed? Individual vs. household o How to ensure comparability over time? Repeated cross-section vs. panel survey Panel surveys are more time resource-intensive Use same questions (make sure they are still meaningful!) Employ consistent sampling methodology o How to ensure comparability across countries? Coordinated joint efforts by all countries involved Replicating what has been done (requires caution!)

20. 20 How can data quality be ensured? o Developing a well-tested questionnaire Reviews of existing surveys Experts groups Qualitative testing (focus groups, cognitive interviews) Quantitative testing (pilot surveys) o Sampling design o Mode of interview

21. 5. 5. How to analyze and present the data to inform policy?

22. 22 Main approaches for data analysis o How to develop indicators? Frequencies and proportions of individual questions Combining data by creating composite scores (e.g. sum of correctly answered fin knowledge questions) Weighted scores Factor analysis o How to identify potential target groups? Use cross-tabulations Regressions Segmentation (by ranking people according to scores) Cluster analysis

23. 23 THANK YOU! Contacts: vperotti@worldbank.org szottel@worldbank.org