Financial literacy is considered as one of the main tools to prevent over-indebtedness that has plagued many microfinance borrowers. A consistent and effective financial literacy program will ensure that borrowers receiving loan funds will use them for its intended purpose and will not divert it for non-productive purposes.
One main concern however is the perception that financial literacy is an added burden both for the borrower and the loan staff. On one hand, ineffective financial literacy methodologies are viewed by clients as time consuming, taking away precious time from their income-generating activities. On the other hand, most loan staff has a notion that doing financial literacy activities reduces their level of performance. It does not contribute to the attainment of their targets and their main functions of generating borrowers and collecting repayments.
When done properly, financial literacy will develop the capacity of the clients to become prudent managers of funds and responsible borrowers. This in turn will lower the cost of providing services by the MFIs. Applicable methodologies should be the main consideration in the design of FinLit materials. Among the key features that can help make the materials effective are the following:
- The AUDIENCE of the sessions should primarily be the current clients, but it should also encourage non-clients as well. Efforts should be made to reach as much audience as possible.
- The materials should use VISUALS to reinforce verbal presentations. Structured-learning activities (SLAs) are applied in sessions where it is applicable. Texts in the visuals should be minimal so as not to intimidate clients who cannot read.
- The MATERIAL should be designed as a “discussion-starter” and should be able to generate interest and participation among the audience.
- The loan staff shall be the FACILITATOR in the conduct of the learning sessions. The sessions shall be interfaced with her/his regular field activities like loan assessment, collection and monitoring activities.
- The SESSION should be conducted in the field whenever possible, as often as possible to cover as many topics as possible. The session should not be made as a requirement for loan release.
- The material should be PARTICIPATORY and INTERACTIVE, so that maximum participation from the clients can be expected and encouraged.