Paper

Financial Capability and the Poor: Are we Missing the Mark?

Understanding consumers’ perspectives on financial capability
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This paper examines the concept of financial capability from the perspective of consumers. It is based on interviews in Kenya with customers of formal and informal financial services.

The paper notes that data from the interviews challenge fundamental assumptions about the role of financial capability in financial inclusion. Findings include:

  • Financial capability in the Kenyan context has more to do with optimizing spending and investment amidst erratic cash flows than with using formal financial services;
  • Discipline and commitment are central to financial management;
  • Consumers use financial devices such as M-PESA and savings groups to aid discipline;
  • Kenyan consumers consider experience more important than education in strengthening financial capability;
  • Channel of delivery of a financial service may pose less risk to consumers than the nature and complexity of the product.

The paper highlights differences between cash flows of middle-income households in advanced economies and low-income households in developing countries. It concludes with policy implications of the findings. These include the need for effective institutional level consumer care services, role of redress mechanisms and transparent communications in client retention and trust-building.

About this Publication

By Zollmann, J. & Collins, D.
Published