financial capabilities in mexico results from the 2012 national survey on financial behaviors,...
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Financial Capabilities in MexicoResults from the 2012 National Survey on Financial Behaviors, Attitudes and Knowledge
G20-World Bank-OECD Conference on Financial Capabilities and Consumer ProtectionMoscow, June 13, 2013
Rekha ReddySenior Economist
Finance and Private Sector Development Group, Latin America Region The World Bank
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The access and usage of a portfolio of financial products and services for the population, under an appropriate regulatory framework that protects the interests of users and promotes its financial capabilities.
Working definition of
Financial Inclusion
QualityAdequacy of
financial inclusion
UsageBetter
Opportunities
Access
Higher number of people included in the financial systemFinancial Inclusion
Curve
Increase in financial
penetration
• Branches (Banks & MFIs)• ATMs• POS (debit & credit card)• Branchless banking
Savings, transactions, credit, insurance, pensions, remittances.
• Appropriateness of products & services• Consumer empowerment• Enabling environment
Financial education
Consumerprotection
Financial inclusion / financial education measurements (supply and demand-side data)
Financial Capabilities Relevance to Mexico’s Financial Inclusion Strategy
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Context of 2012 Mexico Survey
Key Challenges in Financial Capabilities
Policy Implications
Outline
Financial Capabilities Relevance to Mexico’s Financial Inclusion Measurement Efforts
Dim
ensi
onM
easu
rem
ent i
nstr
umen
ts
Regulatory reports (Supply-side data)
GIS for Financial Infraestructure
Demand-side surveys (ENIF2012)
Qualitative studies (focused & impact studies)
FE Program evaluationsFinancial Capabilities
Survey (WB) Financial Literacy
evaluations (OECD) FL school curricula
evaluations (PISA)
Regulatory Reports on complaints (Supply side data)
Impact evaluation of active supervision: Mystery shopper
assessments (CGAP)
Indi
cato
rs
• Access points by each 10,000 adults
• Percentage of municipalities with at least a financial access point
• Percentage of population that lives in a place w/one access point
• Percentage of adults with at least a deposit account in a formal institution
• Percentage of adults with at least one credit account or credit card in a formal institution
FINANCIAL INCLUSION
Access Usage Financial Literacy &Education
Consumer protection
New generation of “Quality” indicators
to be developed
Source: CNBV, 2012. 4
“Core Set of Indicators”: AFI
o Survey sponsored by the World Bank Russia Trust Fund for Financial Literacy and Education and the World Bank Latin America Region in conjunction with national counterpartso Mexico Counterparts: CNBV and CONDUSEF
o Phases of Survey Development o 2010: conceptual framework developed, qualitative research begins,
13 focus groups o 2011: qualitative research 48 in-depth interviews, pilot testing of
quantitative survey o 2012: Nationally representative survey rolled out in June-July to
2,026 respondents, 18 years and older making financial decisions for their household or themselves
o Mexico customized core Russia Trust Fund questionnaire (ex: OECD-INFE financial knowledge module, financial education, use of government programs)
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The 2012 Financial Capabilities Survey
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Context of 2012 Mexico Survey
Key Challenges in Financial Capabilities
Policy Implications
Outline
1. Many Make Plans…. Far Fewer Adhere to Them
Only 29% of the population reports having money left over after paying for basic expenses such as food and other necessities.
70%of adults reported planning how they used the money they received.
34%reported always keeping to their plan.
63%Say they know how much is available at home for daily expenses…
18%know exactly how much they spent in the last week.
Source: World Bank analysis of Mexico Survey on Financial Capabilities, 2012
45% of survey respondents felt they could cover a major expected expense of one month’s income without borrowing
Just 34% felt they could cover a major unexpected expense
Major Expenses
Major Expenses
Children’s Future
Children’s Future
Less than 1/3 of the population under age 60 reports plans to cover old-age expenses
Over age 60, nearly 2/3 report insufficient or no provisions for living costs
Old AgeOld Age
Slightly more than half of the parents surveyed had plans to support their children’s education
Plans to save for children’s inheritance were less common (>20%)
2. Limited Funds Set Aside for Future Expenses
Source: World Bank analysis of Mexico Survey on Financial Capabilities, 2012
Ability to Cover Major Unexpected Expenses by Income
29%
High Income
Middle-High Income
Low-Middle Income
Low Income
18%
12%
14%
28%
38%
51%
55%
54%
43%
36%
31%
17%
Regularly Sometimes Never
Source: World Bank analysis of Mexico Survey on Financial Capabilities, 2012
Percent Reporting Shortfalls in Money For Necessities
Report borrowing from family or friends to make ends meet
3. Several Indications of Financial Strain, Particularly Among Low-Income Individuals
Family members—namely mothers and fathers are the most common source of guidance.
No one
Other
Other family member
A teacher
Father
Mother
0% 10% 20% 30% 40% 50% 60%
51%
5%
4%
7%
22%
26%
Percentage of Respondents
4. Half of the Mexicans Surveyed Were Never Taught to Manage Their Money
Teachers of Money Management
Source: World Bank analysis of Mexico Survey on Financial Capabilities, 2012
5. Many Financial Products Users Seem Optimisticin their Assessment of their Ability to Choose Products
…
…
All Products
Account at a financial institution
Personal Loans Tandas Pawn
Shops
Look for information from distinct sources 57% 71% 66% 53% 52%
Consider various alternatives before deciding 62% 76% 71% 60% 60%
Look to find the most appropriate product for needs 68% 76% 74% 68% 68%
Verify terms and conditions before contracting 68% 81% 76% 72% 64%
Verify terms and conditions in detail 62% 66% 51% 61% 60%
60% Of those borrowing from pawnshops and participating in tandas (informal rotating savings groups) say they verify terms and conditions in detail
Source: World Bank analysis of Mexico Survey on Financial Capabilities, 2012
Mexicans have weaker performance relating to interest rate calculations and the concept of risk and portfolio diversification.
Mexico’s level of correct responses to questions related to numeracy, the time value of money and the interest paid on a loan were in line with other countries surveyed.
Time value of money Calculation of principle and interest
Compound interest Risk and Return Diversification0
20
40
60
80
100
Mexico Armenia Ireland PeruSouth Africa UK
6. Relative Weaknesses in Financial Knowledge Also Suggest Challenges to Choosing Financial Products
Source: World Bank analysis of Mexico Survey on Financial Capabilities, 2012. Non-Mexico data are from Atkinson, A. and F. Messy (2012), “Measuring Financial Literacy: Results of the OECD / International Network on Financial Education (INFE) Pilot Study.
7. Cross-Country Data Suggest Relatively Short-Term Planning Horizon for Mexicans
Mexico
Leban
on
Urugu
ay
Turke
y
Armen
ia
Colombia
Nigeria
0
20
40
60
80
100Budgeting
Mexico
Leban
on
Urugu
ay
Turke
y
Armen
ia
Colombia
Nigeria
0
20
40
60
80
100Covering Unexpected Expenses
Mexico
Leban
on
Urugu
ay
Turke
y
Armen
ia
Colombia
Nigeria
0
20
40
60
80
100Living Within Means
Mexico
Leban
on
Urugu
ay
Turke
y
Armen
ia
Colombia
Nigeria
0
20
40
60
80
100Savings Orientation
Mexico
Leban
on
Urugu
ay
Turke
y
Armen
ia
Colombia
Nigeria
0
20
40
60
80
100Monitoring spending
0
20
40
60
80
100 Orientation towards the future
Mexico
Leban
on
Urugu
ay
Turke
y
Armen
ia
Colombia
Nigeria
0
20
40
60
80
100Not Impulsive
Mexico
Leban
on
Urugu
ay
Turke
y
Armen
ia
Colombia
Nigeria
0
20
40
60
80
100Not Overspending
Mexico
Leban
on
Urugu
ay
Turke
y
Armen
ia
Colombia
Nigeria
0
20
40
60
80
100Achievement Orientation
Source: Kempson, Perotti and Scott, 2013
Over half the population falls into two clusters: unsophisticated money managers and short term money managers.
22%Unsophisticated money managers
33%Short-term money managers12%
Young impulsive spenders
9%Affluent but disorganized
25%Careful money
managers and planners
8. Distinct Challenges for Profiles in Financial Capabilities
Source: World Bank analysis of Mexico Survey on Financial Capabilities, 2012.
Over half the population falls into two clusters: unsophisticated money managers and short term money managers.
9. Diversity in Regional Weaknesses in Financial Capabilities
Source: World Bank analysis of Mexico Survey on Financial Capabilities, 2012.
Financial knowledge and financial capability are positively associated with use of formal financial products such as bank accounts
and credit cards.
Financial knowledge and financial capability negatively associated with use of informal financial products like pawn shop loans and informal loans from family.
8.1 7.69.4
26.1
15.4 14.1
5.7
17.9
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Bank account Credit card Pawnshop loan Loan from family or friends
%
Percentage of individuals with low/high financial capability using the financial products
Low financial capability High financial capability
World Bank Analysis of National Survey on Financial Capabilities, Mexico 2012 and Consejo Nacional de Inclusión Financiera 2012 financial infrastructure data
No statistically significant relationship between number of commercial branches in a municipality and number of individuals with formal products, suggesting that increased bank branch access is not enough
Banking correspondents increase access to formal financial products primarily for individuals with high financial capability or high financial knowledge
10. Not Enough to Provide Financial Inclusion Channels, Also Need Enhanced Financial Capabilities
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Context of 2012 Mexico Survey
Key Challenges in Financial Capabilities
Policy Implications
Outline
Diverse challenges show that increasing financial capability requires multi-stakeholder efforts.
Increased activity of Mexican coordination mechanisms for public authorities, such as working groups on Financial Education and Financial Inclusion (CONAIF), established in 2011, will help to
address financial capabilities challenges and support effective implementation of programs.
Coordination with private sector stakeholder activities is also crucial.
National Survey of Financial Behaviors, Mexico 2012
Enhanced financial infrastructure is needed to expand financial inclusion—although it is not the only factor.
Allow deposit-taking “cajas de ahorros” to sign up banking correspondents on the same terms as banks.
More specific rules to promote the marketing of basic bank accounts to the financially excluded could be issued.
Policy Implications
Scale up promising programs that support rural adoption of mobile payments.
Technology that increases access to personal finance information can help improve planning behaviors and enhance decision-making.
Mobile phone and Internet based personal finance tools can help users better administer their spending, savings and investments.
The use of text messages and social media can be used to send simple sustained messages related to personal finance, such as
managing account balances, loan payment, and savings to promote desired behaviors.
Encouraging financial institutions to create labeled savings accounts for specific goals, commitment accounts and future dated mobile payments
are simple ways to make savings gains feel tangible and curb tendencies to overspend and view only the short-term
Modify policy to encourage recipients of social benefits to save rather than withdrawing their transfer (Oportunidades)
Remittance linked products aligned with the needs of migrant workers and their families offer the opportunity to move transfers
directly into saving products.
National Survey of Financial Behaviors, Mexico 2012
Improved product design elements incorporated into financial products can help people save.
Policy Implications
Ensure financial education interventions are well-timed and well-targeted.
Carefully designed school based programs coupled with programs incorporating learning modules that involve the household could be
implemented to support the critical role of the family in providing financial education.
Design interventions for a population that is not accustomed to learning in a classroom setting, such as entertainment education
(telenovelas, radio) to disseminate key messages in financial capabilities to the general population.
National Survey of Financial Behaviors, Mexico 2012
Support customer protection interventions that help mitigate effects of limited financial knowledge.
Could require the current Total Annual Costs (APR) that is in percentage form to be modified to Total Amount You Pay in peso
value.
Adapt regulations to reflect new channels such as mobile banking or new types of correspondents.
Policy Implications
Require regulated financial institutions to incorporate good practices for disclosure and pricing regimes
Project Team Institutions and Contact Information
CONDUSEF: Marco Carrera Santa Cruz, [email protected] CNBV: Luis Garza Trevino, [email protected] Bank, Rekha Reddy, [email protected]
THANK YOU!