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Questions, uncertainty, and a small idea.

Exploring whether the problem is financial literacy, access to services, or investor return, and an idea about loans including finance class

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   Trying to research access to finance, and the problems behind it, has proved a challenge.  Becoming clear on just what the issues are seems important before engaging too many ideas. 

    Is the problem financial literacy?  An article I found in Slate magazine claimed that financial literacy doesn't work, and in fact is supported by organizations who want laws built around the assumption that consumers financial education is all that is necessary to keep them out of bad financial mistakes.  Slate says "Financial literacy doesn't work. One recent study published in the journal Management Science found that studying financial literacy has a “negligible” impact on future behavior and that within 20 months almost everyone who has taken a financial literacy class has forgotten what they learned."  Still this seems to speak to the question of how financial education can be maintained long term, rather then whether it has any value.

    Another question I found was whether or not access to financial services actually helped the poor.  A study by Amit K. Bhandari claimed, "The result suggests that the growth in bank accounts is notsignificantly associated with the reduction in below poverty line population across states."  One reason for this is that people without access to finances often have such small income that they can't "even think ofabout opening a bank account."  

    There is also the issue of the supply side.  Banks have little interest in direct finance which is considered a leakage.  Other contributions on Ideo seem to address that well, with micro-creidit and similar ideas.


    A larger question, which I could not find much information on, and which might belong in the 'new lens' section, here, is how do psychological factors play into the issue of finance?  How might people's perceptions of money keep them from educating themselves?  Do poor people view themselves differently in ways that prevent them from seeing opportunities?  And alternatively, how are perceptions of the poor keeping financial entities from making investments for them, fearing perhaps the money would be 'wasted'? 


    If financial institutions, or wealthy philanthropists are resistant to aiding the poor for fear that the financial illiteracy of the poor will mean bad use of funding, then might there be a way to include in a loan contract, something like a financial literacy class the borrower is obligated to attend or pass, in order to keep the loan, as part of the repayment plan.


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What about a network of peer support - I think people take instruction/advice from someone who has been in their position and has successfully moved from poverty/low income may be more effective than taking advice from a banker who is coming from a different perspective. Real life success stories to empower others?

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