and gender gap
Programmes of financial education for women have a number of positive benefits for them, for their families and for their countries. Interview with the Ocse consultant Sue Lewis
In 2010, the OECD International Network on Financial Education (INFE) created an expert subgroup on Empowering Women through Financial Awareness and Education, to better understand the causes and consequences of differing levels of financial literacy by gender and gender-specific approaches to improving financial literacy.
We interviewed Sue Lewis, policy consultant at the OECD on financial education and savings and investments choices, about the consequences of gender differences in financial literacy and how to tackle them with adequate policy responses:
Mrs Lewis, since 2007 the Colombian Government has been implementing a successful INFE project, called "Women Savers in Action", aimed at enhancing financial education among women, including them in formal financial system and strengthen productive enterprise. Among many other factors, INFE studies highlight the positive externalities of financial literacy of women on family relationship. Could you explain better this point? How has it been measured?
It seems from the evaluation that the programme had a number of positive benefits for women, also in the home: "Women Savers in Action" raised confidence and self esteem, which empowered women to negotiate a more equal relationship at home and to improve relationships; one example was a recognition of the woman as a wage earner, and a more equal sharing of household chores: at the end of the programme, women were also more likely to regard themselves as a joint head of household. They also understood different forms of abuse, from violence to economic manipulation, and where to go for help. Perhaps the most dramatic result was the change in the proportion of women who considered it was not worth investing in educating daughters because they would just get married: 98.5% of women agreed with this statement at the beginning; only 1.4% did so after participating in the programme.
This is a highly significant result, but I was wondering whether or not this result can be extended to other countries. After all, women's financial literacy is a global issue, but INFE projects are mainly "country-specific".
In principle, understanding differences in factors such as age, education, household income and work status can help financial education and awareness initiatives in both developed or developing countries. But in practise, the policy response will depend on the circumstances and priorities of individual countries: for example, developing countries are more likely to give high priority to interventions which increase financial inclusion, the use of formal savings and entrepreneurship skills for women, whereas in high income countries, the focus is more on avoiding problem debt, long-term planning and saving for retirement, and developing women's skills in choosing products.
Then, is there any common feature relating to financial literacy that belong to all women all over the world?
Although it is risky to generalise, there do seem to be small, but significant, gender differences in financial knowledge everywhere, even in many cases after allowing for the abovementioned factors (age, education, household income and work status). Moreover, women hold fewer financial products, are less confident in financial mattersmore risk averse in financial investments, and less likely to compare financial products or seek independent advice before buying a product. Women also appear to have a shorter financial time horizon than men: they are more likely than men to keep a close eye on day-to-day spending, but they are less able to save for the long-term (not only because of lower financial knowledge, but also because of lower earnings and weaker labour market position in general)
What are the main consequences of this gender gap for the society as a whole?
There are consequences of financial illiteracy at many levels; women who are not financially literate will be less likely to participate in the economy, reducing the potential for growth: this is likely to have a bigger impact in developing countries, where microbusinesses form a significant part of the economy.
And for an household in general, considering that in day-to-day spending women perform better than men?
At the household level, there will be an imbalance of economic power: we know men and women tend to have different spending priorities, with women more likely to spend money on the family. If women do not have a say in the family budget, or manage it badly, children are likely to suffer. The mother's financial illiteracy also means she will not be able to pass on financial "know-how" to her children. Financial behaviours appear to be set early in childhood. This can be overcome to some extent by learning about money in school from an early age but, even now, few children have this opportunity. At an individual level, financially illiterate women will not manage financial risk well, and will accumulate fewer assets. Many women rely on a husband for support, and find themselves facing poverty through divorce or the death of a partner. This is a particular problem for older women, who cannot generate income.
But evidences suggest that financial educational programs affects better women than men ...
There is some evidence that, in the area of financial education, women are aware of their low financial knowledge and are less confident than men about their finanzial skills, which would make them more 'teachable', which is to say that they may be more likely to change their behaviour than men as a result of education.
Women are then more keen on learning than men, then. As a policy maker, which approach would you suggest for effectively tailoring educational programs on women?
Some approaches seem to work particularly well for women, for example, the opportunity to discuss issues in a group. However, the best approach is likely to be strongly influenced by local culture, so policymakers need evidence on what works in their own country. As the successful Colombian project discussed below shows, it can be beneficial to adopt a holistic approach to financial education, working on issues - like domestic violence or health - which may at first sight be unrelated.
How would you suggest to approach the most vulnerable subgroups, such as widows and single women?
The problem of 'hard to reach' subgroups is relevant to a range of policies of course, not just financial education. It often helps to ask the question "where do women go?". In the case of single mothers, this might, for example, be a local drop-in centre where they take their children.
How do you work on that in UK?
In the UK we have some examples of women learning about money in these centres for single mothers, for instance. Also there may be a money expert who visits the centre once a week to discuss individual questions or money problems. Older women are more likely to go to a health centre, a library or a free advice provider. These are all 'trusted intermediaries' who can give women some basic information about personal money, and signpost them to education or expert advice. These partnerships are often difficult to establish: a health centre may not see the relevance of financial education, despite strong evidence that financial problems are linked to poor health, especially mental health.
Which is the role of traditional financial institutions in regard to that?
I believe the financial services industry needs to think about how it communicates with women: it is clear from the OECD evidence that women are less interested than men in financial matters and less likely shop around for products. The language and approach used by financial institutions may contribute to this by being aimed predominantly at men.
Which policies would you suggest for developed countries, as Italy for instance, where women are less exposed to financial products but at the same time female entepreneurs face many difficulties in accessing any kind of credit?
Gender discrimination in loans is well documented and appears to apply in countries across income and stages of development; this is despite women, in general, being more likely to repay loans. The failure of women to secure credit may be due to lack of confidence, or the inability to develop a convincing business plan: these issues can be addressed through financial education. If it is a matter of institutional discrimination on the part of banks, instead, this would require a supply-side solution, maybe along the lines of the regulatory deal which underpins the US Community Reinvestment Act. Whatever the solution to this particular issue, it is clear than many problems for future generations can be averted if children are taught about money in schools. This would give every child the opportunity to leave school with the knowledge, skills and confidence to manage their money, and to understand their own motivations and attitudes.
As for any other subject, then, financial education should start at school...