Financial education is an important tool to achieve greater financial capability and access. Financial education empowers consumers to exercise their rights and responsibilities in the consumer protection equation. It increases consumer confidence reducing risks when purchasing and using financial products and services thus increasing their financial capability. Financial capability is the internal capacity to act in one’s best financial interest, given socioeconomic environmental conditions. It therefore encompasses the knowledge, attitudes, skills, and behaviors of consumers with regard to managing their resources and understanding, selecting, and making use of financial services that fit their needs1.
The World Bank Bank, in conjunction with Fin- CoNet, an international cooperation platform for supervisory agencies in the area of financial consumer protection, conducted a Global Survey on Consumer Protection and Financial Literacy to collect information from financial regulatory agencies in 114 economies. The financial literacy of consumers and the impact of consumer empowerment measures are measured through broad-based household surveys that are repeated from time to time to see if the current policies are having the desired impact on the financial marketplace.
As shown by the map below, the activities undertaken by regulators fall in two broad categories: 1) improving public awareness on financial sector topics and 2) working directly with financial service providers and users to deliver financial education. Click on each country to discover what initiatives in these categories are being implemented globally.
Data source: Global Survey on Consumer Protection and Financial Literacy: Oversight Frameworks and Practices in 114 Economies, The World Bank, 2014
1. World Bank Definition: http://responsiblefinance.worldbank.org
- Financial education is a tool for increasing consumer financial literacy. According to OECD, financial education is the process by which financial consumers and investors improve their understanding of financial products and concepts and, through information, instruction and objective advice, develop skills and confidence to become more aware of financial risks and opportunities to make informed choices, know where to go for help, and take other effective actions to improve their financial well-being.
- Financial literacy represents the level of aptitude in understanding personal finance. It often refers to awareness and knowledge of key financial concepts required for managing personal finances and is generally used as a narrower term than financial capability.
- Financial capability is the ability of consumers to use the acquired financial literacy to make better informed decisions about managing their finances. According to the World Bank definition, it is the internal capacity to act in one’s best financial interest, given socioeconomic and environmental conditions. Financial capability encompasses the knowledge (literacy), attitudes, skills, and behaviors of consumers regarding understanding, selecting, and using financial services and the ability to access financial services that fit their needs.