Financial Education and Microfinance

By Sheethal Shobowale, KF9, Peru

Doris, one of the loan officers at Asociación Arariwa, has been working with clients in Urubamba and Cusco for 17 years.

I sat in on one of the monthly loan payment meetings of one of her communal banks, Aguas Buenas. All members paid their monthly payments on time, but two of the members asked permission beforehand not to attend. Because of their absence, Doris commented on the importance of attending the monthly meetings, saying “No vamos a lograr nada” (We won’t achieve anything this way). She even called one of the absent members on her cellphone to remind them of the importance of attending monthly meetings.

Attendance is importance especially since during each meeting, loan officers teach a short workshop on different topics such as financial literacy, business training, family well-being or health. In this meeting Doris taught a lesson on setting financial goals. Having done some financial literacy workshops for teenagers and some credit counseling for adults in my work with the Lower East Side Credit Union in New York, I was excited and honored to see Arariwa’s financial literacy training in action, especially by a loan officer as experienced as Doris.

First, she played a short video spotlighting two Arariwa entrepreneurs discussing their metas financieras (financial goals) for their businesses and families, the timeframe to reach these goals, and plans to accomplish these goals. Here’s the video:

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She then facilitated a discussion about the video with the group. As an exercise, Doris asked the group to define the goals of the women in the video. Then she asked the group members to share their goals. One member said her goal was to keep working and keep her business growing. Doris reminded her to add a timeframe and concrete steps to reach this goal. Another member and his wife want to open a printing shop within the next 3 years. They are saving and planning for how they will buy the necessary machinery and materials. Doris complimented him on his hard work.

After the video and discussion, she asked if the group members have listened to Arariwa’s 7AM Friday morning radio show. As part of the financial literacy program instituted at Arariwa, two of its staff members – Dilmer, one of Arariwa’s loan officers, and Clotilde, the Director of Education, produced a radio show in both Spanish and Quechua that airs around the Cusco region that families can listen to together. This radio show complements the videos and in-person workshops conducted by loan officers and involves other family members such as the member’s spouse in the family financial planning, who may or may not be clients of Arariwa. This usually means the husband since Arariwa works mostly with women. The radio show also empowers the man to learn on his own. It also involves the children in the family goals if they are old enough to understand.

Unfortunately, most of the group sells goods in various markets and start selling very early in the market, well before 7 AM. All the members told Doris that they are already working by the time the radio show airs so they cannot listen to the program. This is one of the issues that hinders financial literacy workshops – time spent doing something else is income lost while loan interest continues to accumulate.

Studying the Effects

Arariwa is in the process of studying the effects of financial literacy training on business growth, delinquencies and defaults in partnership with Innovations in Poverty Action (IPA). I had a chance to sit down with David Bullon-Patton, a research associate at IPA, to talk about the financial literacy curriculum and the study.

David and Clotilde, Arariwa’s Director of Education, worked together with a film production company to create videos featuring Arariwa entrepreneurs talking about their businesses and their financial goals. Featuring Arariwa clients and their businesses in the videos makes the content more personal to the communal banks and thus more effective. The curriculum focuses on determining the differences between spending, saving and investing, with the end goal of increasing the saving and investing rate of Peruvian families. Each client is also given a financial literacy workbook to note their goals and plans for their businesses.

The IPA study consists of separating Arariwa banks into two groups – test groups that receive financial literacy training and control groups that do not. IPA interviews both groups at the beginning of the study, asking questions about quality of life, family savings and business growth. A year later, IPA will visit both groups the entrepreneurs again with similar questions to gauge the affect of financial literacy training on Arariwa’s work. I am looking forward to reading the results of the study when they are published next year.

With experienced loan officers like Doris conducting training for clients, I hope that Arariwa’s financial literacy curriculum is effective and that more Peruvian families are learning to set and accomplish their goals as well as save for their future.

A proud financial literacy proponent, Sheethal Shobowale just finished her KF9 placement with Asociación Arariwa in Cusco, Peru and recently started her KF10 placement with Emprender in La Paz, Bolivia.

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