financial education fund fund management inception report

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Financial Education Fund Fund Manager Emerging Markets Group (EMG) Ltd. emergingmarketsgroup.com In association with Genesis Analytics Financial Education Fund Fund Management Inception Report 2 December 2008

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Page 1: Financial Education Fund Fund Management Inception Report

Financial Education Fund Fund Manager Emerging Markets Group (EMG) Ltd. emergingmarketsgroup.com In association with Genesis Analytics

Financial Education Fund

Fund Management Inception Report

2 December 2008

Page 2: Financial Education Fund Fund Management Inception Report

Financial Education Fund Inception Report i

TABLE OF CONTENTS

ABBREVIATIONS AND ACRONYMS.............................................................................................................. 1

EXECUTIVE SUMMARY................................................................................................................................... 2

1. INTRODUCTION .................................................................................................................................. 7

2. RATIONALE FOR THE FEF................................................................................................................ 8 Relationship with other DFID Programmes......................................................................................................... 10

3. GOAL, PURPOSE AND OUTPUTS................................................................................................... 11

4. FEF GOVERNANCE .......................................................................................................................... 13

OPERATIONS COMMITTEE ............................................................................................................................ 13

INVESTMENT PANEL..................................................................................................................................... 15

FUND MANAGER.......................................................................................................................................... 16

MANAGING COMMUNICATIONS...................................................................................................................... 17

5. FUND MANAGEMENT ARRANGEMENTS ...................................................................................... 18

FUND MANAGEMENT TEAM .......................................................................................................................... 18 South Africa-based team .................................................................................................................................... 18 UK based-team................................................................................................................................................... 19 Other international experts.................................................................................................................................. 19

OFFICES AND LOCATIONS ............................................................................................................................ 20

MANAGEMENT SYSTEMS AND PROCESSES.................................................................................................... 20

FINANCIAL SYSTEMS.................................................................................................................................... 20

6. FEF FUNDING POLICIES.................................................................................................................. 21

FUNDING WINDOWS ..................................................................................................................................... 21

ELIGIBILITY CRITERIA................................................................................................................................... 22 Due diligence ...................................................................................................................................................... 27

ASSESSMENT CRITERIA FOR CATEGORY A, B, C PROJECTS ........................................................................... 27

ADDITIONAL CRITERIA FOR CATEGORY B PROJECTS ...................................................................................... 29

CORPORATE RISK FOR DFID IN CONSIDERING VARIOUS TYPES OF GRANTEES............................................... 30

EXAMPLE PROJECTS .................................................................................................................................... 30

7. FEF MARKETING STRATEGY ......................................................................................................... 33

DEVELOPING THE PIPELINE........................................................................................................................... 33 Country-specific targeted marketing ................................................................................................................... 33

COMMUNICATION AND BRANDING.................................................................................................................. 34 Website............................................................................................................................................................... 35

8. FUNDING ROUNDS AND PROCESSES .......................................................................................... 36

FUNDING ROUNDS ....................................................................................................................................... 36

FUNDING CYCLE.......................................................................................................................................... 36

9. GRANT MANAGEMENT.................................................................................................................... 39

CONTRACTING............................................................................................................................................. 39

DISBURSEMENTS ......................................................................................................................................... 40

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Financial Education Fund Inception Report ii

PROJECT OVERSIGHT .................................................................................................................................. 40

FINANCIAL CONTROL AND REPORTING.......................................................................................................... 41

DEALING WITH PROBLEM PROJECTS............................................................................................................. 41

10. MONITORING AND EVALUATION................................................................................................... 43

OBJECTIVES................................................................................................................................................ 43

MONITORING ............................................................................................................................................... 46

EVALUATION................................................................................................................................................ 46 Standard of evaluation required.......................................................................................................................... 47

MONITORING AND EVALUATION PROCEDURES AND ACTION STEPS................................................................... 48

INDICATIVE COSTING .................................................................................................................................... 48

11. LEARNING AND DISSEMINATION .................................................................................................. 49

APPROACH TO LEARNING AND DISSEMINATION............................................................................................... 49

LEARNING ................................................................................................................................................... 49

DISSEMINATION ........................................................................................................................................... 49

12. KEY PARTNERSHIPS ....................................................................................................................... 52

13. RISK AND MITIGATION STRATEGIES............................................................................................ 54

14. EXPANDING THE FUND................................................................................................................... 56

FUNDING MECHANISM OPTIONS ................................................................................................................... 56

ANNEX 1: LOGICAL FRAMEWORK ............................................................................................................. 57

ANNEX 2: WORKPLAN.................................................................................................................................. 62

ANNEX 3: BUDGET AND CASH FLOW........................................................................................................ 69

ANNEX 4: PHASE 1 OF THE FUNDING CYCLE: CONCEPT NOTES......................................................... 70

ANNEX 5: PHASE 2 OF THE FUNDING CYCLE: FULL APPLICATIONS................................................... 71

ANNEX 6: FEF RATIONALE AND FOCUS ................................................................................................... 72

ANNEX 7: MONITORING AND EVALUATION POLICY AND PROCEDURES .............................................. 1

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ABBREVIATIONS AND ACRONYMS

BLCF Business Linkages Challenge Fund

CGAP the Consultative Group to Assist the Poor

DFID Department for International Development

EMG Emerging Markets Group

FEF Financial Education Fund

FSA (UK) Financial Services Authority

FSB (South Africa) Financial Services Board

FSDK Financial Sector Deepening Kenya

FSDT Financial Sector Deepening Tanzania

M&E Monitoring and Evaluation

NIACE National Institute of Adult Continuing Education

NGO Non Governmental Organisation

OECD Organisation for Economic Co-operation and Development

PFEG (UK) Personal Finance Education Group

TA Technical assistance

UK United Kingdom

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EXECUTIVE SUMMARY

The Financial Education Fund (FEF) was conceived and initiated by DFID as a challenge fund1 to trigger and support financial education in developing countries. DFID has allocated £4m to the project for an initial three and a half year period. It has been conceived as a multi-donor fund that will expand its funding as well as its geographical range.

Rationale for the FEF

Financial inclusion is achieved when consumers across the income spectrum in a country can access and sustainably use financial services that are affordable and appropriate to their needs. The overall level of inclusion achieved is determined by a variety of factors affecting the individual directly (demand-side factors) as well as the institutions providing the services (supply-side factors). The majority of people on the African continent do not use formal financial services. This is both a symptom and a major cause of poverty since they are not able to benefit from the savings vehicles, transaction functionality, risk management tools and various wealth building options offered by supervised financial institutions.

Most donor support and private sector initiatives for the growth of financial inclusion have thus far focused on increasing access to financial services through the expansion of supply. It is however increasingly clear that a supply-side focus is not sufficient. Improvements have led to increased access to financial services by the poor in some instances but usage still remain very low. Lack of knowledge, wrong perceptions and behavioural traits of the financially excluded together inhibit their use of the financial services and present a barrier to ongoing improvements in financial inclusion.

This implies a need for financial education, which can be defined as “the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being”2. This need resonates at three levels:

� The public level: the role financial education can play in the public interest, for example through increased levels of national savings, higher levels of financial intermediation or reduced fiscal demands for social welfare;

� The level of the financial institution, given the benefits to be had from more financially capable customers and potential customers, such as improved usage and lower default rates; and

� The personal level: where the need for financial education breaks down into four distinct components: the need for personal resource management; the need to be able to fulfil transactional and other basic banking needs; the need to be able to provide for major future expenses and risks; and, finally, the need to manage exposure to debt and to know how to escape a debt trap once inside.

This need for financial education would imply that individuals have a demand (i.e. would proactively seek and have a willingness to pay) for financial education and that public and private players alike would have an incentive to supply financial education. This is however not always the case. The scoping studies and review of the international literature show that financial education initiatives in developing countries are still too few and far between to meet the need for financial education. This is due to a number of reasons at each of the three levels of needs, such as the fact that financial education is a quasi-public good (implying that individuals do not have a willingness to pay3 for it and that there are external benefits that do not accrue to private providers, implying a disincentive to provide). There are furthermore information asymmetries, the

1 A challenge fund awards one-off grants according to pre-determined selection criteria to successful applicants on a competitive basis over multiple funding rounds that are widely and publicly advertised. A fund manager is appointed to market the fund, develop a pipeline and support interested applicants. The grants are awarded by an independent Investment Panel, in this case with expertise in financial education and related fields. 2 OECD 2005. 3 This is of course exacerbated by the fact that low-income persons would simply not be able to afford spending money on financial education as they already have to trade off even basic expenditure needs given their constrained budgets.

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drivers of consumer behaviour are not fully known and returns from financial education are still uncertain. There is also often a policy deficit in terms of financial education and, given other pressing budget priorities, public authorities in developing countries have thus far not allocated sufficient expenditure to financial education.

The Financial Education Fund (FEF) has been conceived to respond to this problem through the challenge fund mechanism, which has proven effective as a first entry mechanism in the financial sector in those areas where the problem is clear but the solutions untested.

Goal, purpose and objectives

FEF is a path-finding programme, seeking to increase financial inclusion whilst demonstrating how financial education can be used for poverty reduction. The high-level goal of FEF is to establish financial education as a credible means to reduce poverty in African countries by increasing financial capability and financial inclusion. The Fund will pursue this goal by achieving its purpose, which is to increase the financial capability of low-income persons in selected African countries through funding the implementation and evaluation of financial education initiatives. A financially capable person is defined as one who has the knowledge, skills and confidence to be aware of financial opportunities, to know where to go for help, to make informed choices, and to take effective action to improve his or her financial well-being while an enabling environment for financial capability building would promote the acquisition of those skills. Financial capability thus has four functional components: knowledge, skills, attitude (the desire to change behaviour) and, ultimately changed behaviour.

To reach its purpose, FEF has five measurable objectives:

� Objective 1: The establishment of an efficient and cost-effective challenge fund mechanism able to allocate funding to public institutions, NGOs and private firms for the implementation of financial education projects

� Objective 2: A portfolio of high quality financial education projects implemented by a range of organizations that test financial education in a variety of formats targeting an array of different audiences.

� Objective 3: Increased financial capability of a significant number of low-income persons targeted by FEF-funded projects.

� Objective 4: Increased learning on effective approaches to financial education is captured and communicated.

� Objective 5: Improvement of the enabling environment for financial education in FEF target countries.

Governance structure

FEF will be governed and managed by the following bodies:

1. An Operations Committee, consisting of representatives of DFID and any other donors that may come on board, who will be responsible for primary oversight and overall strategy;

2. An Investment Panel, consisting of 6 external experts, who will be responsible for reviewing and approving all projects to be funded by FEF;

3. A Fund Manager, who will be responsible for the day-to-day operations and management of FEF. The core team is based in Johannesburg, with technical and administrative support provided from EMG in the UK. An integrated Management Information System and financial system is used to facilitate effective fund management.

Funding policies

FEF will award grants through four funding windows:

• Category A projects provided by any not-for profit organisation and do not require matched funding.

• Category B projects provided by for-profit entities and hence requiring at least one-on-one matched funding.

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• Category C projects aimed exclusively at evaluating the impact of existing projects (a limited number of such grants will be awarded).

Grants for all three categories will be awarded on a competitive basis according to the challenge fund mechanism. In addition, Category D will be created for projects aimed at developing or implementing a national strategy for financial education, the set-up of a coordinating entity, or related areas. These grants will be limited in number and will be awarded outside of the competitive funding process.

Eligibility and assessment criteria

Applications will be filtered according to a number of eligibility criteria setting the parameters under which projects can and cannot be funded. These are:

1. Capacity to implement: FEF is not prescriptive regarding the nature of applicants and organisations from

the public, private and civil society spheres that can apply. All applicants must however be able to

demonstrate that they have the capacity to successfully implement the proposed financial education

project.

2. Direct provision of financial education: Projects must provide financial education directly to

beneficiaries with the intention of improving their financial understanding and capability. Projects

aimed, for example, at developing training materials only, will not be eligible.

3. Must improve financial capability in one or more of the four aspects of financial capability identified:

knowledge, skills, attitudes or behaviour.

4. Must target increased or changed usage of financial services: FEF will fund projects that seek to impart

not only personal financial management skills (such as budgeting), but will also trigger increased and/or

enhanced usage of financial services that will extend current levels of financial access in the target

countries.

5. Must primarily target low-income groups: Projects must focus on improving the financial capability of

low-income persons, families and communities.

6. Potential for scale: FEF will fund projects that have the potential to impact large numbers of persons,

either through direct communication with large groups or through the presence of multiplying factors

such as the training of individuals involved in advising or influencing others in the target market.

7. Ability to credibly measure impact: A primary objective of FEF is to test the relative success of different

approaches to financial education. All FEF projects must therefore be able to measure the impact of their

financial education interventions.

8. Leverage: Projects will be expected to offer leverage to the applicants’ own resources and existing

networks, particularly networks of trust used by low-income persons.

9. Implemented in the FEF target countries: Projects must be implemented in FEF target countries, namely

Botswana, Ghana, Kenya, Namibia, South Africa, Tanzania, Uganda, and Zambia so as to cluster

initiatives and build multiple interventions that feed off and complement each other.

10. Maximum implementation period of 24 months: FEF projects should be implemented over a period of no

more than 24 months, including final impact assessment activities.

11. Maximum grant size of £250,000: Due to the focus on testing alternative approaches to financial

education, FEF will not contribute more than £250,000 to any single project.

The following additional eligibility criteria will apply to Category B projects:

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12. Privately owned grantees must contribute matched funding on a 1:1 basis: When funding privately

owned businesses (as grantees or leading applicants of a consortium), FEF requires private applicants to

share the risk of the project by providing matched funding equal to the contribution of FEF.

13. FEF resources cannot be allocated to product marketing: Private sector applicants that provide financial

services must demonstrate that FEF funds will not be used to market their own products. They need to

apply FEF resources to more generic financial education or training in the use of products that have

application beyond their branded product range.

Once eligible projects have been identified, a number of assessment criteria will be applied to rank projects and guide decision-making. Each is allocated a weight of 25% in decision-making:

1. Capacity of the applicant to implement the project;

2. Approach and methodology to be used in the proposed intervention;

3. Potential impact of the intervention;

4. Ability to assess the impact.

Two additional assessment criteria apply to Category B (for-profit entity) projects (these criteria will be assessed separately from the four assessment criteria above):

1. Matching contribution size (the proportion that own funds contribute to the overall project budget);

2. Level of public good provided.

Marketing strategy

Marketing is core to the success of FEF. The FEF pipeline will be developed through a combination of proactive and reactive marketing strategies. Proactive marketing includes generic publicity to establish the public profile of the FEF, as well as direct interaction with institutions able to deliver financial education projects. The FEF website (www.financialeducationfund.org) is one of the channels through which FEF’s brand will be established. FEF has been launched through public workshops in four countries (Kenya, South Africa, Uganda and Zambia) and meetings have been held with potential applicants where relevant. In addition, opportunistic marketing, in response to invitations and at events sponsored by third parties, and reactive marketing in response to enquiries on an ongoing basis, have been undertaken.

Funding rounds and processes

FEF will operate through competitive funding rounds. For the existing £4 million fund (£3.2 m. available for grants) 2 application rounds are planned within the period 2008-2009. In each round, grants will be awarded through a 2-phase funding cycle: in the first phase, applicants will submit Concept Notes (CNs) that will be appraised by the Fund Manager and submitted to the Investment Panel for review and decision-making (based on a standard CN Assessment Form). The Investment Panel will then invite shortlisted applicants to submit Full Applications (FAs). The CN application deadline for the first funding round is 5 December 2009. It is expected that the round will be concluded with the finalisation of Grant Agreements by 14 June 2009, by which time the next funding round will be launched.

Grant management

Though pipeline development and funding rounds and processes set the platform for the success of FEF, whether it reaches its goal and purpose will ultimately depend on the successful implementation of funded projects. Close financial monitoring of each of the grantees will ensure that projects make good progress and stay in line with approved workplans and budgets.

Monitoring and evaluation

An important element adding to and building on grant management is the monitoring of project implementation and evaluation of project impact. To this end, each project will be required to regularly report on progress (for monitoring purposes) and, importantly, will be required to submit an evaluation plan indicating how the impact of the project (relative to its stated objectives) will be measured. The FEF

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Monitoring and Evaluation Policy and Procedure manual (Annex 7) sets out the principles in respect of monitoring and evaluation that apply to FEF. These policies and procedures will guide the Fund Manager, the Investment Panel as well as applicants for funding and grantees. It will also form the basis for external and independent evaluations of individual projects as well as the program as a whole.

A combination of quantitative and qualitative measurement techniques will be used to meet the minimum standard of evaluation set by FEF. Individual project evaluation will be collated to feed into the evaluation of the FEF programme as a whole. The FEF logframe (containing the goal, purpose and measurable objectives of the FEF) will be the benchmark against which programme impact is evaluated. In each instance, it is important that the baseline of financial capability be established before a project is implemented, so as to measure the change relative to that baseline. It is also important that, where possible, impact is again measured 3-6 months after project completion to test the lasting impact of the intervention. Furthermore, grantees will be advised to test the impact of the intervention on the target audience relative to a comparison group of individuals with similar characteristics, but who did not undergo the financial education intervention. This will help to isolate the direct impact of the intervention from exogenous impacts and trends.

Learning and dissemination

Evaluation only has an impact when learning is extracted from it, disseminated and applied. As FEF is a pilot project, distilling and disseminating new learning on effective approaches to financial education is one of its core objectives and fundamental to its experimental nature. This is intended to address some of the major causes of market failure – both in the private and public provision of financial education. It is anticipated that learning will be generated on: the relative impact and cost-effectiveness of different types of financial education interventions; the drivers of behavioural change that lead to the extension of financial access; and effective interventions to create enabling environments for the promotion of financial capability.

A number of learning materials will be produced, including the development of case studies and the preparation of short policy notes targeting policy-makers and regulators. A classification of financial education instruments based on the learning from the FEF will also be developed to contribute to the emerging best practices in the area of financial education in developing countries.

Although the production of written materials is important the core FEF dissemination function will be the engagement with persons and institutions who are either involved in the field of financial education or who have an interest or a stake in the successful growth of financial capability. The written materials and the website, with clear links to other relevant sites as well as all relevant FEF documentation, will be used as dissemination tools to supplement this core process of engagement.

Key partnerships

In addition to the primary stakeholders for the FEF, namely DFID, the Fund Manager, the Grantees and, most importantly, the recipients of financial education, there are other key strategic partners.. Each will be pursued not only to consult on best practices for the FEF and tap learning from their experience, but also to market and promote FEF and disseminate learning with a view to future collaboration, technical support, or just contributing to the financial education field in general. Relevant institutions include: international NGOs with a focus on financial education; think tanks/research centres/consulting firms; international policy thought leaders (such as the OECD, the World Bank or CGAP); non African Regulators and other organisations with a mandate in financial education; and international financial institutions interested in the FEF.

Risks and mitigation strategies

Project management should always include a strong risk management component. FEF faces a number of risks ranging from low to high potential impact, such as a lack of a sufficient demand-driven response (medium risk) or the inability to effectively measure impact (high risk). These risks are identified upfront to ensure that the appropriate mitigation strategies are put in place to avoid and manage such risks.

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1. INTRODUCTION

The Financial Education Fund (FEF) was conceived and initiated by DFID as a challenge fund4 to trigger and support financial education in developing countries. DFID has allocated £4m to the project for an initial three and a half year period. It has been conceived as a multi-donor fund that will expand its funding as well as its geographical range. Given the imperative for coordination in financial education initiatives, there is a strong need for donor coordination in this space5. Negotiations are currently underway to incorporate additional funders (see Section 14 for an overview of progress).

� The initial focus is on Sub-Sahara Africa, though it may expand to other developing countries, should the timeframe of the fund be extended. A consortium of the Emerging Markets Group (EMG) and Genesis Analytics (Genesis) was appointed as the Fund Manager of FEF on 9 July 2008. This report brings to an end the inception phase aimed at finalising the design and establishing efficient and cost-effective challenge fund mechanisms to allocate funding to public institutions, NGOs and private firms for the implementation of financial education projects.

A number of activities were carried out during the inception phase, including:

� Recruitment of FEF personnel and consultants;

� Undertaking detailed scoping studies for nine potential target countries to ascertain current financial education activities, interest in the FEF and scope for high-quality projects in each country. Each scoping study entailed drawing up a comprehensive database of private sector, NGO and public sector contacts and phoning and emailing such contacts to introduce the fund and test interest. These databases were used as basis for the marketing of the fund. The scoping and marketing processes are discussed in Section 7.

� Appointing an investment panel consisting of 6 members, each bringing a specific skills set relating to financial education, financial inclusion or next generation financial services (discussed in Section 4)

� Undertaking public launches in October 2008, through 4 in-country workshops.

� Completing the first marketing round for the first funding round of project Concept Notes (deadline 5 December 2008).

� Designing and establishing the website on-line from the beginning of November 2008. It will be updated continually to reflect the latest available information and documents.

� Drafting and disseminating application procedures and guidelines as well as marketing materials to potential applicants. These documents are accessible through the website.

� Facilitating interactions with potential donors and other potential partners/interested parties. In this way, the work towards the expansion of the fund as well as the learning and dissemination component has already started.

� Revising the logframe to meet DFID’s requirements. Based on the logframe, the fund management performance criteria have been revised and captured in the fund management agreement.

The purpose of this inception report is:

� To report on the finalisation of the design of the FEF and the structure of the fund over its initial phase, including the mechanisms, processes and procedures, as well as the eligibility and assessment criteria for funding applications.

4 A challenge fund awards one-off grants according to pre-determined selection criteria to successful applicants on a competitive basis over multiple funding rounds that are widely and publicly advertised. A fund manager is appointed to market the fund, develop a pipeline and support interested applicants. The grants are awarded by an independent Investment Panel, in this case with expertise in financial education and related fields. 5 As other bilateral, multi-lateral and private donors extend their activities to the field of financial literacy and education, the fund will seek to attract their funding, removing the need for a multitude of programmes focusing on the same issue.

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� To set out the context for the development of the Operations Manual that will form the basis for all programme activities during the lifetime of the Financial Education Fund.

2. RATIONALE FOR THE FEF6

Limited current usage despite efforts to increase access to financial services. The majority of people on the African continent do not use formal financial services. This is both a symptom and a major cause of poverty since they are not able to benefit from the savings schemes, transaction functionality, risk management tools and various wealth building options offered by supervised financial institutions. Financial inclusion is achieved when consumers across the income spectrum in a country can access and sustainably use financial services that are affordable and appropriate to their needs. The overall level of inclusion achieved is determined by a variety of factors affecting the individual directly (demand-side factors) as well as the institutions providing the services (supply-side factors).

Most donor support and private sector initiatives for the growth of financial inclusion have thus far focused on increasing access to financial services. Access is defined as the ability (as opposed to actual uptake) of persons to use financial services that are (1) appropriate for their needs, (2) affordable to them, (3) available within easy geographic reach and (4) from which they are not excluded due to either government regulation or conditions imposed by a financial services provider. Donor strategies to improve access have tended to focus on supply-side measures and the impact of regulation. Whilst advances remain to be made in the extension of financial access, converting access to actual usage is proving an equally important problem. The ultimate objective of expanded financial inclusion is to increase the actual usage of financial services by people currently excluded from the formal financial system.

The reasons for this failure to convert access into usage are less well known and certainly differ between the various forms of financial services (credit, savings, insurance, transactions and payments, and remittances) and different population segments. There is conclusive evidence that much is due to a lack of knowledge, not only about the specific financial service and how it is delivered, but also about the management of money generally, as well as misplaced perceptions about financial services. The extent to which other behavioural characteristics - such as trust in the delivery mechanism, the high discount rate applied by poor persons to potential future receipts of money in cash, cultural preferences, or fear of financial services and financial institutions (the threshold barrier) - determine whether a person will use a service or not, is less well known.

Together, the lack of knowledge, wrong perceptions and the behavioural traits of the financially excluded inhibit the use of the financial services to which the poor have access, and present a barrier to ongoing improvements in financial inclusion.

This implies a need for financial education. Financial education is defined by the OECD as “the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being”7. The country scoping reports as well as the international literature on financial inclusion and financial education show that there is a definite need for financial education (see Annex 6 for a full description). This need resonates at three levels:

� The public level: the role financial education can play in the public interest, for example through increased levels of national savings, higher levels of financial intermediation or reduced demands on the fiscus due to reduced need for social welfare;

� The level of the financial institution, given the benefits to be had from more financially capable customers and potential customers, such as more usage and lower default rates; and

6 A full description of the rationale for the FEF (including the need for financial education, the current supply of financial education and the FEF response to inadequate supply), as well as the focus of the FEF is contained in Annex 6. 7 OECD 2005.

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� The personal level: At the personal level the need for financial education breaks down into four distinct components: the need for personal resource management; the need to be able to fulfil transactional and other basic banking needs; the need to be able to provide for major future expenses and risks; and, finally, the need to manage exposure to debt and to know how to escape a debt trap once inside.

Inadequate supply of financial education to meet this need. This need for financial education would seem to imply that individuals would have a demand for financial education and that public and private players alike would have an incentive to supply financial education. This is however not always the case. The scoping studies as well as an international literature scan show that financial education initiatives in developing countries are still too few and far between to meet the need for financial education (once again, see Annex 6 for a full description). There are a number of reasons for this “supply deficit” at each of the three levels of need:

� Personal level: More often than not, need does not translate into individual demand (with demand being defined as proactive seeking of financial education by the consumer, or even a willingness to pay for it – a situation which is exacerbated for low-income people). The problem is that most people do not recognise their deficit of knowledge or skills. There are furthermore information asymmetries between consumers and suppliers of financial education. Hence individuals are not familiar with how their need for greater financial literacy can be met through financial education and what benefits can accrue to them from participating in financial education. As the benefits of financial education are not known or quantified to its target consumers, the need for it does not translate into demand. Indeed, very seldom have financial education initiatives been developed in response to expressed demand originated by the client/public (except in response to specific usage-related demand generated when selling financial products or services). This emphasises the public good nature of financial education. In the absence of willing consumers prepared (and able) to pay for the financial education service, it has to be provided as a quasi-public good.

� Financial institution level: Financial education is a quasi-public good in that low income beneficiaries cannot, as a rule, be required to pay for it. It is also “public” in that suppliers cannot capture all the benefit emanating from financial education. Positive externalities are generated that cannot be appropriated by the suppliers. Such external benefits include financial market stability and other aspects. Financial education generally also does not directly generate revenue, though it does imply significant long-term gains for financial service providers through greater usage. This is often undermined by the uncertain returns of such interventions due to limited past experience. Potential suppliers of financial education are furthermore not familiar with the exact extent of the lack of financial knowledge and skills and face great uncertainty about the drivers of financial behaviour. All of this limits the incentive for provision by private providers. Where they do provide financial education, this most often has a marketing drive (to promote uptake of their products) or is provided under corporate social responsibility (hence is not a core focus for the player from a financial point of view).

� Public level: The relative newness of financial education in developing countries and the uncertain returns as highlighted above imply that the public resources dedicated to financial education are still limited. African governments are typically faced with resource constraints. In the face of other budget priorities, resources have been limited for financial education. To date, policy makers and other financial sector players have primarily tackled financial exclusion through "supply side" measures such as the development of new products targeted at lower income segments of the market. Throughout the “microfinance revolution” and the more recent emphasis on branchless banking solutions and next generation financial services, the emphasis has been on the expansion of access to affordable, appropriate products within easy reach of the target audience, rather than on the demand-side.

The FEF response – meeting the need for financial education. FEF is designed to respond to the market/public sector failure and resource constraints in the supply of financial education. In doing so it seeks to address the demand-side challenges in the quest for increased financial inclusion in Africa’s low-income communities.

It uses the challenge fund mechanism, which has proven very useful in exploring pioneering areas in the

financial sector. It is particularly suitable to the financial education area for the following reasons:

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� It can blend a demand-driven approach with a social entrepreneurial role played by the fund manager. The fund manager can trigger applications that are suitable to achieve the fund’s objectives;

� It is flexible, allowing different funding windows to be opened and closed as experience grows;

� It builds knowledge through experience rather than research. The existing base of experience with financial education in developing countries is so slim and what there is so thoroughly researched, that additional research will add very limited value. Rather, what is required now are financial education interventions designed to generate maximum information on what works and what does not;

The challenge fund is the philanthropic equivalent of the venture capital fund. It funds the ideas of the

public, NGO and private institutions (or any combination of these) which have the capacity to implement

these ideas. It introduces competition into the delivery of public goods. On the private side it co-funds (on a

matched funding basis) the delivery of goods and services with a high potential to improve the lives of poor

people in targeted African countries. The grant-making mechanism allows the Investment Panel to impose

any number of conditions on grantees, ranging from a requirement for matched funding to minimum levels

of impact evaluation. The FEF’s different funding windows (see the discussion from p. 21) are designed to

tap the overlapping areas between personal, financial institution and/or public interest benefits.

The FEF response – testing and learning from financial education initiatives. In addition, a core reason for

the FEF’s existence is to evaluate the relative effectiveness of financial education interventions in terms of

the personal, public and provider benefit that is derived from it and to disseminate such learning so as to

inform future financial education strategies. This is intended to address some of the major causes of market

failure – both in the private and public provision of financial education – beyond just the FEF. This will

require the rigorous evaluation of existing approaches and supporting innovative new approaches.

RELATIONSHIP WITH OTHER DFID PROGRAMMES

As a pro-poor challenge fund targeting African countries, FEF builds on and learns from the experience of previous DFID challenge funds, including the Financial Deepening Challenge Fund, the Business Linkages Challenge Fund, the Remittance Partnership Challenge Fund and the recently launched African Enterprise Challenge Fund. It brings, however, a unique angle through its focus on financial education to trigger behavioural change that will support greater usage of financial services, in this way impacting on the welfare of the low-income sector. Financial education is essentially a public good that can be delivered by public or private entities. This contrasts to the use of business ventures to benefit communities and the use of public funds to trigger private investment as was found in the other challenge funds.

As a challenge fund, it is important that it does not operate in a vacuum in the countries where it awards grants but takes cognisance of existing DFID support programmes, where possible enhancing or coordinating with current programmes. So, for example, the buy-in from the DFID country offices in the various countries is crucial, as is cooperation with respectively Financial Sector Deepening (FSD) Kenya (which is launching a large-scale financial education initiative) and the DFID-supported Financial Sector Deepening Trust (FSDT) Tanzania, with its initiatives to fund a national financial literacy strategy. FEF will also work closely with the FinMark Trust which promotes financial markets for the poor in Africa.

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3. GOAL, PURPOSE AND OUTPUTS

FEF is a path-finding programme, seeking to increase financial inclusion whilst demonstrating how financial education can be used for poverty reduction.

The logical framework, or ‘logframe’, therefore combines objectives related to, on the one hand, improved knowledge, skills, confidence and more and better usage of financial services (financial capability) as well as the creation of an enabling environment that will support the growth of financial capability, and, on the other hand, learning and dissemination.

The FEF logframe (attached as Annex 1) sets a series of output and outcome targets for the lifetime of the project organised around the five key objectives of the program. The logframe is therefore the core of the fund management contract itself, ensuring that the fund management activities focus on achieving the aims of the programme. It has the following components:

The high-level goal of FEF is to establish financial education as a credible means to reduce poverty in African countries by increasing financial capability and financial inclusion.

The Fund will pursue this goal by achieving its purpose, which is to increase the financial capability of low-income persons in selected African countries through funding the implementation and evaluation of financial education initiatives.

We define a financially capable person is one who has the knowledge, skills and confidence to be aware of financial opportunities, to know where to go for help, to make informed choices, and to take effective action to improve his or her financial well-being while an enabling environment for financial capability building would promote the acquisition of those skills. Financial capability thus has four functional components:

� Knowledge or understanding which an individual has of the different aspects of personal financial management and use of financial services (both formal and informal);

� Skills - the practical ability of the individual to apply the knowledge in the use of an actual product or service or in personal financial conduct;

� Attitudes - even with the necessary knowledge and skills many persons are not prepared to use certain financial services. This may be due to perceptions, personal orientation, behavioural traits or other psychological factors. These condition the attitudes and thus behaviour of the individual; and ultimately

� Actual changes in financial behaviour. Changes may be due to the financial education intervention or another cause. Controlling for other influences on behaviour is therefore an important part of evaluating the impact of financial education interventions.

A more detailed discussion on the components of financial capability including examples of each component is contained in Section 10 and Annex 7. As is evident from the Rationale for FEF (Section 2), financial education is one of the ways8 in which financial capability can be improved. It is aimed at impacting on all four components of financial capability highlighted above.

The purpose-level target is for FEF-funded financial education interventions to lead to a demonstrable change of behaviour that is statistically significant when compared to a comparison group9 who did not receive the financial education. Such change of behaviour can occur in any of the following aspects of financial capability:

� Day to day personal financial management, such as budgeting;

� Planning for future expenditure and retirement;

8 There are also various other and potentially more powerful ways in which financial capability grows, for example parents modeling financial behaviour, personal experience and interaction with friends, family, financial services providers and others being the main ones. 9 A group of people with similar characteristics or background as those undergoing the financial education, but who did not receive financial education. See Annex 5 for a full discussion of comparison and control groups.

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� Appropriate use of financial products;

� Increased use of financial products.

To meet the purpose, five specific objectives will have to be achieved, each of which is assigned either output or outcome performance indicators or both (see Annex 1 for full details):

� Objective 1: The establishment of an efficient and cost-effective challenge fund mechanism able to allocate funding to public institutions, NGOs and private firms for the implementation of financial

education projects. The initial set-up of the funding mechanism has been largely completed within the inception period. The ongoing efficiency will be measured ultimately in the successful disbursement of grants and completion of projects. The aim is to have Grant Agreements signed for full disbursement of FEF funds within two funding rounds over the initial three-year life span of the fund, with a target of 70 project Concept Notes in total received in the two funding rounds, leading to a total of 20-25 funded grants.

� Objective 2: A portfolio of high quality financial education projects implemented by a range of

organizations that test financial education in a variety of formats targeting an array of different

audiences. In order to assess the quality of financial education projects, a project evaluation report will be completed for each project. The portfolio must have sufficient diversity to test a representative sample of financial education methodologies and has to cover various distribution channels and segmented target audiences. As higher risk projects that test new methodologies and approaches will also be included in the portfolio, it is expected that not all projects will succeed. Learning from such projects will be particularly important in order to inform future strategies. For this reason, each project will be required to make adequate provision for evaluating impact. Some projects may even consist only of the evaluation of existing financial education interventions.

� Objective 3: Increased financial capability of a significant number of low-income persons targeted by

FEF-funded projects. It is important that the financial education interventions funded by FEF leads to a demonstrable impact when compared to a comparison group that did not receive financial education in terms of: day to day personal financial management, such as budgeting; planning for future expenditure and retirement; appropriate use of financial products; or increased use of financial products. This objective essentially operationalises the purpose-level target of FEF. Although the impact of financial education will be measured by project, the Fund will target increased financial capability in a significant number of all final beneficiaries of financial education projects.

� Objective 4: Increased learning on effective approaches to financial education is captured and

communicated. FEF will develop case studies and policy notes capturing the lessons from both its successful and failed projects. Learning will be generated on the relative impact and cost-effectiveness of different types of financial education interventions, the drivers of behavioural change that lead to the extension of financial access, and what interventions are effective in creating an enabling environment for the promotion of financial capability. Based on this learning, a draft classification of financial education instruments rating different channels, target audiences and methodologies in terms of effectiveness and efficiency will be produced. This aims to assist both policy-makers and practitioners engaged in the field of financial education.

� Objective 5: Improvement of the enabling environment for financial education in the FEF target

countries. Although the bulk of its outcomes will be project-specific, FEF will seek to achieve wider systemic change in three of the countries in which it operates. Such change can be evidenced, amongst other changes, by the development and adoption of a public policy on financial education, the establishment of a national institution to coordinate financial education policy and programmes, and non-FEF funding, both private and public, being committed to ongoing financial education initiatives. The duplication or scaling up of FEF-funded projects with non-FEF funding will of course also indicate wider impact. Further indicators would be the application of standards and principles developed by the FEF by institutions not funded by the FEF, and the use of data generated or triggered by the FEF in domestic institutions and/or processes.

The rest of this report sets out the mechanisms through which these objectives will be achieved.

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4. FEF GOVERNANCE

Best practice in corporate governance requires separation between (1) the approval and ongoing oversight over the implementation of strategy, and (2) the development and implementation of strategy. The former function rightly belongs to the owners/funders of a project or institution, while the latter function can be performed either by the owners themselves, or by managers or other executive staff appointed by them. Within the context of FEF, the owner is DFID as well as other donors who capitalise the fund, whereas the executive management function will be largely performed by the appointed fund manager. Due to the investment nature of FEF, DFID will delegate part of its decision-making power to an Investment Panel who will have the authority to approve projects for funding by FEF.

This section sets out the mandate, composition, and scope of authority and decision-making processes for the various bodies involved in the implementation of the Financial Education Fund (FEF). The fund will be governed and managed by the following bodies:

i. The Operations Committee, who will be responsible for primary oversight and overall strategy;

ii. The Investment Panel, who will be responsible for reviewing and approving all projects to be funded by FEF;

iii. The Fund Manager, who will be responsible for the day-to-day operations of FEF.

Figure 1: FEF Governance Structure

Operations Committee

Constitution: DFID, jointly with any other donors who contribute funding to FEF, will establish an Operations Committee.

Composition: The Operations Committee will consist of:

� The Head of DFID’s Financial Sector Team;

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� DFID’s Lead Advisor;

� DFID’s Project Officer for the FEF;

� Another member of DFID's financial sector team to be nominated by the Head of DFID’s Financial Sector Team and the Head of the Growth and Investment Group;

� One representative from every other donor who contributes to FEF.

A representative of the Fund Manager shall attend all meetings of the Operations Committee to report on fund management activities and to support the decision-making process of the Committee.

Function: The Operations Committee is responsible for approving the strategy, investment policy, budget, and annual work plans for FEF. In addition to these general functions, the Operations Committee will perform the following specific functions:

(a) Approve the appointment of members of the Investment Panel;

(b) Together with the Fund Manager, mobilise additional resources for an expanded Fund;

(c) Decide on the remuneration of the external members of the Investment Panel, i.e. persons who are not in the employment of any of the donors supporting FEF;

(d) Approve procedures and guidelines for the management of the Fund’s activities;

(e) Approve target countries which will form the marketing focus of the Fund;

(f) Monitor the overall implementation and performance of the Fund, including triggering statutory Output to Purpose Reviews as required by DFID and any other donors and commissioning independent evaluations as desirable from time to time;

(g) Decide on the extension of the life of the Fund, if necessary.

(h) Review and advise on major exceptions to planning, budgeting, procurement, or financial management.

Chairperson: The Operations Committee is chaired by the Head of DFID’s Financial Sector Team.

Meetings: The Operations Committee shall meet quarterly. The Chairperson determines when and where the meetings are held. The Operations Committee may meet more often if necessary.

Decision-making: A majority of the members of the Operations Committee shall constitute a quorum, provided that no quorum shall be present unless a representative of every donor that contributed to FEF is present. The Operations Committee may make decisions by email, telephone or video conference between in-person meetings. Decision-making is done by a majority of Committee members physically present at an in-person meeting or in attendance via video or telephone conferences, and by no objection by all representatives after a reasonable specified period of review for email decisions. Any member has the right to abstain without impacting on the consensus.

Declaration of interest: Members of the Operations Committee shall disclose any conflict of interest (actual or likely) which they or their respective principals may have with the activities of FEF. The Operations Committee shall decide how to deal with such a conflict of interest.

Minutes of meetings: The Fund Manager shall be responsible for arranging Operations Committee meetings, including keeping the minutes of meetings and submitting them within 7 days of their conclusion for approval by the Committee.

Liaison with Fund Manager: The Operations Committee shall designate a person or persons from amongst its members who shall be responsible for ongoing liaison and interaction with the Fund Manager and who shall provide guidance to the Fund Manager between meetings of the Operations Committee. At the moment, this person is Nick Godfrey, Economic Advisor in DFID’s Financial Sector Team.

Remuneration: The remuneration of members of the Operations Committee and any direct costs flowing from their participation in the activities of the Operations Committee will be covered by their respective principals.

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Investment Panel

Composition: The Investment Panel members will be appointed based on the following principles:

� The panel will initially consist of six members appointed by the Operations Committee.

� A seventh panel member may be appointed if other donors decide to co-fund FEF.

The panel members should bring combined expertise and experience regarding:

� African and International background; within Africa, a combined experience in Southern Africa, East Africa and West Africa

� Financial education

� Financial inclusion

� Monitoring & Evaluation

� Grant management/challenge fund

� A balance between members with public sector, private sector, NGO and development agencies’ background.

The following candidates have been approached:

� Mark Napier, FinMark Trust, based in South Africa

� Christopher Musoke, Consultant, ex-FSDU manager, based in Uganda, worked extensively in East Africa

� Elaine Kempson, University of Bristol, M&E expert

� William Derban, Barclays Capital, Ghanaian based in London

� Donna Oosthuyse, Citi Foundation, CEO Africa Division

� Brian Richardson, CEO of Wizzit, the main mobile financial services provider in South Africa (TBC)

The first five candidates have indicated their willingness to be part of the panel. Brian Richardson has only recently been approached after attempts to involve Judyth Oduor (Safaricom) failed.

Other possible candidates are:

� Lazarus Muchendje, Zain

� Muhota Kimoto, Kenyan banker, based in Nigeria

DFID’s Lead Advisor will be an observer member of the Investment Panel. The DFID Lead Advisor or his/her delegate will attend the meetings of the Investment Panel in an observer capacity and will report to the Operations Committee on its proceedings and decisions. The Operations Committee may appoint additional members to the Investment Panel should the need arise. Members of the Investment Panel are appointed for the full term of the FEF and their tenure will terminate on the termination of the Fund. To prevent any conflict of interest the Fund Manager will not be part of the Investment Panel, though it will be responsible for making arrangements for, providing inputs to, and attending Investment Panel meetings.

Function: The Investment Panel reviews and approves all projects to be funded by FEF according to policies approved by the Operations Committee. In particular, it is responsible for the following functions:

(a) To approve or reject project Concept Notes (referred to in this report as Concept Notes or CNs) and extend invitations to apply for funding to applicants whose project Concept Notes have been approved;

(b) To approve or reject applications for funding (referred to in this report as Full Applications or FAs). The Investment Panel may request further information (from either the Fund Manager or the applicant), impact appraisals or personal appearances in relation to applications presented to it;

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(c) To decide on the size of the funding and impose conditions on the funding provided, including a schedule of payments linked to performance;

(d) To recommend, if need be, strategy or policy changes, priorities, and monitoring and evaluation systems to the Operations Committee;

(e) To exercise oversight over the implementation of approved projects on behalf of the Operations Committee. For this purpose, the Investment Panel will receive six-monthly reports from the Fund Manager on progress with project implementation;

Chairperson: The Operations Committee will designate a Chairperson and Deputy-Chairperson (who will preside over meetings of the Investment Panel in the absence of the Chairman) from amongst its members.

Meetings: Meetings of the Investment Panel will be convened by the Chairperson upon the request of the Fund Manager as and when required to consider proposed projects. Following consultation with the Fund Manager and other members of the Investment Panel, the Chairperson shall determine where meetings are held or if meetings can be convened through video or telephone conference. Members shall receive at least 30 days’ written notice of a meeting, provided that the notice period may be waived with the approval of all the members.

Decision-making: A majority of the members of the Investment Panel shall constitute a quorum. Decision-making is done by a majority of members present at a meeting. The presiding officer of the Investment Panel has a deliberative and a casting vote.

Declaration of interest: Members of the Investment Panel shall disclose any conflict of interest (actual or potential) which they may have in respect of any proposed project or other matter serving before the Investment Panel. The Chairperson of the Investment Panel shall decide how to deal with such a conflict of interest and such resolution shall be reported to the Operations Committee at its next meeting. Should the Chairperson have a conflict of interest, the Deputy-Chairperson will rule on that conflict. Should the rulings on declared conflicts of interest result in the Investment Panel not having a quorum, the matter will be referred to the Operations Committee to decide how to proceed.

Minutes of meetings: The Fund Manager shall be responsible for keeping the minutes of Investment Panel meetings and communicating all decisions of the Investment Panel to interested parties. In particular, the Fund Manager shall record the reasons for decisions relating to projects (both Concept Notes and Full Applications) and will be responsible for communicating the reasons to applicants upon request.

Remuneration: The donors funding FEF will bear the cost of the participation of any of their staff members in the activities of the Investment Panel. The Fund will bear the cost (both direct costs and potentially professional remuneration) of external (non-FEF donor) members of the Investment Panel.

Fund Manager

Appointment: The Fund Manager has been appointed by international competitive tender for a period of 3 and a half years.

Function: The Fund Manager is responsible for the day to day operations of FEF. In particular, it is responsible for the following functions:

(a) The development of FEF mechanisms, processes and procedures, including eligibility and assessment criteria for funding applications;

(b) The operational management of the Fund;

(c) Marketing and pipeline development;

(d) Application and grant allocation process management;

(e) Contracting and management of grants;

(f) Monitoring and evaluation of fund performance and impact;

(g) Distillation and dissemination of learning;

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(h) Mobilising support from other potential donors.

The Fund Manager will work closely with related DFID programs and those of others in the financial inclusion and financial education space.

Fund Management Agreement: The Fund Manager is appointed in terms of a comprehensive performance-related fund management agreement.

Managing Communications

The Fund Manager will be responsible for maintaining communication with the Operations Committee and with the Investment Panel. The Fund Manager will send quarterly reports to the Operations Committee and will be in regular contact with the Project Officer and with other members of the Operations Committee as needs be.

The Fund Manager will also be in regular contact with the members of the Investment Panel regarding Panel meetings, to send Concept Notes and Full Applications and to provide regular feedback about the funding rounds and how projects are unfolding.

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5. FUND MANAGEMENT ARRANGEMENTS

Fund Management Team

The EMG & Genesis team is based in two locations: the operations core team is based in Johannesburg while the governance and support structure is based in Thame, UK. The South African-based core team consists of two full time professionals, supported by a team of experts in various areas as described below. The UK based-team is composed of the Project Director as well as technical and administrative support.

There have been some changes in the original team as it was presented in the proposal. These include the replacement of Jack Newnham (Project Director), by Geoff Norman, the replacement of Gordon Freer (Monitoring and Evaluation) by Illana Melzer and the appointment of Katja Silva-Leander and Vera Ogorodnikova as part of the UK Project Management Team to provide additional technical and administrative support.

SOUTH AFRICA-BASED TEAM

Dominique Brouwers, the Team Leader provides technical and operational leadership to FEF. She is also responsible for the external aspects of fund management – i.e. stakeholder engagement, promotional activities and pipeline development, dissemination of lessons learned and mobilising support from potential donors. Dominique submits all reports, deliverables, work plans and budgets to the Project Director for review and approval and provides the Investment Panel with appropriate summaries and assessments of Concept Notes and Full Applications. She will also liaise with the on-site Project Coordinator on organisational and administrative issues.

Shireen Miller, Operational Fund Manager is responsible for internal aspects of fund management – operational procedures and policies, preparing contracts with grantees, portfolio management and administering grants disbursements. She will support the Team Leader in pipeline development activities, learning & dissemination and engagement with the FEF stakeholders.

Paul Zille, Project Coordinator is based in the same office as the Core Team. He oversees the team’s performance and reports potential problems and risks to the Project Director.

Hennie Bester, Strategic Advisor advises the Team Leader, the Project Director and other team members on the strategic direction of the Fund. He is responsible for the development of a detailed marketing and communications strategy, which integrates the marketing focus of the Fund, as well as testing and fine-tuning FEF’s monitoring and evaluation approach. He also works closely with the Operations Committee on opening the FEF to other donors.

Figure 2: Organisational Chart

Core Management Team

Team Leader

Dominique Brouwers

Operational Fund

Manager

Shireen Miller

Project Director

Geoff Norman

Project Coordinator

Paul Zille

Regional Support

East Africa / West Africa /

Southern Africa

Strategic Advisor

Hennie Bester

Technical Experts Financial Literacy / Education

Communications & PromotionMonitoring & Evaluation

Project management

support

Technical Advisor– Katja

Silva-Leander

Administrator – Vera

Ogorodnikova

Accountant - Taskin

Chowdhury

Operations Committee

DFID

Lead Project Advisor

and Project Officer

Governance

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Janet Wilhelm, Communications Expert is responsible for establishing the FEF brand, developing FEF website architecture, marketing materials and messages and identifying communication channels. Once the funded projects have initiated activities, she will write case studies and dissemination materials.

Illana Melzer, Monitoring and Evaluation Expert will be responsible for establishing with the core team a comprehensive system for monitoring and evaluating the performance and impact of FEF, developing monitoring and evaluation templates and guidelines to be used by the applicants to the Fund, the Fund Manager and future grant recipients during project implementation. She will advise the Operational Fund manager on the development of databases/e-tools to be used for collection and analysis of the monitoring and evaluation data. During the funding rounds and at a later stage, she will provide advice and feedback to the core team, applicants and grantees on how to undertake monitoring and evaluation research and how to analyse project indicators.

Omoneka Musa, Analyst at Genesis, has been responsible for most of the scoping studies related to Southern African countries as well as Kenya. She will be involved in supporting the applicants during the funding rounds.

UK BASED-TEAM

Geoff Norman, Project Director provides support to the core team on all strategic issues, reports to DFID on all strategic and contractual aspects of FEF, countersigns all contracts with grantees and signs off all payments. The outgoing Project Director (Jack Newnham) travelled to Johannesburg to work with the Team Leader and the Operational Fund Manger in developing FEF’s Operational Policies & Procedures and established the MIS. Further travel is planned to provide on-going strategic oversight.

Katja Silva-Leander, Technical Advisor works closely with the Project Director in supporting the team leader on technical and project management issues related to the FEF to ensure a successful delivery of the fund and its projects. She helps write and review reports, helps in the early appraisal of Concept Notes and Full Applications, works with the team leader in developing partners for downstream work, and will provide guidance to panel members in the orientation phase etc. She is also responsible for reporting to DFID on FEF activities and makes sure deliverables are submitted and on time, while acting as the main communication channel between the core team and DFID.

Vera Ogordnikova, Project Administrator is responsible for the administration of contracts with grantees, effecting payments to grantees, making grantee payment requests to DFID and coordinating budgeting and reporting needs with DFID. She will process invoices from grantees, prepare invoices to DFID, prepare FEF Fund Manager budget forecasts for DFID and prepare FEF financial reports for DFID.

Taskin Chowdhury, Accountant will work with Vera on effecting payments to grantees, making grantee payment requests to DFID and coordinating budgeting and reporting needs with DFID.

OTHER INTERNATIONAL EXPERTS

Mike Erskine will provide specialised financial literacy and education expertise. We also have a list of international experts that can be used, should a specific need occur. These experts have specific knowledge related to various aspects of financial education and can be called upon if needs be. These are: Monique Cohen (Microfinance Opportunities, various areas of expertise such as Train the Trainers, Curriculum development), Dr Garth Japhet (Soul City Institute for Health and Development Communication, experience in adult education through media), and Prof. Harry Dugmore, (Rhodes University, Behaviour Change applied to financial education). We shall expand this list over time.

Christine Hougaard, East Africa coordinator, is based in Tanzania and has been the main person responsible for the scoping study in East African countries as well as Zambia. She is also contributing to various strategic researches such as monitoring and evaluation and the FEF rationale and focus and is working closely with Hennie Bester. Christine will serve as regional coordinator for activities in East Africa such as initial marketing, launch workshop, information to potential applicants and assistance to applicants and grantees.

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Offices and Locations

Office in Johannesburg - The Core Team is based at Genesis Analytics’ office in Johannesburg, and is able to tap into all of Genesis’ resources for research, administrative and project management support.

Office in Thame – the governance and support team is based at EMG’s office in Thame, UK, and is able to tap into EMG’s well established administrative, project management and accounting systems and procedures. In addition, synergies can be drawn from this office’s experience in managing and administering previous challenge funds, including the Business Linkages Challenge Fund and the Remittance Partnership Challenge Fund, and involvement in the Financial Deepening Challenge Fund.

Hubs–Currently we have active representation with minimal project infrastructure in East Africa with Christine Hougaard being based in Tanzania. She is not only our regional representative but is also an integral part of the core team. We will be able to establish offices in East Africa, West Africa and other regions if the Fund grows and if such offices are considered necessary.

Management Systems and Processes

As shown in Figure 3, the FEF Management Information System (MIS) is made up of three principal components – a contacts database, a knowledge management system, and a financial management system. The MIS will capture the necessary data to analyse our own fund management processes as well as the progress and performance of funded projects. We can provide these data, on a timely and accurate basis, to the Operations Committee and to any independent evaluators for the purposes of assessing the Fund Manager’ performance. The FEF Fund Manager has developed and will maintain a detailed database of key contact persons, organisations, and histories of contacts with potential and actual applicants. This will help measure the effectiveness of marketing methods and target our on-going marketing campaigns.

Figure 3: FEF Management Information System

Database

Knowledge

Mgt.

System

Financial

System

Fund Management System

&

Management Information System

Financial Systems

Systems are in place - adapting Microsoft Excel-based applications - for the financial management of the FEF, including the monitoring of FEF grant disbursements. The system provides all the data needed to manage the implementation of FEF grants, as well as the associated performance monitoring needed to trigger grant payments. Excel-based systems will provide summary information to the Team Leader and Operational Fund Manager of the financial information needed to monitor FEF expenditures on individual projects and in aggregate. Budget Information is integrated to ensure that the fund management processes are closely monitored, drawing on data in the financial management system and promotions and applicant-related data in the contacts management system. All quarterly and annual reporting will be driven through this FEF MIS system.

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6. FEF FUNDING POLICIES

This section describes the funding policies of the FEF. The FEF will fund three types of projects: direct

financial education interventions, the evaluation of existing financial education interventions funded by third

parties and strategic interventions designed to improve the enabling environment for financial education in

the FEF target countries. These three types of projects are funded through four funding windows (financial

education interventions can be provided by either private or public/NGO institutions) which are described in

the next section. This is followed by the eligibility and assessment criteria for the respective categories.

Whereas the eligibility criteria yields a yes/no answer to applications received, the assessment criteria are

designed to rank applications in terms of their potential contribution to the achievement of the FEF’s

objectives listed above.

Funding windows

The FEF will entertain applications for projects fitting into one of four funding windows:

1. Projects providing financial education implemented by non-private sector entities (Category A projects)

2. Projects providing financial education implemented by private sector entities (Category B projects)

3. Projects which will focus exclusively on the evaluation of existing financial education interventions

implemented by third parties that are not funded by the FEF (Category C projects)

4. Projects designed to create an enabling environment for financial education in a country and which does

not entail the direct provision of financial education (Category D10 projects)

Funding allocations to Category A, B and C projects will be made on a competitive basis by the Investment Panel, i.e. applications will compete with other applications for the available funding. It is anticipated that the Fund Manager will have to trigger applications for Category C projects through interaction with existing projects funded by third parties. However, Category C projects will compete on an equal basis with Category A and B projects.

Category D projects will be identified by the Fund Manager in discussions with potential applicants, but approved by the Investment Panel. Although trade-offs between different category D projects will have to be made, given limited funding, Category D project funding will not be awarded on a competitive basis.

It is proposed that at least 80% of all funds available for project funding be allocated to Category A, B and C projects and no more than 20% of funding to Category D projects.

10 The need for coordination/strategy emerged strongly in the scoping studies, suggesting that it would be wise to consider funding

such interventions. For example: in Uganda various financial sub-sectors are coming together to form the so-called “FinLit Foundation”. Its aim is to set up a secretariat, run on an independent budget and coordinate financial education initiatives across the commercial banking, microfinance, insurance and capital markets industries. It has also obtained the buy-in from government (via the central bank), but has yet to come off the ground. In Kenya, the FSD Kenya has been working with various Kenyan stakeholders representing interested parties in financial education. This has resulted in the newly formed Financial Education Project (FEP) which will work on a national strategy. .FEP and FEF have agreed to work together in co-funding financial education projects. The two organisations have already joined forces through a common launch. Though there have been some isolated financial education initiatives in Tanzania, there has thus far been no sense of direction and no indications of actual achievements on a large scale. The FSDT has launched an initiative with the Bank of Tanzania to fund a national financial literacy strategy. This is however currently hampered by a lack of coordination within the Bank of Tanzania. In Zambia there is some political motivation for financial education, given the inclusion mandate of the government under its Financial Sector Development Plan. The Bank of Zambia has been tasked with this and the state's vocational training authority is also on board. There is however no clear idea yet of how to approach it and how to get projects off the ground. In all of these instances, the coordination efforts are therefore in need of guidance and of support in devising a strategy.

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Eligibility Criteria

The following eligibility criteria will apply to Category A, B and C projects:

1. Capacity to implement: FEF is not prescriptive regarding the nature of applicants. We

expect there to be

at least eight potential categories of Fund recipients:

� NGOs or foundations focusing on financial education: These can be either indigenous African NGOs or international entities that have or want to enter into partnerships in Africa. Non-profit organisations are often providers (rather than funders) of financial education programmes. Most came to that field indirectly; for instance, an organisation promoting entrepreneurship for women might extend its services to financial education in order to empower women entrepreneurs. Some of these non-profit organisations may also be able to deliver financial education on behalf of other players. On the foundation front initiatives generally target a broader public than clients and employees, even if funded by private enterprises or banks’ foundations.

� Private financial institutions undertaking financial education: The role for partnerships with commercial players in the UK is highlighted by the Thoresen Review (2008) and we found a similar situation in African countries. Banks or insurance companies often launch or take part in financial education programmes with a strong focus on increasing product take-up from existing or prospective clients. Through the challenge fund mechanism (given a strong pro-poor requirement), such initiatives can be harnessed by FEF, with the requirement for matched funding enhancing the bottom line. There are several private financial institutions, including banks, insurers and others that are increasingly operating in various African countries, thereby providing even more potential leverage to the Fund. Moreover, in countries where some coordination of financial education exists, commercial institutions have been involved in more broadly-based, less marketing-orientated initiatives.

Private financial institutions may also include microfinance organisations, financial cooperatives or village banks which include a financial education component in their loan granting process. These may be for-profit or non for-profit institutions.

� Industry associations: Operating at the meso level, these are often tasked with educating the public on specific issues related to their industry. Examples include the South African Insurance Association, the Association of Micro-finance Institutions in Uganda or the banking associations in various countries.

� Technology providers delivering financial services via new channels: Among the most important players in this sphere are mobile operators. Safaricom in Kenya, with its Vodafone-driven M-Pesa mobile phone banking initiative, is a case in point. In just over a year it accumulated almost 2 million clients in a country with fewer than 4 million bank accounts. Likewise, South African m-bank Wizzit has achieved considerable success. It depends entirely on social marketing with a strong financial education element and does not even have a physical branch network. As mobile banking initiatives spread through more and more African countries (for example the recently launched Z-Pesa by Zantel in Tanzania), FEF could play a central role in co-funding financial education to ensure sustainable, responsible usage of mobile banking services.

� Employers: Larger private sector employers are considered eligible where they are well placed through their scale and capacity to deliver increased financial capability to their employees and others, especially on topics that have a connection to conditions of employment (retirement planning) or impact on work environment (e.g. fraud due to over-indebtedness). They generally work with external service providers, either for-profit or NGOs, to provide a limited number of sessions to their workers. This type of intervention has limited outreach in countries where formal employment is low, but might be a particularly effective way to reach specific target groups.

� Media organizations or production houses could be interested in focusing some attention on financial literacy. Often they would be considered as a secondary partner working for instance with a bank or a regulator, but they might also be a good starting point, as they are likely to know who has an interest in the domain.

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� Non-financial service provider companies: Some entities, such as consulting firms, also have the capacity to deliver financial literacy programs or material. While this might only be the case in countries where such initiatives are already common place, in other countries there might be individuals or organisations with skills in for instance adult literacy, HIV/AIDS prevention, or small business training that would be ready to extend their services to financial education.

� Government agencies or regulators tasked with financial education or public entities (such as FSD

units) with a financial inclusion mandate: Examples include the potential country and regional nodes set out above. Most central banks and non-bank financial regulators have now at least some degree of awareness of the need for financial literacy, even though they may not yet have an official mandate to engage in this area. In a few African countries, government has intervened directly in the sphere of secondary or tertiary education. In a few cases agencies have also been set up to promote consumer awareness.

Though a wide range of organisations will be considered, applicants must have the capacity to implement the full project or must be able to source the necessary expertise from external service providers where this is required.

Consortia will be encouraged. Where consortia are brought together for an application, a lead applicant must be identified who will be the contracting party for FEF and who will be required to enter into subcontracting arrangements with members of the consortium.

2. Direct provision of financial education: Projects must provide financial education directly to beneficiaries of such education with the intention to improve their financial capability. Projects that propose to only develop financial education materials without applying these materials in education interventions will not be funded. The same applies to projects that consist only of training trainers. Similarly, the bulk of FEF funding must be applied to education interventions or communication events rather than to the development of materials.

As pointed out by Kempson (2008)11, the evaluation strategy depends on the delivery channels. Evaluation is easier when the project uses direct contact delivery channels (such as training sessions or workshops). However, from the scoping studies undertaken as well as the literature quoted below, our findings are that FEF cannot limit itself to projects using direct contact delivery channels. The monitoring and evaluation framework described in section 10 will deal with that situation.

From the scoping studies (see selected project examples at the end of this section) the impression is that, where projects have been implemented, the emphasis has either been on public education campaigns (via mass media) or initiatives targeted via workshops/road shows, MFI and other community group interactions. Public education campaigns account for a significant proportion of the demand. The examples of existing financial education projects contained in at the end of this Section emphasise that there is a need to approach financial education from different angles to "bring the message home". For example: Microfinance Opportunities (2008), which has had activities in several of our target countries, as a rule emphasises direct training. For branchless banking financial education they however admit that the dispersed nature of the target market makes direct training difficult. They suggest a mix of channels in their recent branchless banking study based on the experience of branchless banking operators of what works best.

3. Must improve financial capability: FEF will support projects that improve the financial capability of individuals and households. FEF considers a financially capable individual to be one who has the knowledge, skills and confidence to be aware of financial opportunities, to know where to go for help, to make informed choices, and to take effective action to improve his or her financial well-being. Financial capability therefore has four dimensions: (1) knowledge, (2) skills, (3) attitudes and (4) behaviour and FEF seeks to impact all of these. Please note that the focus is on personal financial management, not the financial management skills related to a business. (For more information on the various dimensions of financial capability, applicants are referred to Annex 7.)

11 Monitoring and evaluating the DFD Financial Education Fund, May 2008

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4. Must target increased or changed usage of financial services: FEF will fund projects that seek to impart not only personal financial management skills (such as budgeting), but also seek to trigger increased and/or enhanced usage of financial services that will extend current levels of financial access in the target countries.

5. Must primarily target low-income groups: Projects must focus on improving the financial capability of low-income persons, families and communities. Whereas interventions using mass-based communication mediums will inevitably be available to all income groups, the content and orientation must be towards low-income clients.

6. Potential for scale: FEF will fund projects that have the potential to impact large numbers of people, either through direct communication with large groups or through the presence of multiplying factors such as the training of individuals who will be involved in advising or influencing others in the target market.

7. Ability to credibly measure impact: A primary objective of FEF is to test the relative success of different approaches to financial education. All FEF projects must therefore be able to measure the impact of their financial education interventions. Projects proposals must include budgeted proposals for impact evaluation, including, amongst others, the collection of baseline data, target outcomes and proof of expertise to undertake the evaluations. Evaluation of projects is discussed in Section 10 and Annex 7 contains the complete FEF Monitoring and Evaluation Policy and Procedures.

8. Leverage: Projects must leverage the applicants’ own resources and existing networks, particularly networks of trust used by low-income persons. All applicants must demonstrate some leveraging of other resources, internal capacity, or partners’ resources alongside FEF resources.

9. Implemented in the FEF target countries: Projects must be implemented in the FEF target countries, namely Botswana, Ghana, Kenya, Namibia, South Africa, Tanzania, Uganda, and Zambia so as to cluster initiatives and build multiple interventions that feed off each other. Regional projects will also be eligible provided the majority of FEF resources are applied within FEF target countries. The geographical focus of FEF may extend in the future, depending on demand and the availability of resources.

A scoping study of 9 countries was undertaken to determine the geographical focus of the Fund. The countries were assessed based on the following criteria:

� Existence of a coordination or policy node that would be ready to work with FEF, preferably as a coordinating body. Sustainability requires coordination and proactive policy, as the delivery of financial education, despite its huge potential benefits, is not financially sustainable in itself. Financial education is most likely to achieve sustainability beyond the life of the Fund in countries where there is an institution acting as financial education coordination node. FEF also needs some official backing in each focus country that would give some comfort that we are working with the authorities and would facilitate our interaction with the various parties.

� Minimum level of access to financial services: The Fund must focus on countries in which at least a minimal, ‘threshold’ level of access to appropriate financial services exists. For financial literacy to be converted into usage, the potential client must be able to convert that knowledge into action within a reasonable time.

� Awareness: Existence of financial education initiatives as well as awareness of what financial education can achieve and how it can be delivered makes it easier for FEF to interact with would-be applicants. However, we want to achieve a balanced portfolio where countries at different levels of awareness are represented. It is interesting to note that in some countries such as Kenya, the awareness is high although the number of concrete projects already in place is still low.

� Existence of baseline data: The need for learning implies that the Fund should focus on countries with existing baseline data from which progress and impact can be measured to ensure optimal learning. FinScope surveys provide the most up-to-date information on financial services usage in several African countries.

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The scoping exercise gave the following information:

Table 1: Country Evaluation

Country Interest at government level

Financially served (%

pop)12

Awareness regarding financial

education

FinScope data

available

Potential for FEF

South Africa

FSB (regulator) tasked with national coordination; willing to be the FEF coordinating body.

69

A variety of initiatives exist led by the financial sector, employers, NGOs, govt, etc.

2003-2007

Very high as the focus is now on refining existing approaches, testing new ones and on measuring impact of interventions

Botswana

Botswana Institute of Bankers is a potential coordinator as national approach seems fragmented.

54

Some initiatives already in place (banking weeks, FE through employers) as well as a national strategy for financial education in school.

2004

Low to medium. Responses to the scoping have been slow to come but positive after a while. Need for external funding seems low.

Namibia

NAMFISA (regulator) tasked with national strategy but still to be developed. Their interest to be the FEF coordinator remains to be confirmed.

57

Some initiatives already exist but mostly related to product promotions by financial institutions.

2004

Low to medium; responses to the FEF enquiries have been slow but good awareness of the potential of financial education. Prospect in terms of regional projects.

Zambia

FinMark Trust Zambia working closely with the Bank of Zambia has volunteered to be the coordinating organisation.

38

Starting; ideas are emerging and some have concrete plans to roll out activities.

2005

Medium to high, the awareness of the need for financial education is high, feedback regarding FEF enthusiastic.

Kenya

FSDK willing to coordinate for FEF; FSDK also have activities in financial education, which include designing a national strategy.

55

Starting; financial education is a hot topic but not many initiatives under way yet.

2006

Medium to high, the positive factors being the FSDK acting as a catalyst, the number of organisations planning to enter the area and concrete examples of initiatives in neighbouring Uganda.

Tanzania

FSDT with the Bank of Tanzania are willing to coordinate; FSDT is working on a national strategy

25

Very few initiatives and awareness of financial education is low. However, there was interest

2006

Medium: the work done so far by the FSDT and the enthusiasm of would-be applicants are

12 Includes usage of informal financial services.

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together with the Central Bank.

in the possibility to apply to FEF for funding.

positive but the lack of knowledge about financial education and prior examples might result in low quality applications.

Uganda

Capital Market Authority on behalf of the FinLit Foundation soon to be established and tasked with National Coordination.

48

Various initiatives undertaken by MFIs, NGOs, industry associations, media, etc. With plans for more initiatives, but in need of funding

2006

Very high, financial education now seen as the stumbling block to financial inclusion. Past initiatives now call for more refinements.

Ghana

Government is about to launch a financial education national strategy. The Ministry of Finance and Economic Planning (Mofed) is the main player and a potential coordinator for FEF.

N/A

Some initiatives and more projects looking for funding in the NGO, banking sectors.

2008 planned

Medium. Some organisations have specific ideas and are ready to submit Concept Notes.

The scoping study on the ninth country – Rwanda – was suspended because of the specific situation of this country where government seems to have a much stronger role than in other countries on planning financial education through various channels. It was decided that a country visit would be needed to assess the situation. This is likely to happen during the preparation phase for funding round 2.

The strategy has been to launch FEF in the countries with the most promising results: Zambia, Uganda, South Africa and Kenya. This has been achieved through a series of workshops (see below) where the fund was presented and the process for application and selection explained in detail.

Applications from Ghana, Botswana, Namibia and Tanzania will also be accepted but no in-country launch was held for the first funding round.

10. Maximum implementation period of 24 months: FEF projects should be implemented over a period of no more than 24 months, including final impact assessment activities. This will require early implementation of the financial education interventions themselves to allow sufficient time for impact assessment.

11. Maximum grant size of £250,000: Due to the focus on testing alternative approaches to financial education, FEF will not contribute more than £250,000 to any single project.

The following additional eligibility criteria will apply to Category B projects:

12. Privately owned grantees must contribute matched funding on a 1:1 basis: When funding privately owned businesses (as grantees or leading applicants of a consortium), FEF requires private applicants to share the risk of the project by providing matched funding equal to the contribution of FEF. In this regard, additional (rather than sunk) investments are sought from private sector partners. A substantial proportion of the private contribution must be in cash and the FEF must be able to verify the full extent of the contribution. Resources such as intellectual property and existing materials would not be considered as a suitable match for FEF resources.

13. FEF resources cannot be allocated to product marketing: Private sector applicants that provide financial services must demonstrate that FEF funds will not be used to market their own products. They need to apply FEF resources to more generic financial education or training in the use of products that have application beyond their branded product range.

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While FEF funds cannot be applied to marketing, the resources that the applicant is bringing to bear alongside FEF funds may relate more directly to the promotion of the applicants’ products or services. However, it should be noted that the degree to which public goods (rather than private goods) are developed will be a consideration in the competition (see Assessment Criteria below)

DUE DILIGENCE

The FEF Fund Manager will perform an initial and limited due diligence on all Full Applications received. This will include the following:

� Registration and other requirements related to legal personality: The legal registration of the applicant will be verified, inter alia by requesting copies of the registration documents from applicants and then verifying these with the necessary national authorities. The governance arrangements of institutions will be checked.

� Financial probity: The financial good standing, including tax compliance, of applicants will be verified.

� Delivery and managerial capacity: The ability of applicants to deliver proposed project outputs within the indicated time frame will be assessed. As far as possible this will be done through visits by the Fund Manager to applicants.

� Experience in financial education: Where applicants assert previous experience in financial education, these will be verified, inter alia, through checking materials used in previous projects as well as any project reports that may be available. Interviews with the relevant staff members will be sought.

� Trade check: The fund manager will check whether there have been any reported cases of fraud or anything illegal in an applicant’s dealings. This could be taken from news reports or from people in the business who may be aware if the firm in question has been engaged in dodgy business which could be embarrassing. DFID country offices will be requested to provide any information of this nature that may be available to them.

Assessment criteria for Category A, B, C projects

Project Concept Notes and Full Applications for FEF funding selected for consideration by the Investment Panel, will be assessed using the following criteria. The criteria are grouped into four categories, each carrying equal weight in the assessment:

1. The capacity of the applicant to deliver the project outputs and outcomes (25%)

Managerial and delivery capacity: Applicants must have the necessary institutional capacity and managerial strength to implement the proposed financial education interventions, either as a single applicant, or through the members of the consortium.

Financial strength: Applicants must be able to manage the cash flow and other financial requirements to implement the project. The necessary financial record-keeping and reporting systems need to be in place.

Experience with financial education: The institution must have the experience with financial education or adult literacy necessary to implement the relevant intervention. This will differ from project to project.

Experience of key individuals: Key individuals responsible for implementing the project must have the necessary experience for the tasks allocated to them.

Coherence and sufficiency of consortium: Consortia must demonstrate that they have assembled the requisite skills and resources to implement the project in a cost effective and efficient manner (avoiding a top heavy or cumbersome structure).

Additionality: FEF seeks to fund projects which would not have happened if FEF funding was not made available. Applicants therefore need to demonstrate that the project would not have happened if it was not for FEF funding.

2. The approach and methodology to be used in the proposed intervention (25%)

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Method of financial education employed: Is the content and manner in which the financial education will be delivered (e.g. components of financial capability targeted, channel used, method of communication, materials, etc) credible given existing knowledge.

Clarity and quality of project plans: Is the project plan clear, systematic and complete. Does it cover all the elements of the process and is the timeframe realistic.

Innovation and the need to add to existing learning: FEF seeks to support projects that will push the financial education frontier forwards, test new ideas and approaches and inform others as to how best to deliver financial education to a variety of target groups. This requires not only a rigorous evaluation of existing approaches (where these have not yet been fully evaluated) but also innovating and developing new approaches to financial education. In the financial education environment innovation is interpreted broadly and will be considered in the local context. It may be innovation in the method and style of delivery, innovation in the form of partnerships used to deliver financial educations, or innovation in others forms.

Extent of applicant’s own resources leveraged: To what extent is the applicant using its own in cash and in kind resources to implement the project and thus adding to the cash provided by FEF.

Extent of networks of trust13 leveraged: To what extent does the project utilize existing networks of trust and institutions to deliver its education?

Extent of development of local capacity: FEF seeks to build national capacity to design and deliver financial education initiatives in target countries and the degree to which such local capacity is developed will be a consideration in the selection of projects. Where international organizations are involved in partnership with organizations based in FEF countries, the degree to which knowledge and skills are transferred will be an important consideration.

3. The potential impact of the intervention (25%)

Scale – the number of low income persons to be reached: FEF seeks to develop models for delivering financial education to large numbers of underserved individuals and households and the number of these target audiences reached will be an important assessment criteria.

The profile of beneficiaries will also be important, as FEF has a low-income focus and will seek to support projects that lead to increased financial education for poorer and more marginalised groups. However, there is recognition that there are a range of unmet needs for financial education, and FEF may not always seek the poorest groups as beneficiaries of projects.

Increased financial capability and behaviour change: FEF projects must seek to improve the full range of financial capability (knowledge, skills, attitudes and behaviour). As such it seeks to improve both the quality and the quantity of the usage of financial services. Generally this will be in the form of increased or more responsible usage of financial products or services, but may also come through changes in the way individual or household budgets are managed.

Potential for replication, sustainability and/or systemic impact: FEF seeks to maximise the impact of the resources it applies. The degree to which projects are likely to lead to a longer term impact beyond the period of FEF support will therefore favour one project over another. Longer term impact may occur in a variety of ways, and may not always be due to the continuation or expansion of project activities. These could include: scaling-up project activities, replication of projects by other institutions, institutionalisation of the knowledge and skills to ensure continued communication of financial education messages beyond project completion, continuation through other funding sources, and/or some form of sustainability through capturing an income stream to continue to fund project activities.

13 A network of trust is an existing set of client relationships (such as the branches of an MFI), or other relationships with persons trusted by the target market for the financial education intervention. Such networks of trust facilitate communication with the target market.

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In some cases the longer term impact of a project may not be through the project being developed and used to deliver financial education to more people, but may come through some sort of systemic change. Plans for how the outputs and outcomes of projects will be disseminated so as to maximise the impact of the project will be an important consideration.

Contribution to the wider national strategic and enabling environment for financial education: Consideration of how the proposed project will impact and relate to other existing and planned financial education initiatives in the country of implementation will be a factor. FEF is seeking to build and support multiple initiatives that are mutually reinforcing and an awareness of how the project impact will relate to the wider financial education field in the country of implementation will be critical. Competitive projects are likely to have some potential to impact on national strategies or coordinating capacities alongside the delivery of financial education to the target groups.

4. The ability to assess the impact of the intervention (25%)

Whether measurable targets are set: Due to the importance of exact evaluation of impact, the extent to which the proposal contains realistic and measureable targets based on previous experience of sound projects or best estimates, will be important.

Quality of proposed evaluation methods and planning: FEF is seeking to support projects that add to the learning of how to deliver financial education effectively and efficiently. Being able to understand and assess the approach applied, challenges faced, results achieved, and impact on recipients of support will be critical. The approach employed and the methodology for monitoring and evaluation therefore needs to be clear, practical and adequate.

Sufficient evaluation skills: Applicant organisation(s) must demonstrate sufficient professional skills to implement their evaluation plans and to manage an effective M&E process. If these skills do not currently exist within the organisations, applicants need to source sufficient skills from third party service providers. Applicants are encouraged to use external service providers to ensure the independence of evaluations14.

Additional criteria for Category B projects

The following two additional criteria will be used to assess Category B projects. These criteria will be separately assessed and not count to the rating under the overall assessment set out above. These separate assessments will be considered by the Investment Panel when they make their final decision.

1. Matching contribution size: What is the size of the matching contribution provide by privately-owned

applicants. The FEF seeks to leverage as much non-FEF resources as possible to achieve its objectives.

2. Degree of public goods provided: For private sector applicants, the degree of public goods delivered is a

key consideration. Thus, the more accessible financial education provided by these projects are to the

general public (and not just the clients of private financial services providers or employees of private

employers, to take to examples of potential applicants) the more attractive the project.

Ultimately, there will be tensions between the ability of (mostly) private sector applicants to provide significant resources of their own and the need for projects to deliver (mainly) public goods, but this is a tension that the challenge fund process is ideally suited to address. Challenge funds have been used as a development tool by DFID and other donors to work with private sector partners in an open and transparent way – the competitive process results in a legally binding Grant Agreement that ensures the private sector recipient of support delivers the project as approved by the Investment Panel. In that context, it is also necessary to consider the corporate risk for DFID. This is envisaged in the next section.

14 The Fund Manager can assist applicants to identify suitable service providers to assist with project evaluation.

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Corporate Risk for DFID in Considering Various Types of Grantees

The UK International Development Act (2002) does not restrict DFID from providing funding to commercial (“private sector”) organisations, but there is significant reputational risk to DFID that remains when funding commercial organisations. This reputational risk is largely addressed by FEF through the setting up of a transparent open competitive process, as any organisation that objects to a competitor receiving funding could have applied for such support themself, and provided the availability of funds is put squarely in the public domain, there is no unfair advantage that one commercial organisation receives over another.

As such the FEF policy of providing funds to commercial organisations is contingent on effective promotion of the fund, and on a modus operandi that protects the fund from accusations of favouring one potential applicant over another. The distinction between the role of the Fund Manager in promoting FEF and supporting applicants to develop strong competitive proposals, and the role of the Investment Panel as the decision makers and guardians of the competition, are particularly important in the context of funding commercial organisations and enabling FEF to stand behind the Investment Panel as the group that allocates funding fairly according to the assessment criteria.

Also under the IDA, funds cannot be provided in advance of need – i.e. advances to FEF private sector grantees are not allowable unless there is a clear justification (in terms of development impact) as to why there is a need to provide advance funding. This policy of no advance to the private sector grantees will be communicated clearly before the funding rounds.

Private sector applicants and matching funds – the restriction on the use of FEF funds in relation to marketing a private sector applicants own products is clear, as is the minimum one to one match of private sector investments. However, matching funds provided by the applicant are not restricted in the way that FEF funds are (in terms of what counts as eligible), but the manner in which matching funds are applied and the overall leverage of FEF resources are key considerations in the assessment and evaluation of competing bids.

In theory, a application from a private sector applicant that applied FEF funds to the promotion of public goods (more akin to social marketing) and that leverages a one to one match, where the applicants’ funds are applied purely to product marketing, would qualify for consideration. However, in practice, it is unlikely that such an application that meets the minimum criteria for consideration of private sector led applications would be successful, as the effective promotion of FEF should elicit competition between private sector applicants such that the degree of public goods/social marketing delivered and the leverage of private sector funds would be ways in which applicants would make their FEF projects more competitive.

Under EU rules, State aid is aid (financial or otherwise) granted by a state within the EU to a business. State aid is prohibited by the EU Treaty if it distorts or threatens to distort competition by favouring certain undertakings and affects trade between member states. There is a de minimis threshold of EUR 100,000. State aid is required to be reported to the EU unless it falls within a “block exemption”. Running an open tender competition or procurement exercise does not guarantee that an intervention is free of state aid.15 However, there is no State Aid concern because the operation and impact of FEF will be outside of the EU.

Example projects

The following projects have been identified through the scoping studies and indicate the types of projects that might be funded by the FEF. They show not only a variety of delivery channels but also a broad range of target audiences:

PROJECT EXAMPLE ONE: Broad Ranging Financial Education Campaign about to be launched by a Commercial Bank in Zambia

Target audience: school children, salaried adults, SMEs

15 (Cumbria Broadband -Project Access case).

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Channels: various used, including

• Training of bank staff in branches, training of school teachers (development of materials commissioned)

• Recording a TV programme to discuss topics on savings, investment (to be shared on DVD via branches and distributed

to other organisations to show their employees)

• Finalising a comic on financial literacy depicting real life situations, placed in popular newspapers once a week for 16

weeks, then converted into booklet

• SME targeting through their branches - identify staff, develop modules for them, select a date and ask SMEs to sign up for

training; also do this outside of branches, e.g. the local market.

Duration: one year as a start, with intention to extend, depending on feedback

Indicative budget: about $100,000 in cash, excluding all staff resources, transport, etc costs not included in budget but covered by company as overheads

PROJECT EXAMPLE TWO: Association of Microfinance Institutions Uganda (completed project)

Project partners:

• FSDU Uganda (funding)

• AMFIU (microfinance network and staff resources)

• Ministry of Finance and Economic Planning (financial extension workers)

• Straight talk Foundation (communication development, e.g. radio recordings, posters)

• Communication for Development Foundation Uganda (CDFU)

Target audience: micro finance clients/potential clients

Channels: multiple angles approach:

• 20,600 radio spots

• 244 call-in shows

• 220 prepared shows

• distributed 93,000 each of flyers and handouts

• 920,000 copies of "Moneyworld" newspaper in 5 languages

• 922 flipcharts (with interesting pictures sketching situations that the facilitator then explains to a group)

• 22 music dance and drama performances in communities, e.g. at annual general meeting

• trained 129 trainers (financial extension workers who then go out into the community and engage people on financial

literacy matters)

• In addition they feel strongly that a follow-up project would also need to cover inclusion of financial education in the school

curriculum. For this, government needs to be lobbied.

Budget:

• pilot: GBP43,000

• national roll-out: GBP 277,000

• training of trainers, music dance and drama done as additional component: GBP99,000

Duration: pilot 6 months, national roll-out one year. Would not recommend anything shorter; only stopped due to lack of further funding

PROJECT EXAMPLE 3: Training to MFIs and Clients by a Tanzanian NGO MFI (country office of large international organisation)

Background: The organisation has conducted limited financial education training thus far, and where it has done so, has focused on the training of its staff members. It now however wants to roll-out a full-fledged microfinance training facility.

Target audience: clients as well as staff members and other MFIs

Channels: generic courses to MFI employees to train them to in turn train members/clients on financial literacy (a fee will be

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charged); a tailor-made five day training course to MFIs (the organisation itself gets the training and has to pay for it); training to SMEs on business development (envisaged 50 courses per year, reaching a total of 1250 people per year in year 1, rising to 5000 in year 4, charging a minimal fee per participant)

Duration: the initiative is to be implemented over a four-year period divided into annual phases

Indicative budget:

• total expenses: $1.2m in year one, rising to about $1.7m in year 4

• envisaged income from fees: $560k in year one, rising to break even in year 4 - they therefore are in need of outside

funding to fund the "gap" initially

PROJECT EXAMPLE 4: Two Projects of an Insurance Association in East Africa

1. Public broadcasting campaign to sensitise the public about the need for third party vehicle insurance - once-off

communication to remind them that such insurance is statutory

Target audience: owners of vehicles (i.e. not low-income, but in a country where insurance uptake is virtually negligible, even expansion of the market in the middle income is considered greater financial inclusion and in need of financial education)

Channels: 10 radio stations, 5 newspapers, 2 TV stations

Duration: only 10 days

Indicative budget: about $5100

2. Project to sensitise the public on the need for insurance

Target audience: general public, including urban and rural, the majority of which is low income

Channels: 9 radio stations, 3 newspapers, outdoor advertising

Duration: 6 months

Indicative budget: about $91,000 to run the ads (5% allowed for monitoring, but no overhead costs for the implementing organisation included); additional $30,000 for outsourced design

INTERNATIONAL PROJECT EXAMPLE: Citi Foundation Global Campaign on Financial Education

Target audience: microfinance clients, school children, general public

Channels:

• Personal finance video series, Wallet Wisdom. Each short 4-6 minute episode profiles a financial challenge that “real

people” face, such as paying back college loans or saving a home from foreclosure. Citi experts provided content and on-

air expertise.

• To reach those with minimal financial skills, the Citi Foundation's Global Financial Education Project has provided financial

education training to 266 master trainers and 2,831 organizational trainers, reaching over 168,000 clients of microfinance

institutions in 30 countries worldwide in the past two years.

• Through alternative delivery channels such as radio and newsletters, the program has reached an additional 6.6 million

individuals globally.

• Additionally, in 2007 more than 39,000 high school students from 31 countries participated in the new Junior Achievement

Banks in Action program, sponsored globally by the Citi Foundation to increase young people's understanding of how

banks work and empower them to manage their money responsibly.

Duration: a 10-year global programme

Budget: $121m to date - on a global scale, $36m spent in 65 countries in 2007 - on average about $550k per country (though there is likely to be significant variation).

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7. FEF MARKETING STRATEGY

The FEF’s marketing strategy is designed in the first instance to develop a pipeline of projects that will contribute to achieving the objectives set out in this paper and secondly to build the brand and reputation of the FEF. The pipeline focused marketing must yield a portfolio of 20-25 funded projects covering a variety of target audiences, channels and content areas relating to financial capability and is designed to attract both low and higher-risk projects, i.e. projects that test new ideas and methodologies.

Developing the pipeline

The Fund Manager will employ both proactive and reactive marketing strategies to develop a pipeline of fundable projects:

� Proactive marketing: The Fund Manager will drive the proactive marketing strategy. It has the following key thrusts:

� Generic publicity to establish a public profile for the FEF. The focus here will be on regional newspapers and selected publicity events, the latter being chosen on an opportunistic basis. This approach must be used cautiously since it may generate many ineligible Concept Notes.

� Direct interaction with institutions able to deliver financial education projects. The Fund Manager has already completed scoping studies of all 8 target countries and has identified an initial list of target institutions. The Fund Manager will also assist potential applicants to find suitable partners where these are required to perform specialist functions, particularly independent evaluation, that the main applicant is not able to perform. The Fund Manager has completed in-country launches in Zambia, South Africa, Kenya and Uganda. High potential institutions in other countries will initially be contacted by phone and email until country visits to these destinations are scheduled.

� Opportunistic marketing, i.e. in response to invitations and at events organised by third parties.

� Reactive marketing: The Fund Manager is called upon to respond to enquiries on an ongoing basis. Most of the verbal enquiries are fielded from the FEF operational office in Johannesburg, South Africa. The FEF website will however serve as the key source of information and ongoing communication with potential applicants as well as grantees. It provides sufficient background information on all aspects of the FEF, including a comprehensive briefing document on Project Evaluation and the minimum standards set by the FEF in this regard. Another key source of feedback will be the Investment Panel who will adjudicate all FEF applications, both at the Concept Note and Full Application phases. The Investment Panel will interpret the selection criteria on an application by application basis. They will set the definitive standard to be met by applicants for funding. It is important that the Fund Manager provides full feedback on these standards to all applicants and potential applicants.

The following paragraphs discuss the country-specific marketing which links to the direct marketing to interested institutions and potential applicants.

COUNTRY-SPECIFIC TARGETED MARKETING

The FEF team has already commenced the country specific targeted marketing. The following steps have been completed:

(1) Scoping of target countries. Scoping studies were undertaken in the following countries: Kenya,

Tanzania, Uganda, Zambia, South Africa, Botswana, Namibia, and Ghana. During these scoping

studies institutions which are involved or potentially can be involved in financial education were

contacted by telephone to introduce the FEF, identify key persons to talk to, enquire about the most

read media, obtain initial feedback on their financial education approach and interest, and identify

potential strategy coordinating points or institutions within those countries that they FEF can work

with.

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(2) Identification of countries in which FEF will commence marketing: Based on the feedback during

the scoping studies, the following countries were identified as having the most potential to source

FEF projects: Kenya, South Africa, Tanzania, Uganda and Zambia.

As a next step, the following activities were conducted in-person in selected countries (Kenya, South Africa, Uganda and Zambia):

(1) One on one contacts with key institutions identified during the scoping studies as being of particular

interest to FEF. The purpose of these meetings were be to brief them on FEF, to assess the appetite of

potential applicants for implementing financial education projects, to identify potential projects and

examine their fit with the initial selection criteria, and to communicate time frames.

(2) Identify delivery and evaluation capacity within country. Because of the importance of evaluation to the

FEF, the country visits also aimed to investigate the capacity of research and other institutions within the

country to assist with the evaluation of potential FEF projects within those countries.

(3) A public event or workshop (widely publicised) to launch FEF in the country. Such events were hosted

in partnership with the local champion/ regulator in each launch country. The event was used to

introduce the FEF and to fully explain the application process. The launch schedule was as follows:

� Zambia: 23 October 2008 (in partnership with FinMark Trust Zambia, and with a presentation by the Central Bank, the Bank of Zambia on the need for financial education)

� South Africa: 28 October (in partnership with the Financial Services Board, with a presentation by the FSB head of consumer education)

� Uganda: 31 October 2008 (in partnership with the Financial Literacy Foundation, a cross-industry coordinating entity for financial education in Uganda, supported by the Bank of Uganda)

� Kenya: 19 November 2008 (in partnership with FSD Kenya, who is shortly launching a Financial Education Partnership for Kenya that will work together with the FEF)

In each instance, the launch was well-attended and triggered much interest in the FEF. Country visits to the other FEF target countries will be conducted in due course as the need arises. In these countries, the FEF was launched by means of a widely-distributed email communication containing the application materials, background information on the fund and the link to the FEF website.

Initially, the plan was to have an official launch in Tanzania and more informal interaction in other focus countries, especially South Africa. However, as reported earlier, the Tanzanian scoping study indicated that the potential is not as high as the awareness amongst players of what financial education entails is fairly low. On the other hand, South Africa, Zambia, Kenya and Uganda were identified through the scoping exercise as high potential countries with high demand for interaction with the fund manager. It was therefore decided to organise workshops in these countries that would serve the dual purpose of launching the fund and providing practical information to would-be applicants on the FEF objectives and application process.

We will also participate in other events focusing on financial education and where we can promote the fund on a more casual basis. The (South African) National Conference on Financial Education, held in Johannesburg on 17-18 November 2008 and the workshop organised by the Bank of Namibia on financial literacy on the 27th November 2008 are events where the FEF team leader has been given the opportunity to introduce the fund and to interact with potential applicants.

Communication and branding

The aim is to build the profile of the FEF primarily as a challenge fund for financial education, but also as a reliable source of information about financial literacy. This is important for the dissemination of lessons learned.

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The branding strategy has a number of strands:

� Presentations by the FEF team. These will include both the public and private sector, from small groups to public events (e.g. talks at forums, conferences). Printed information about the FEF should be available to distribute at presentations. A number of presentations have already been made (to the Financial Service Board in South Africa or to FSDK in Kenya, for instance).

� Compiling and maintaining a database of relevant and interested organisations and programmes in the different countries. Regular short emails will be sent to this database. Initially such communications will be about the roll-out of the programme and the funding rounds, but later they will focus on disseminating lessons learnt, case studies or other relevant information. This in turn will help to maintain interest and bring people back to the website.

� Building relationships with local partners, individuals and organisations, and using their networks – websites, newsletters, printed information in their offices, etc – to help promote the FEF.

� Having a presence at events on financial literacy (e.g. the presentation at the National Conference on Financial Education in Johannesburg in November). Printed information will be available to distribute to participants.

� Using the media to create awareness of the FEF and issues around financial literacy more generally. This has two prongs – paid advertising and building relationships with the media in the different countries so that they carry articles by the FEF or write about it or on the topic. The handling of the media should include building the profile of individuals in the FEF team (e.g. Dominique Brouwers) and through this the work of the FEF and the importance of financial literacy. This will include placing articles by the person and getting them on radio and TV. The idea is that over time the FEF becomes a credible source of information on financial education so that people know they can approach the FEF when they need information. Both mainstream and specialist media (such as publications on adult education or development) should be approached.

The Operational Fund Manager has created a stakeholders’ database as part of our MIS with clearly assigned

responsibility for the relationship and regular engagement. The Communications Expert has also ensured that

the Core Team is equipped with articulately branded, relevant, and audience-targeted promotional and

presentation materials.

WEBSITE

The FEF website (www.financialeducationfund.org) went live in early November. It provides, clear information about the fund, who is eligible to apply and from which countries, the criteria for selection including the importance of monitoring and evaluation, the application process and the application forms.

A secondary purpose of the website is to provide information and resources on financial literacy and education more broadly. The overall aim is to project an image of financial literacy being about people (not numbers) and how the absence or presence of these skills affects people’s daily lives. To this end the site will include write-ups of selected initiatives from the start. These will later include case studies of successful projects.

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8. FUNDING ROUNDS AND PROCESSES

Funding rounds

FEF will allocate funding in categories A, B and C in competitive funding rounds. Each funding round entails the completion of a funding cycle which starts with invitations to submit applications for funding and terminates with the issuing of signed Grant Agreements to successful applicants.

Category D grants are not awarded on a competitive basis using the funding cycle. Such projects are sourced by the Fund Manager and negotiated on a bilateral basis with the potential grantee. However, category D projects must also be approved by the Investment Panel. As far as possible, the Fund Manager will submit proposals for category D projects to the Investment Panel for approval during meetings that are scheduled as part of a competitive funding cycle. This may not always be possible, in which case the Investment Panel will be convened through teleconference or video conference to decide on category D proposals.

Two funding rounds are scheduled under the current capitalisation of the FEF – the first funding round commenced in September 2008 and will be followed by the second funding round during 2009. The possibility exists that the Investment Panel may not allocate the full funding available for grants during these two rounds or that the FEF may receive additional funding to be allocated. Should any of these eventualities arise, the Fund Manager will schedule additional funding rounds in consultation with the Operations Committee.

Funding Cycle

FEF utilises a two-phase funding cycle. The purpose of this approach is to:

� Build in a competitive and transparent element for applicants within distinct time frames and processes.

� Achieve a more efficient use of the resources committed to the whole programme through clearly defined stages of promotion, development, application, approval, contracting, disbursement, monitoring and evaluation.

� Encourage visionary and innovative ideas by means of a Concept Note phase. This phase also helps sift out ineligible applications and weaker ideas with very little prospect of early success, saving applicants the time and resource effort required to complete a Full Application and the Fund Manager the time and resources to evaluate inappropriate applications.

� Further strengthen the potentially successful ideas into Full Applications to ensure that the limited funds are allocated to projects with the best chances of successful implementation to meet the objectives of the FEF.

The two phases of the funding cycle are the following:

Phase 1: Concept Notes. The Project Concept Note phase is designed to elicit brief project concepts that can be evaluated with relatively little effort against the selection criteria of the FEF. Those concepts that are considered eligible and with enough potential to develop into fundable projects, are approved by the Investment Panel and the applicants in question are invited to submit Full Applications. Ineligible applications and weaker ideas with very little prospect of success are weeded out, saving applicants the time and resource effort required to complete a Full Application. This process also provides an opportunity for the Fund Manager to stimulate applications with a better fit with the FEF’s objectives. The Fund Manager may also propose to the Investment Panel that technical assistance, up to a value of $5000 be provided to deserving applicants, who does not have the necessary resources, to improve potentially promising proposals.

Phase 2: Full Applications. In the second part of the funding cycle, Full Applications are submitted, based on the detailed application criteria and guidelines as contained in the Operational Manual and communicated to applicants approved by the Investment Panel in phase 1. The Fund Manager will assess all the applications, undertake a limited due diligence of applicant organisations and make recommendations to the

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Investment Panel. The Investment Panel has sole responsibility for approving or refusing applications to receive grants and to impose conditions, including payment schedules against the achievement of performance targets, on such grants The Investment Panel may also refuse a Full Application in its current format, but invite the applicant to submit a revise application in the next funding round. Phase 2 closes through the conclusion of a Grant Agreement between the Fund and the grantee.

The full funding cycle takes six months and occurs twice yearly at six monthly intervals. Bidding cycles will run consecutively and there will be no delay between the completion of one funding round and commencement of the next round. The steps to be taken as part of both phases of the funding cycle are reflected in Table 2 below.

Table 2. Funding cycle

TASK TIMEFRAME

Phase 1: Concept Notes

Issue invitation to submit applications:

• Timelines specified

• Fund Manager promotes funding round through general and targeted marketing

6 weeks before closing date for Concept Notes

Engagement with potential applicants:

• Fund manager engages with potential applicants to increase likelihood and quality of applications submitted

Concept Notes evaluated: • CNs captured on electronic database and unique project number allocated to each; • Fund Manager checks against eligibility criteria – use CN Assessment Form. Applicants that

do not meet the eligibility criteria are advised by email with a short reason for their ineligibility given.

• Applicants identity verified using light touch enquiry process • Assessed by Fund Manager using assessment criteria. Scores awarded and captured on CN

Assessment form. Forms and ranked list of qualifying CNs forwarded to Investment Panel.

21 days from Concept Note closing date

Investment Panel decides on Concept Notes: • Investment Panel members complete CN Assessment forms • Investment Panel meets to approve/ reject Concept Notes • Investment Panel provides guidance to applicants on necessary adjustments to their project

ideas • Reasons are provided for rejecting CNs. • CN applicants are advised of the decision of the Investment Panel together with reasons. • Successful applicants receive Full Application forms as well as guidance documents. Team

leader discusses Investment Panel feedback by telephone with successful applicants.

50 days or less from Concept Note closing date

Phase 2: Full Applications (FAs)

Engagement with Applicants:

• Fund Manager engages with applicants invited to submit FAs to assist with preparation of FAs, especially to ensure adequate evaluation built into the FA and to coordinate evaluation across projects in any one country or countries.

FA closing date within 50 days of Investment Panel meeting to decide on CNs

Full Applications received:

• FAs received checked for completeness • All FAs electronically captured on database. • Acknowledgement of receipt sent to applicants. • Incomplete FAs and FAs received after deadline returned to applicants. • FAs forwarded to relevant DFID country offices for their optional comments. • Due diligence performed and Due Diligence Report completed.

Within 21 days of FA closing date.

Full Applications evaluated:

• FAs evaluated against the eligibility criteria to check whether revised proposals still comply with the eligibility criteria;

Within 21 days of the FA closing date.

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• FAs are assessed and scored using the assessment criteria and FA Assessment Forms. Comments on the technical quality of the FAs are compiled, utilizing technical experts where necessary.

• A ranked list of FAs is compiled and forwarded to Investment Panel together with completed and scored FA Assessment Forms, comments on the technical quality of the FAs prepared by technical experts, the complete FAs and any comments received from the DFID country offices.

Investment Panel decides on grants awarded: • Investment Panel members complete their own FA Assessment Forms. • Investment Panel meets to decide which applicants are awarded grants and which are turned

down. Final decisions are made by the meeting. If the IP requests additional information or a further evaluation, the FA stands over until the next meeting of the Investment Panel.

• Investment Panel imposes conditions on grants if they consider it appropriate. • All FA applicants are advised of the decision of the Investment Panel together with reasons.

Successful applicants receive draft Grant Agreements as well as conditions imposed. Team leader discusses Investment Panel feedback by telephone with successful grantees. Reasons for being turned down supplied to all failed FAs.

Within 50 days or less of closing date for FAs.

Feedback to Operations Committee and DFID country offices: • Minutes of the Investment Panel meeting forwarded to the Operations Committee. • DFID country offices appraised by email of the success or failure of applications from their

countries.

Within 7 days of Investment Panel meeting

Grant agreements finalised: • Grant agreements negotiated with the grantees, incorporating the conditions imposed by the

Investment Panel. • Grant agreements signed.

Within 45 days of Investment Panel meeting to decide on FAs.

The timetables for phases 1 and 2 of the first funding round are set out in Annexes 4 and 5 respectively. The full procedures to be followed during each stage of the above process, are set out in the Operations Manual. The final stage of the process set out in Table 2 above, forms part of the grant management functions of the Fund Manager and is discussed in the next section.

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9. GRANT MANAGEMENT

Each funding round culminates in the selection of a number of successful Full Applications. Once successful applications have been identified, the next step is grant management. This entails contracting, the management of the disbursement of grants, oversight over projects funded, including financial controls, and dealing with problem projects.

Contracting

Challenge Funds are mechanisms through which donors can fund public institutions, not-for-profit partners (“Civil Society/NGO”) as well as for-profit partners. A typical design feature of existing Challenge Funds, however, is that grant funds are provided to the private sector under agreed conditions e.g. that the commercial entity provides at least fifty percent of the project costs. The standard funding agreement combines language taken from a standard accountable grant and a standard contract for services. Although it is a grant it is legally binding.

The draft Grant Agreement prepared for the FEF (and attached to the Operations Manual) has the following characteristics:

� The Fund Manager (acting as principal) and the grantee are the contracting parties.

� The same contract is used for all categories of grantees, with the necessary changes for private grantees who have to provide matched funding;

� The language used is primarily “grant” language to avoid any presumption that the agreements with the commercial organisations were contracts for services, to ensure that EU procurement rules will not apply.

� The general rule is that advance funding will not be given to commercial organisations – DFID may have to seek Treasury approval to provide advance funding to the commercial organisation recipients.

Each contract will include the following provisions:

� Any special terms and conditions set either by the Investment Panel or the Fund Manager based on the evaluation of the Investment Panel;

� The Evaluation Plan submitted as part of the Full Application and as approved by the Investment Panel, or amended following conditions imposed by the Investment Panel;

� The funding of the project from all sources including timetables for investment by the FEF, the grantee and other parties;

� The obligation of the grantee to supply regular monitoring reports and annual evaluation reports and to maintain financial statements, records and other information on the project for subsequent third party evaluation;

� The right of reasonable access to the project and project information on the part of the Fund Manager or its authorised representatives;

� A commercial confidentiality undertaking to enable the grantee to generate reasonable returns from the initiative, subject only to the requirement that the Fund Manager may publicise the project to promote the FEF elsewhere and stimulate interest in the FEF in a manner that does not breach such confidentiality;

� The circumstances under which the contract may be renegotiated, suspended or terminated by either party and the financial implications of such actions for both parties; and

� The requirement that the grantee will ensure that an annual audit of the project is undertaken and an audit report is submitted to the FEF on such expenditure until disbursements are completed. Such an audit is to be conducted by an auditor who is a member of that country’s relevant professional body.

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Individual contracts will be drawn up and executed in line with this policy framework.

Disbursements

The Fund manager will make disbursements of the grant at quarterly intervals in arrears. Disbursement of the grant may in exceptional circumstances be made in advance at quarterly intervals. In both cases disbursements will be made against a planned expenditure schedule that will form part of the Full Application process. Grantees will submit quarterly expenditure returns to the Fund Manager of all project expenditure (whether funded from FEF monies, the grantee’s own resources or those of a third party) using the Expenditure Claim Form..

The Fund Manager will have the discretion to oblige grantees to provide supporting documentation or evidence of expenditure for all items of expenditure. The Fund Manager can request further information, visit the project or do whatever is necessary to assure that project expenditure is in order.

The Fund Manager will review the quarterly expenditure returns, reconcile advances and approve the next scheduled disbursement. Disbursements will be made, and reported to DFID, once advances have been approved.

Project Oversight

The Fund Manager will monitor project implementation on each of the projects funded under the FEF. A close involvement with each of the grantees will ensure that projects make good progress and stay in line with the workplan and budget agreed from the outset. Project oversight will entail the following:

� Grantees will be required to provide quarterly progress reports, including information on progress against the workplan and performance versus targets included in the Grant Agreement. The Fund Manager will review the reports in accordance with contractual arrangements and may contact grantees for clarification or to request further information;

� Grantees will be required to submit quarterly expenditure returns to the Fund Manager of all project expenditure (whether funded from FEF monies, the grantee’s own resources or those of a third party). The Fund Manager will review the reports in accordance with contractual arrangements and, if not satisfied, can request further information, visit the project or do whatever is necessary to ensure that project expenditure is in order;

� Fund Manager will undertake regular monitoring trips to projects to oversee project implementation and performance against agreed targets. During these trips, information will be collected and consolidated into reports to be presented to the Investment Panel at the next Panel meeting;

� Key monitoring indicators will be agreed from the start with grantees and included in the Grant Agreements. The impact targets will be contained in the Evaluation Plan, which is also included in the Grant Agreement. This will enable the Fund Manager to monitor projects from an early stage and subsequently to evaluate their performance not only against their own targets but also against other projects funded under the FEF;

� Local and international evaluation specialists will carry out in-depth evaluations of selected projects and their impact. These evaluations will become the subject of FEF case studies and policy notes and will also feed into other learning materials produced by the FEF.

� Finally, grantees will be required to submit Project Completion Reports, including completed project evaluations upon completion of the project and the end of the FEF Grant Agreement. Such reports will provide an overview of the implementation of the project from beginning to end and draw conclusions on performance versus targets and benefits of the FEF grant.

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Financial Control and Reporting

The Fund Manager has established a dedicated central accounting operation to manage and disburse FEF grant monies for projects. The Fund Manager has also established an accounting and administration operation to exercise appropriate financial control over all receipts and disbursements and to produce the necessary financial reports. This control will also extend to ensuring that grantees also invest their own resources (and those of third parties if applicable) in accordance with the financing plan set out in the application and incorporated into the Grant Agreement.

The Fund Manager will be responsible for receiving and reviewing all progress and expenditure reports from grantees and, once satisfied that everything is in order, disburse the funds to grantees according to their Grant Agreements.

Dealing with Problem Projects

The Fund Manager will monitor all projects and take immediate action if any project is not being implemented in accordance with its work plan and budget. Each project is required to submit a quarterly progress report and expenditure report. The Fund Manager will review both reports carefully and ensure that progress is satisfactory and on schedule. These reports will provide the first indications that problems may be occurring. If the Fund Manager has any concerns that a project may not be progressing satisfactorily, the grantee will immediately be contacted and asked to explain the situation.

Although a thorough application process and selection should minimise the risk that projects are not implemented according to the FEF’s policies and procedures, that the project budget will be overspent or even that fraud will occur, it is important for the Fund Manager to be aware of possible problems and to be able to detect them as early as possible. With that in mind, the Fund Manager will work closely with the grantee to avoid further disruption. The Investment Panel and Operations Committee will be made aware of any problem or risk thereof.

All problem projects will need to be closely monitored until the problem is resolved. Generally, it can be expected that the most common problems will be that there will be delays in implementing work plans and that expenditure will not be exactly in accordance with the budget. In these situations, it will be necessary to revise work plans and budgets within the overall timetable and budgetary ceilings. If the problems persist, it may be necessary to take action to preserve the integrity of the FEF and its funds.

The following table provides some examples of potential problems and how they will be addressed.

Table 3: Examples of Potential Problems and Possible Solutions

Problem Course of Action/Possible Solutions

Project is running behind schedule

• Review project progress with grantee and identify causes(s) of delays. If problem is one of small delays in action and expenditure, allow project to continue and monitor closely.

• If delays more significant, revise work plan and expenditure plan as necessary, keeping within maximum two year implementation schedule. Monitor project closely to ensure work plan and schedule is maintained.

Project expenditure higher than budgeted

• Review past and projected expenditure with grantee and seek to revise downstream expenditure so that original budget is maintained.

• If not possible, ask grantee to increase contribution from own and partner resources to meet budget increase. If grantee cannot increase contribution, suspend project according to Grant Agreement, get grantee to make new budget and submit to next Investment Panel meeting.

Grantee does not submit progress and expenditure reports on time

• Remind grantee of obligations. If grantee does not provide reports immediately, suspend disbursements until reports submitted.

• Reinstate project following receipt of reports. Monitor closely thereafter to ensure future reports are submitted on time.

Grantee unable to make planned contribution to the project

• Suspend project until grantee makes the agreed resources available.

• If situation persists, terminate project and take necessary steps to recover FEF funds already advanced.

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Problem Course of Action/Possible Solutions

Nature of project changes significantly from that in the original application

• Suspend project immediately.

• If nature of project changes from original concept, grantee will need to submit revised proposal to Investment Panel.

Expenditure is incurred on items not in original budget

• Temporarily suspend project immediately and investigate.

• If due to lack of control or other management problems, ensure grantee rectifies situation and reimburses any FEF monies used for unauthorised items.

• If expenditure changes due to nature of project changing from original concept, grantee will need to submit revised proposal to Investment Panel.

Funds being misused • Suspend project immediately. Investigate situation and ensure grantee auditor also investigates and reports.

• If misuse due to lack of control or other management problems, ensure grantee rectifies situation and reimburses any FEF monies misused.

• If misuse is fraudulent, terminate project and instigate legal action to recover FEF monies.

One or more members leave consortium

• Temporarily suspend project immediately. Review project status with grantee (lead organisation) and determine whether/how project can continue to be implemented.

• If project can be continued, grantee will need to submit revised proposal to Investment Panel.

• Terminate project if grantee and other consortium members no longer able to sustain the project and seek to recover FEF funds already advanced.

Grantee faces business problems, suffers significant losses or business failure

• Suspend project immediately and terminate project if grantee clearly no longer able to sustain the project and other consortium members cannot manage on their own.

Project acquires negative image in country

• Call all relevant players in for investigation of reasons. Temporarily suspend project if remedy possible. Terminate project if not.

• Consider remedial public relations.

Fund acquires negative image

• If no remedy visible then involve donor, grantees and government in urgent meeting to discuss situation. If remedy is possible, launch recovery public relations exercise.

• If not, fulfil existing contractual obligations and suspend any future Fund activities.

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10. MONITORING AND EVALUATION16

The FEF’s framework for monitoring and evaluation is set out in the full Monitoring and Evaluation Policy and Procedures document attached as Annex 7. These policies and procedures will guide the Fund Manager, the Investment Panel as well as, importantly, applicants and grantees. It also forms the basis for external and independent evaluations of individual projects as well as the program as a whole. These policies and procedures may be amended during the course of the program as our experience with evaluation grows.

Objectives

Monitoring and evaluation are essential to the success of the FEF. The specific objectives of these two separate but related functions are the following:

� To establish the relative effectiveness of financial education interventions. A core objective of the FEF is to generate learning on the relative effectiveness of financial education interventions in developing countries. The only way to do this is through the rigorous application to individual projects, both projects funded by the FEF as well as projects independently funded, of a sound, best practice evaluation framework that will stand up to international scrutiny. Similarly, projects which target the same aspect of financial capability but deliberately use different channels and target different audiences and test various options will go a long way to extend our learning. The FEF will thus encourage such multi-dimensional projects. Where the FEF funds strategic interventions, the impact of these interventions need to be similarly evaluated.

� To understand the determinants of behavioural change that either extend or restrict increased/more

appropriate usage of financial services amongst low income clients. The evaluation objectives of FEF go beyond just establishing the relative effectiveness of FEF interventions. In selected FEF projects the evaluation process will be used to probe the reasons for behavioural change or the lack thereof. This information will be used not only to inform future design of financial education interventions, but also the general strategy for the extension of financial access.

� To track the progress and efficiency of the implementation of individual FEF-funded projects. The monitoring process must deliver the management information required by the fund manager as part of its continued oversight of the implementation of individual projects.

� To track the progress, efficiency and effectiveness of the management of the program by the Fund

Manager. A core objective of the monitoring and evaluation functions is to keep the Fund Manager accountable, both in terms of the efficiency of the operations of the FEF and the outcomes which it seeks to produce

� To determine the performance-related remuneration of the Fund Manager. The remuneration of the Fund Manager is linked directly to fund performance (operational as well as, importantly, in terms of actual project outcomes). The monitoring and evaluation functions must deliver the necessary independently verified information on which the performance-based fee of the Fund Manager will be determined.

To enable rigorous assessment of impact it is necessary to distinguish between monitoring (as the regular

collection of data on a programme or service, through which progress in implementation is tracked) and

evaluation (which involves a periodic or one-off in-depth analysis of programme/project performance

against pre-determined objectives and anticipated outcomes; evaluation often draws on information gathered

through monitoring as one input).

Monitoring and evaluation take place at two levels: that of the programme as a whole (i.e. monitoring and

evaluating the actions and performance of the fund manager) and that of each individual project (i.e.

16 This section draws extensively on Kempson 2008 which was prepared as part of the design of FEF.

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monitoring and evaluating the actions and performance of the grantees). Evaluation of individual projects

also feeds into the synthesised evaluation of the programme as a whole.

Progress will be tracked against both stated outputs and outcomes. An output is an activity or deliverable

implemented or produced by either the fund manager or a grantee. An outcome is the result of the activity in

terms of increased financial capability of the target audience or an improved national enabling environment

for increasing financial capability amongst the low-income population. As part of the purpose of the FEF is

to find effective approaches to increase financial capability using financial education, outcomes can also

relate directly to the learning generated by projects or the programme as a whole.

As described in Section 3, financial capability has four functional components17 (relating to the cognitive,

psychological and behavioural elements that are prerequisites for action and that require measurement in

different ways to ensure credible evaluation). Each aspect of financial capability relates to each of the four

measurable dimensions as captured in the FEF logframe (Annex 1), enabling evaluation of impact:

1. Knowledge. This refers to the actual knowledge or understanding which an individual has of the

different aspects (content domains) of personal financial management and use of financial services (both

formal and informal):

� Knowledge on day to day personal financial management, for example how to budget and do financial planning over a normal life cycle. This includes knowledge on financial or money concepts such as the interest rate

� Knowledge on the need to plan for future expenditure and retirement and the vehicles through which to do so

� Knowledge on the appropriate use of financial products, including different types of financial services (transaction banking, savings, credit, insurance) that are available and how they can they assist the individual to improve his/her life. This also includes the relative advantages and disadvantages of using formal vs. informal financial services. It also extends to knowledge on what your rights are as a client and what they mean, as well as where to go and what to do when things go wrong – the various recourse options.

� Knowledge relating to increased use of financial products, i.e. how these financial services can be accessed and where (channel information). This includes awareness of the different technologies which can be used to access financial services e.g. mobile phones, ATMs, electronic cards, as well as the functionality of products, i.e. how they work (e.g. the difference between different types of bank cards - there is much confusion between debit and credit cards), for which transactions or purposes a product can be used (e.g. that debit cards can also be used for store purchases and cash back). Furthermore, it includes knowledge on where to go and who to approach to access specific services, what the various services cost and knowing what to take along, what to ask, and what to refuse.

When a person has the necessary knowledge, he or she is able to start exploring usage. However, the person may not yet have the necessary skills to convert knowledge into usage.

2. Skills: Refer to the practical ability of the individual to apply the knowledge in the use of an actual

product or service or in personal financial conduct. It includes the following:

� Skills relating to day to day personal financial management as well as planning for future

expenditure and retirement: the ability (rather than just the knowledge) to prepare a budget, keep records of spending and plan ahead for life cycle events;

17 In line with the work done by Microfinance Opportunities (2005)

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� Skills relating to appropriate use of financial products: skills to use product comparison information

� Skills relating to increased use of financial products: the ability to actually use the relevant technology (e.g. how to use a PIN, ATM, mobile phone for transactions);

A person with the necessary skills is technically equipped to start using a particular financial service or to undertake certain personal financial management tasks.

3. Attitudes: Even with the necessary knowledge and skills many persons are not prepared to use certain

financial services. This may be due to perceptions, personal orientation, behavioural traits or other

psychological factors. These condition the attitudes and thus behaviour of the individual. Key attitudes

conditioning the usage of financial services include:

� Attitudes relating to day to day personal financial management

� Attitudes relating to planning ahead entail overcoming the high discount rate characteristic of low-income behavior, leading to a consistent under-evaluation of future cash payments or receipts. It requires changing an attitude of “why budget/plan for old age when I always get by in the end?”;

� Attitudes relating to appropriate use of financial services cover the convenience factor - “this is what I’ve always done and how everybody around me does it, so I am not really interesting in learning about formal services”. It also includes overcoming loss/risk aversion and a lack of self-discipline, such as the “hassle factor” – “why fill out forms, disclose personal information, queue, when I can just transact in cash?

� Attitudes relating to increased usage of financial products include trust in (1) the service, (2) the service provider, (3) the delivery channel/technology, for example, the perception that paper documents are better proof than electronic documents, a preference for face-to-face banking; a preference for cash transactions as opposed to electronic money that cannot be touched; trust through familiarity and use over time. It furthermore includes the confidence to approach the service provider, ask for assistance, etc, i.e. finding formal financial services intimidating;

The measurement requirement here is to determine whether the person’s attitude dissuades them from using a particular financial service. The test is whether the person is committed to use the service in the near future. Commitment is short of actual changed behaviour and must serve as sufficient indication of the success of a financial education intervention where a person does not have the resources to start using the service immediately, need to jump through other hoops to start using the service, e.g. apply for necessary formal identification, or the service is not available to the person in that area.

4. Behaviour: Refers to actual changes in financial behaviour18. Changes may be due to the financial

education intervention or another cause. Controlling for other influences on behaviour is therefore an

important part of evaluation. Examples of behaviour change would include:

� Behaviour changes regarding day to day personal financial planning: implementing budgeting and regular financial planning;

� Behaviour in terms of planning for future expenditure needs and retirement: planning for financial security implemented

� More appropriate usage of financial products: for example using credit responsibly or starting to manage your debt position back to sustainable levels (if already over-indebted).

� Increased usage of financial products: Starting to use a formal financial service, such as a savings product, a transaction bank account or insurance; starting to use other transactions or functionality offered by a financial product which the person has had access to for some time.

18 Note that sometimes, not changing behaviour might actually make sense.

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The procedures for monitoring project and programme implementation and evaluating changes in

knowledge, skills, attitudes and behaviour changes against the stated objectives at both the project and

programme level are as follows:

Monitoring

Project monitoring methods. Grantees will be required to undertake ongoing monitoring of their projects. The information generated will be used by the Fund Manager to track progress in line with the project plan and the output targets that need to be achieved (captured in the Project Evaluation Plan – see the discussion under Evaluation below). Of equal importance is the generation of sufficient monitoring information to feed into the evaluation of the project. Output monitoring techniques19 can be used to record who uses the service (their characteristics and patterns of behaviour that the programme is seeking to modify) and the costs involved in doing so. Monitoring information can also be used to provide information with regard to process, for example to gauge the details of the implementation of the project (and any deviation from what was planned), hurdles encountered and how overcome, strengths of the programme, areas for development (and changes in practice required) and suggestions for change. Some of this information can be collected statistically, some will require depth interviews with staff and other stakeholders.

Programme monitoring methods. Programme monitoring will be done through the Management Information System and the reporting done to DFID. This will capture and collate information on marketing, pipeline development, individual project implementation, disbursements, etc, so as to monitor progress against the output indicators contained in the logframe (attached in Annex 1).

Evaluation

Evaluation methods. The logframe’s goal, purpose, objectives and objectively verifiable output and outcome indicators form the basis for the evaluation of the programme. At the project level, each grantee will be required to draw up an Evaluation Plan (with guidance from the Fund Manager) to determine the exact level and methods of evaluation for the project at hand. Essentially the same evaluation or impact assessment techniques and procedures will apply at both the project and programme level.

A combination of quantitative and qualitative measurement techniques should, wherever feasible, be used:

� Qualitative techniques offer the opportunity to develop a detailed understanding of the impact of a programme or service. But because they involve small numbers of respondents they cannot be used to quantify it or to generalise from the findings.

� Quantitative techniques can be used to derive generalised findings, but will only be successful if the sample is robust and representative of the target population, conducted by skilled, non-biased individuals.

To ensure meaningful results, it is important that impact evaluation techniques (be they qualitative or

quantitative) meet the following criteria as far as possible:

� Need for before and after measurements. In order to assess the impact of a financial education initiative, it is important to know what the baseline of knowledge, skills, attitudes or behaviour is. Only then will it be possible to determine the subsequent change in the desired aspect of financial capability after involvement in the project. Furthermore, measurement of impact needs to take place immediately after project implementation to test its impact as well as, preferably, 3-6 months after the intervention to measure the sustainability of the impact (e.g. whether a person that opened a bank account has sustained that account, or whether a person that developed a budget is still using some time after the financial education intervention).

19 See Appendix 2 of Annex 7 for a matrix of possible types of info that might be collected through monitoring programmes as contained in Kempson (2008).

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� Need for control or comparison groups. A common pitfall in impact evaluation is the fact that, by only studying participants and their reported change in behaviour, one does not know whether the reported impact would have occurred regardless of the intervention of a programme or service. For example, an increase in bank account-holding might be due to a move by government to pay social grants electronically rather than in cash, rather than the impact of a course about the importance of banking and using a bank account among social grant recipients. This measurement challenge can be overcome by incorporating either a control group20 or a comparison group21 in the evaluation.

It should be noted that quantitative and qualitative techniques alike will usually rely on self-reported

behavioural changes. Some evaluations build in the collection of more objective data. The evaluations of

the two Saving Gateway pilots in the UK, for example, obtained details of account opening and subsequent

deposits and withdrawals directly from the provider. It is, however, important not to rely on statements of

intended behaviour in quantitative surveys, as it is known that they often differ significantly from actual

behaviour. While qualitative techniques are also subject to this caveat, one can at least probe actual

intentions or behaviour further. Quantitative techniques should therefore preferably go hand in hand with

actual measurement of usage (where applicable) or other “objective” methods to gauge change where

available.

The technique(s) applicable and the degree to which the various criteria highlighted above can be met will

vary between projects and will depend on a number of parameters:

� The cost of the various techniques (dependent on project scale and local circumstances).

� The skill set in various research techniques available in each project environment.

� Type of intervention. Certain techniques lend themselves better to certain types of interventions than others. For example: quantitative and qualitative before & after surveys/interviews are difficult to conduct when it is not known which people were reached. This will be the case for mass media campaigns. Instead, outputs such as number of brochures distributed, feedback on radio shows, quality of messages, etc should be tracked. In drawing up the evaluation framework, project implementers should therefore distinguish whether financial education projects entail direct contact with recipients or not. Furthermore, strategic interventions will have different evaluation criteria than primary financial education projects.

STANDARD OF EVALUATION REQUIRED

Due to limited resources it will not be possible to apply the same standard of evaluation to all projects. We

have therefore identified three different standards of project evaluation to different projects in order to

optimise resources and learning. The parameters according to which the standards of evaluation are

determined as well as the proposed differentiation are contained in Table 4 below:

20 When survey participants are randomly selected from the population being studied, and then randomly assigned to either undergo the intervention or not, a control group is created – i.e. a randomly selected group of people who have not undergone the financial education and whose knowledge, skills attitudes and behaviour can therefore be tracked to isolate the actual impact of the intervention on those who did undergo it. In practice, however, it may not be possible either to select participants at random or to assign them randomly to the control group. There can also be ethical objections to denying the control group access to a programme or service if its effects are likely to be very beneficial (Kempson, 2008) 21 These practical and ethical challenges can be overcome by not attempting to control who takes part in a programme or uses a service. Thus, though surveys are still administered to both “experimental” and “control” groups, these groups are not randomly assigned according to pure experimental survey methodology. Such a “quasi-experimental” technique may lack the precision, but if carefully constructed can provide relatively robust findings. In this instance one would refer to a non-project comparison group rather than a control group (Kempson, 2008).

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Table 4: Evaluation parameters for different standards of evaluation

EVALUATION PARAMETER LEVEL 1 – “GOLD”

LEVEL 2 – “SILVER”

LEVEL 3 – “BRONZE”

1. Survey administered before and after the intervention (Y/N) Y Y Y

2. Control group/comparison group/national baseline survey data only Control group

Comparison group

Baseline data only

3. Conducted by grantee or professional third party (Grantee/ Prof 3rd) Prof 3rd

Prof 3rd Grantee

4. Additional follow-up survey after defined period (e.g. 3 or 6 months) (Y/N)

Y N N

5. Quantitative and/or qualitative method used Both Both Quantitative only

6. Reasons for financial behavior beyond FE intervention probed further (Yes/No)

Y Y Y

7. Verification of usage of financial services verified with financial service provider

Y, where relevant

Y, where relevant

N

8. Practical test administered, e.g. test of whether can use an ATM or a mobile phone or can draw up own budget (where relevant)22 Y/N

Y Y N

Project applicants will need to indicate in their applications which of the three standards they propose to apply. The FEF will not fund any projects that propose to apply anything less than Bronze standard; while the Gold standard is the ideal. At Full Application stage, the applicants will need to provide full details of their proposed approach to evaluation as part of the Evaluation Plan, given the guidance provided in the FEF Monitoring and Evaluation Policy and Procedures (Annex 7).

Monitoring and evaluation procedures and action steps

The procedures for monitoring and evaluation of individual projects (setting the objectives, designing a monitoring plan and an evaluation plan, conducting a baseline assessment, feeding the findings back into project design, etc) are contained in the full Monitoring and Evaluation Policy and Procedures document (Annex 7). Likewise, the way in which individual project monitoring and evaluation respectively feed into global indicators for programme monitoring and evaluation are set out in the Annex.

Indicative costing

It is difficult to provide indicative cost estimates for monitoring and evaluation of projects before the specific characteristics of projects are known, though it is expected that about 10% of the grant amount will be spent on evaluation. From the first draft Concept Notes that have been submitted thus far and using experience form other projects, the cost range for impact evaluation is between £5,000 and £35,000. A clearer indication will arise once the first round of Concept Notes is evaluated.

22 Especially important for next-generation financial services.

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11. LEARNING AND DISSEMINATION

Approach to learning and dissemination

As the FEF is a pilot project, distilling and disseminating new learning on effective approaches to financial education is one of its core objectives and part of its experimental nature. This is intended to address some of the major causes of market failure – both in the private and public provision of financial education. It will require the rigorous evaluation of existing approaches and supporting of innovative new approaches. While some FEF projects may be dedicated entirely to evaluation of the impact of an existing initiative, it is anticipated that the bulk of learning will come from FEF funded financial education interventions that will build minimum levels of evaluation into them from the outset.

This “testing agenda” creates the opportunity to learn about behavioural change, in particular about the factors that impact financial usage. This will be probed in particular as part of the in-depth qualitative evaluations to be built into FEF-funded projects (see FEF Monitoring and Evaluation Policy and Procedures in Annex 7). This learning will tend to be tacit – implying that the external benefits from it (beyond the internal application within the FEF) will be limited. To prevent this, an explicit learning and dissemination strategy is required. This will ensure that the learning regarding financial education and the mechanisms through which it is implemented is fed into financial education initiatives elsewhere, thereby scaling up the impact of FEF.

Learning

As discussed in Section 3 (Goal, Purpose and Objectives), learning should be generated on:

� The relative impact and cost-effectiveness of different types of financial education interventions;

� The drivers of behavioural change that lead to the extension of financial access; and

� Effective interventions to create enabling environments for the promotion of financial capability.

Materials to be generated. Generating this learning will require a number of learning materials to be produced, including the accompanying papers produced for presentations by the FEF at conferences, seminars or other events, as well as through the development of case studies of FEF-funded projects (the target is to produce 6-8 such case studies) and short policy notes targeting policy-makers and regulators (once again, a target of 6-8 is set).

Financial education classification as contribution to best practice. FEF sets out to contribute to emerging best practices in the area of financial education in especially developing countries. At this stage (and new needs will emerge as we implement the program) a classification of financial education instruments will be drawn up, based on the learning from FEF, to serve this purpose. The classification will be done according to:

� different channels with different characteristics;

� the target audience for which the instrument is appropriate;

� prerequisites for success;

� effectiveness of various instruments in achieving changed behaviour;

� cost effectiveness of the instrument; and

� complementary initiatives.

Dissemination

Two thrusts to dissemination. The core of the FEF dissemination function (and much of the learning function) will not consist of the production of written materials, but of engagement with persons and

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institutions who are either involved in the field of financial education or who have an interest or a stake in the successful growth of financial capability. The written materials described above and our website, with clear links to other relevant sites as well as all relevant FEF documentation, will then be used as dissemination tools to support this core process of engagement.

Engagement strategy. Engagement will entail two distinct elements:

1. Engagement as part of the implementation of the program and individual projects:

Persons and institutions who are involved in the field of financial education, both in Africa and abroad,

will be engaged to form part of the implementation of the FEF itself. In this manner the program will

benefit from their existing expertise, but at the same time whatever new lessons are learnt in the FEF will

be fed directly into their non-FEF activities and spheres of influence. We consider this as probably the

most potent form of dissemination and mutual learning. We anticipate that it will take the following

forms:

(a) Involvement of experts as members of the Investment Panel, as well as external evaluators of project

proposals;

(b) Experts engaged to assist with the development of proposals (who can be partly funded by the FEF

as part of the provision of technical assistance to develop proposals – see Section 8 above);

(c) Persons or institutions becoming involved as consortia or implementing agents in projects funded by

the FEF;

(d) Persons or institutions contracted as third parties to execute certain functions as part of the

evaluation activities attached to particular projects or the program as a whole;

(e) Persons contracted to write case studies or external evaluations of projects.

2. Direct engagement with third parties, but not as part of project implementation:

The Fund Manager will also have extensive engagement with individuals and parties who have a substantial stake in financial education, both in Africa and internationally, but who will not be directly involved in the execution of the programme or any of the projects funded by it (see Section 12 below). This could entail:

(a) Hosting round table discussions with an Africa-focus for partner institutions (i.e. institutions who

also want to promote financial education, even if they are not directly involved in the FEF) based in

Africa. Sessions could be hosted in various destinations on the continent and might involve

institutions like the Kenya FSD and FSDT Tanzania, the South African FSB, Finmark Trust, the

Bank of Tanzania and other national policy-makers, and various NGO associations. In discussions,

Kenya FSD has already indicated that they will fund the engagement of their to-be-appointed

financial education manager to participate in these sessions.

(b) Similarly, hosting discussions or round tables with a more generic focus for international partner

organisations who cannot attend the Africa-based sessions. To limit costs, these will probably make

use of web-based (webinars) or videoconferencing facilities.

(c) On an opportunistic basis, the participation ofFEF staff or project implementing agents in

international or national seminars, conferences and other events focusing on relevant subject matter.

The target would be for between eight and twelve FEF and partner presentations at conferences,

seminars and other events.

(d) Providing direct feedback into the financial sector activities of its funders. ( e ) Finally, communicating all learning which relates to the design of financial products to make them

more appropriate for low-income clients to the financial sector industry through appropriate forums,

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for example bankers associations and financial sector deepening programs, as well as directly to

national policy-makers.

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12. KEY PARTNERSHIPS

In addition to the primary stakeholders for the FEF, namely DFID, the Fund Manager, the Grantees and, most importantly, the recipients of financial education, there are other key partners of importance to the FEF. Section 7 above provides more detail on reaching out to potential applicants. Here we summarise our strategic approach with various categories of key partners:

International NGOs – these are one of the FEF’s primary target groups and will be the subject of a range of marketing and promotion activities to stimulate quality applications to FEF. There are some key organisations such as Opportunity International, Save the Children, World Vision or Five Talents that are of particular significance. These organisations operate internationally and are present in a number of our focus countries. Opportunity International, already has some experience in the area of financial education. These organisations are well placed to be part of strong applications for FEF support. We have engaged with these firms, all of which had initial questions about the criteria to access the fund. One of the most frequent questions was about the possibility to receive a grant for regional programmes that would extend beyond the focus countries.

Think tanks/research centres/consulting firms – Organisations like FinMark Trust and MicroSave Africa fall into this category. They have been operating in financial inclusion on the African continent for a number of years and are known for their quality work. Microfinance Opportunities is a US based organisation that provides services related to financial education and has been working in several of our focus countries. There are other consulting firms either based in Africa or elsewhere that have also shown some interest. These organisations may consider becoming applicants in some instances or may offer their expertise to the applicants/grantees or to the Fund Manager. Such organisations are most likely to engage with the FEF through partnerships with local organisations (unless they have a strong and sustained local presence), in order to facilitate the delivery of financial education effectively in the local context. Forming local partnerships will also help build local capacity for ongoing financial education initiatives beyond the period of FEF support.

Consultations with such organisations during the inception phase have indicated the following:

� There is sometimes limited local capacity for designing effective financial education programmes;

� In some countries there is limited understanding amongst potential local partners as to what financial education entails, and what a suitable response/application for FEF support would look like;

� Organisations such as Microfinance Opportunities and local consulting firms have expertise in financial inclusion and financial education but have no funds of their own to contribute towards a FEF-supported project.

There may be ways of involving such organisations during the period that locally based applicants develop their proposals, including through the use of technical assistance grants (up to a maximum of £5,000 per project). Such grants can be made available once Concept Notes have been reviewed, where the Panel feels they have been presented with a potentially interesting FEF application but the promoters require some additional resources to bring on the expertise necessary to develop a strong application.

The FEF will also share information with research centres and think tanks as part of its learning and dissemination role (Objective 4 in the logframe).

Overall, we have started engaging with these organisations and we will develop these relationships over time to:

� Share information and ensure that they understand what the FEF is trying to achieve. This will be accomplished through personal contact with representatives of each organisation, sharing of FEF materials, as well as outreach to such organisations where the opportunity arises, for example by visiting them when in-country;

� Provide them with information regarding the FEF which they can in turn share with their network; however, external organisations will not be allowed any formal role in promotion so as not to run the risk

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of confusing the FEF’s message;

� Help them think through how they might best engage with the FEF. Such involvement could take a variety of forms, for example information links, engaging as partners for locally led applications, driving regional initiatives, etc.

International policy ‘thought’ leaders – such as the OECD, the World Bank and CGAP.

The OECD is a world leader in terms of financial education policy not only regarding its member countries but also for non-members. The World Bank and CGAP’s interest in the field is also growing fast. We have had initial contacts with these organisations to inform them of the FEF, its objectives and plans. These initial contacts will be built into relationships that can be used as platform for information sharing and dissemination of FEF learning, and that can also serve as a link for DFID in seeking other funders to increase the FEF’s endowment.

Non African Regulators and other organisations with a mandate in financial education such as the Financial Services Authority (FSA), NIACE (National Institute of Adult Continuing Education), and the Personal Finance Education Group (PFEG) – all three of them UK-based

Though these organisations do not operate in Africa, some of them have already established contact with African stakeholders or are keen to do so. We regard them as potential technical assistance (TA) providers for FEF applicants in target countries. For example:

• The FSA, as regulator, has a policy mandate regarding financial education and may therefore be a strong partner or TA provider for similar regulators in FEF countries;

• NIACE, with its combined experience on delivery of adult education and financial literacy targeting specific groups and the PFEG with its focus on personal finance education in schools, could also be strong partners/TA providers for organsations in FEF countries.

These organisations are also sources of best practice and the FEF website will provide links to good resources available on their websites.

Financial institutions interested in the FEF. This is a very diverse group consisting of (a) global players such as Citi Group, Barclays Banks, etc., (b) African owned banks, and (c) microfinance institutions, semi-formal and informal financial services providers.

Many of the local financial institutions have already been identified as potential applicants and have been targeted as part of the FEF launch and promotion campaign. Many of those interested in the FEF have links to international funders or NGOs and will have some support in developing their ideas for financial education activities.

Financial institutions with more of a Pan-African footprint or global players may be targeted in a slightly different way, and have broader roles as FEF partners/stakeholders. Citi Bank, Barclays (including in its group the South African ABSA and its own subsidiaries), Standard Chartered and some others may have resources that can be applied to financial education initiatives, and may also be well positioned to work with local partners (including NGOs) to deliver FEF projects. However, there may also be opportunities for such global players to fund initiatives alongside the FEF that are driven and managed by NGO partners.

Links with some of the key players in such organisations have been established (William Derban at Barclays, Ann Grant at Standard Chartered), and as the FEF rolls out and becomes operational, such links will be expanded and developed.

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13. RISK AND MITIGATION STRATEGIES

Project management should always include a strong risk management component. The following table summarizes the risks we could identify at this early stage, the level of such risks and the mitigation strategies being put in place to mitigate such risks. As the table indicates, some risks can appear contradictory, such as the risks related to lack of demand on the one hand and a high level of inappropriate applications on the other hand. A balance needs to be struck in the mitigation strategy to minimize these types of risks.

Table 5: Risk Management

Risk Level Mitigation

Panel unable to properly assess Concept Notes and Full Applications that come before them

Low • Fund Manager review al Concept Notes and Full Applications and provide technical feedbac to the Panel

• Good guidance notes and templates for application materials

Fiduciary oversight: applicants misrepresent themselves or their capacity to implement project

Low • Limited “due diligence” will be undertaken by the fund management team at Full Application level

• Input from DFID local offices or from other local partners

Reputational risk to DFID in providing funding to private sector organisations

Medium • Competitive process provides level playing field

• Separation of Fund Manager from decision makers ensures transparency – need to maintain this clear separation

• Ensure DFID funds are focused on public good element – not marketing specific products

Lack of demand driven response to FEF funding or poor quality response

Medium • Effective promotional activities by Fund Manager

• Intensive engagement with likely “hot targets” in early stages of promotion

• Launch workshops in key target countries to deliver clear message

• Clear guidance and good website

Slow start up of FEF supported projects

Medium • Clear implementation plans included in FEF application format

• Review by Fund Manager of organisation’s capacity to deliver, and consideration of such issues by Investment Panel as they make funding decisions

• Provision of contract template when organisations are “shortlisted” for Full Applications – to reduce hold up at contracting stage

• Thorough review of capacity to implement, and if questionable, organisation may need stronger partners/TA provider etc

Misuse of funds by grantees Medium • Detailed workplan and monitoring of workplan v. Outputs by fund management team

• Quartely re-imbursement of expenses in most cases rather than disbursement of advances

• If advances required, on-going monitoring of use of funds

Not able to measure and compare impact

High • Clear guidance to all applicants on evaluation techniques and requirements;

• Three standards of impact evaluation as communicated to all applicants (as described in Section 10)

• Set of minimum indicators to be developed by Fund Manager for each type of projects

• Fund Manager assists applicants at Full Application stage to source the necessary evaluation expertise to include in their applications

• Fund Manager coordinates evaluation of projects in a particular target country

Fund Manager overwhelmed with lots of

High • Clear promotional messages as to what FEF can support and what it

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inappropriate applications cannot on the website and other documents

• Fund Manager retain lead in promotion, with care taken when other stakeholders are involved in spreading the FEF message

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14. EXPANDING THE FUND

DFID has conceived the FEF to be a multi-donor fund that will expand its funding as well as its geographical reach over time. The chosen approach to achieve buy-in from other donors is to first get the fund operational based on initial DFID funding. This establishes the credibility and role of the FEF and will then form the basis for attracting external donor funding. As other private, bilateral and multi-lateral donors extend their activities to the field of financial literacy and financial education, the fund, as an existing vehicle, will seek to attract and hence coordinate their funding, removing the need for a multitude of programmes focusing on the same issue.

The FEF’s governance arrangements are designed to be flexible enough to accommodate new donors. For example, additional members can be added to the Operations Committee as new funders come on board.

The extension of the funding is a joint effort between DFID and the Fund Manager, with the Fund Manager supporting DFID’s discussion through information, briefing and direct discussions with potential funders. A number of such funders have indicated their interest. These include private foundations, bilateral donors and multi-lateral donors.

Funding Mechanism Options

The legal entity to which another donor could make a payment to the FEF would be DFID itself. This is usual practice when DFID works in partnership with other donors to establish joint funding instruments. Assuming that other donors are comfortable with DFID’s standard fiduciary oversight arrangements, DFID would agree and sign a Memorandum of Understanding with the other donor and they would simply transfer a contribution into a DFID Third Party’s monies account ring-fenced for the FEF. This account would either be administered centrally by DFID or taken care of by DFID's banker, Crown Agents. This arrangement bypasses the need to set up a separate Trust Fund arrangement and would enable the FEF to move quickly in bringing on board additional funders.

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ANNEX 1: LOGICAL FRAMEWORK

NARRATIVE SUMMARY OVIS: OUTPUTS OVIS: OUTCOMES MOV ASSUMPTIONS

Goal

To establish financial education as a credible means to reduce poverty in developing African countries by increasing financial capability23 and financial inclusion24

• Total funds spent on financial

education in FEF target countries increase by 30% during the life time of the fund.

• Governments and/or financial sector industry associations in half of FEF target countries make policy commitments and allocate resources to promote financial education in their jurisdictions.

• A statistically significant increase in financial capability (see aspects of financial capability under purpose below) occurs in two or more countries in which the FEF operates.

• Independently verified assessments of money spent on financial education in FEF target countries

• Government and Central Bank developments and reports.

• Reports by financial sector industry associations.

• Finscope and other household surveys

• Commissioned evaluations of project impact

• Financial usage is not undermined by other factors such as macroeconomic instability, financial crises, and recession.

• Public, private and NGO players alike are willing to share information on money spent on financial education. Where organisations do not want to share total figures, estimates would need to be derived based on budgets of similar projects

• Adequate surveys are completed in target countries.

Purpose

To increase the financial capability of low-income persons in selected African countries through funding the

Financial education interventions funded by the FEF leads to a demonstrable change of behaviour, when compared to a control group or

• Project evaluation reports • Independent evaluations by third

parties of FEF project outcomes and impact, relative to a control

• The FEF interventions will have the necessary scale to increase financial capability levels among the low-income population at

23 A financially capable person is one who has the knowledge, skills and confidence to be aware of financial opportunities, to know where to go for help, to make informed choices, and to take effective action to improve his or her financial well-being while an enabling environment for financial capability building would promote the acquisition of those skills. Financial capability is defined to entail four functional components: (i) actual knowledge or understanding which an individual has of the different aspects (content domains) of personal financial management and use of financial services (both formal and informal); (ii) skills - the practical ability of the individual to apply the knowledge in the use of an actual product or service or in personal financial conduct; (iii) attitudes - even with the necessary knowledge and skills many persons are not prepared to use certain financial services. This may be due to perceptions, personal orientation, behavioural traits or other psychological factors. These condition the attitudes and thus behaviour of the individual; and (iv) ultimately, actual changes in financial behaviour. Changes may be due to the financial education intervention or another cause. Controlling for other influences on behaviour is therefore an important part of evaluation. The term financial capability is used in this logframe as defined in this footnote. 24 Financial inclusion is achieved when consumers across the income spectrum in a country can access and sustainably use financial services that are affordable and appropriate to their needs. The overall level of inclusion achieved is determined by a variety of factors affecting the individual directly (demand-side factors) as well as the institutions providing the services (supply-side factors).

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NARRATIVE SUMMARY OVIS: OUTPUTS OVIS: OUTCOMES MOV ASSUMPTIONS

implementation and evaluation of financial education initiatives.

comparison group who did not receive financial education, that is statistically significant in any of the following aspects of financial capability: (1) Day to day personal financial

management, such as budgeting; (2) Planning for future expenditure and

retirement; (3) Appropriate use of financial

products; (4) Increased use of financial products.

group (which might be a surrogate control using data from Finscope and other household surveys)

large in the target countries. • Supportive environment for

financial education in target countries

Objectives

Objective 1:

An efficient and cost-effective challenge fund mechanism able to allocate funding to public institutions, NGOs and private firms for the implementation of financial education projects established.

1.1 Grant agreements signed for full disbursement of FEF funds within two funding rounds over initial three-year life span of the fund (target: 70 project Concept Notes received in two funding rounds, leading to a total of 20-25 funded grants).

(Full details of establishment milestones are included in the performance criteria included in the Fund Management Agreement.)

1.1 Database of project Concept Notes (CNs) received, list of Full Applications invited and received, and Grant Agreements of approved projects

Objective 2:

A portfolio of high quality 25financial education projects implemented by a range of organizations that test financial education in a variety of formats targeting an array of

2.1 A project evaluation report is completed to FEF standards for each project funded

2.2 A synthesis report on the portfolio of funded projects.

2.1 A portfolio of projects with sufficient diversity to test a representative sample of financial education methodologies. Projects cover the primary distribution channels and segmented target audiences.

2.2 Projects vary from low risk to high

2.1 Combination of monitoring and evaluation reports:

(a) Monitoring of project implementation reported to fund manager in quarterly reports by grantee, including target audience and format of financial education;

Potential public and private applicants for FEF grants are prepared to invest in financial education.

25 The portfolio must include higher risk projects that test new methodologies and approaches. Experimentation is a core objective of the FEF.

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NARRATIVE SUMMARY OVIS: OUTPUTS OVIS: OUTCOMES MOV ASSUMPTIONS

different audiences. risk, but each contains adequate provision for evaluating impact.

2.3 Some projects may consist only of the evaluation of existing financial education interventions.

(b) Evaluation of baseline financial capability through qualitative and/or quantitative surveys;

(c) Evaluations of post-project impact on financial capability through qualitative and/or quantitative user surveys;

(d) Incorporate a control group or comparison group where possible to enable disentanglement of FEF impact from other possible impacts;

(e) Follow-up assessment 3-6 months after project implementation;

(f) In depth staff interviews.

Objective 3:

The financial capability of a significant number of low-income persons targeted by FEF-funded projects increased.

3.1 Financial education interventions funded by the FEF leads to a demonstrable impact, when compared to a control group or comparison group who did not receive financial education, that is statistically significant in any of the following aspects of financial capability:

(1) Day to day personal financial management, such as budgeting;

(2) Planning for future expenditure and retirement; (3) Appropriate use of financial

products; (4) Increased use of financial products.

3.1 Project evaluation reports;

3.2 Independent evaluations by third parties of FEF project outcomes and impact,

3.3 Finscope and other household surveys

Objective 4:

Learning on effective approaches to financial

4.1 The following learning materials are produced and disseminated:

(a) Communication events – FEF & partner presentations at conferences,

4.1. Learning generated on:

(a) The relative impact and cost-effectiveness of different types of financial education interventions;

4.1: Reports, including the following:

(a) Program reports (inception

report, quarterly reports, annual

reports), including financial

4.1 (a) Communication events take place at which FEF learning can be disseminated

(b) There is an audience for FEF

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NARRATIVE SUMMARY OVIS: OUTPUTS OVIS: OUTCOMES MOV ASSUMPTIONS

education increased, captured and communicated.

seminars, etc together with the accompanying papers produced for those purposes. Target: 8 - 12

(b) Case studies of FEF-funded projects. Target: 6 – 8

(c) Short policy notes targeting policy-makers and regulators. Target: 6-8.

(d) Classification of financial education instruments in terms of:

• different channels with different characteristics,

• target audience for which the instrument is appropriate,

• prerequisites for success,

• effectiveness for changed behaviour,

• cost effectiveness of the instrument, and

• complementary initiatives.

4.2 Dissemination of learning materials via the website.

(b) The drivers of behavioural change that lead to the extension of financial access; and

(c) Effective interventions to create enabling environments for the promotion of financial capability.

reports;

(b) Grant recipient project reports

and case studies containing

overview of project (channel,

target audience, reach) and

impacts ;

4.2 Project database capturing all

CNs and applications received, as

well as the outcomes of these

4.3 Website.

4.4 Minutes of investment panel

proceedings

4.5 National policies reflect new learning on financial education.

learning, willing to take on board lessons

Objective 5:

The enabling environment for financial education in FEF target countries improved.

5.1 Significant improvements in the enabling environment for financial education in three countries, e.g.:

(a) Public policy on financial education developed and adopted;

(b) National institution for the coordination of financial education established and functional;

(c) Increased non-FEF funding for financial education projects (public and private);

(d) Duplication or scaling up of FEF projects with non-FEF resources

5.1 Scan of financial education environment post-FEF, interviews/consultations with relevant role players.

5.2 Government and Central Bank reports

5.3 Financial education surveys conducted by third parties.

5.1

(a) Non-FEF funded financial education service providers, financial institutions, policy makers, regulators and others willing to engage and leverage FEF outcomes

(b) Secondary data and media reports available that will cement impression of enabling environment improvements.

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NARRATIVE SUMMARY OVIS: OUTPUTS OVIS: OUTCOMES MOV ASSUMPTIONS

(e) Application of standards and principles developed by the FEF by institutions not funded by the FEF

(f) Data generated or triggered by the FEF embedded in domestic institutions and/or processes.

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ANNEX 2: WORKPLAN

Month of Implementation Aug 08 Sept 08 Oct 08 Nov 08 D ec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09

Inception Phase

Adapt MIS system - contacts database, knowledge management system and financial management system for FEF Database/KMS and FMS operational

Log Frame Scoping Report Commences Draft typology of potential grantees Develop guidelines and assessment criteria for grant applications Develop FEF Operational Policies and Procedures manual Develop fund marketing strategy Design FEF website Website operational Finalise indicators and M&E framework taking into account eligibility criteria, target countries and log frame Develop M&E templates and guidelines (all levels) to be used by the applicants, the Fund Manager and the future grant recipients during project implementation Provide M&E training to fund management team Finalise workplan for project and detailed workplan for next quarter Submit Inception report to DFID 2/12

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Month of Implementation Aug 08 Sept 08 Oct 08 Nov 08 D ec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09

Sourcing Applications, Appraisal and Approval

Month 3 - Run FEF launch events in ; Zambia, Uganda, Kenya, South Africa & Ghana Organise small workshops and one to one meetings with key potential applicants in the agreed target countries.

23/10 28/10 31/10

19/11 3/12

Propose members for Investment Panel Train the Investment Panel 20/1 Invite submission of CNs & provide facilitation services to grant applicants

5/12

Review & process CNs :update database, conducting due diligence and presenting the CNs to the Investment Panel 19/12 Investment Panel assesses the CNs and meets; feedback is provided to the Applicants and DFID is advised of the Investment Panel's recommendations 21/01 Feedback to bidders - Provide follow-up advice for selected and non-selected applicants

26/01

Receive and process full application

9/03

Review & process FAs :update database, conducting due dilligence, liaising with DFID country offices and presenting the CNs to the Investment Panel 23/3

Investment Panel meets and assesses Applications

6/04

Inform Applicants of decisions & provide feedback 14/04 Draw up contracts with grantees in accordance with the UK Laws– contract approved by DFID

6/05

Implement Processes for Disbursing Funds and

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Month of Implementation Aug 08 Sept 08 Oct 08 Nov 08 D ec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09

Monitoring Expenditure and Project Implementation

Review target definitions and marketing strategy in light of the lessons learned from the first bidding round (team workshop)

Fiduciary Management

Agree implementation agreements with successful bidders Prepare and issue contracts and provide training to grantees to ensure monitoring &reporting requirements are adequately understood and completed Administer disbursement of FEF grants

Financial monitoring - adequate audit trail/monitoring use of funds Liaise with DFID re budget provisions - adequate funds available for timely disbursements)

Monitoring & Evaluation

Develop M&E templates and guidelines (all levels) to be used by the applicants, the Fund Manager and the future grant recipients during project implementation

Establish project base- lines -including purposeful focus groups and primary data collection.

Develop the database/ e-tools to be used for collection and analysis of the M&E data

Establish the timetable and responsibilities for providing the required data/indicators on each project

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Month of Implementation Aug 08 Sept 08 Oct 08 Nov 08 D ec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09

Review quarterly project progress reports from grantees Conduct M&E project visits – M&E reports Invite and encourage independent evaluations – evaluation reports

Analyse performance of bidding rounds

Learning and Dissemination

Develop a targeted communication and dissemination strategy review after 1st contact with target audience – Effective communication/dissemination) Establish partnerships with relevant institutions Story-Telling: capture lessons learned during the implementation of the projects - based on technical reports Disseminate lessons learned to key private sector, Governments, NGOs, DFID (including DFID local offices) and other donors Disseminate editorials and case studies in specialised publications/ relevant business editions

Participate in relevant events (public and private) (see above, to be defined further during inception/first year) Maintain project website

Mobilising Support from Potential Donors & Private Sector

Develop strategy for mobilising additional support from donors and private sector – Strategy discussed & approved with DFID) Build upon existing relationships held by DFID,

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Month of Implementation Aug 08 Sept 08 Oct 08 Nov 08 D ec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09

EMG and Genesis with potential co-funders Develop new relationships with other potential co-funders (public & private sector) Maintain regular contact with stakeholders through face-to-face meetings, attending relevant workshops/seminars/conferences, and by sharing information on FEF on a regular basis

Funding round #1

Month of Implementation Jun 09

Jul 09

Aug 09

Sep 09

Oct 09

Nov 09

Dec 10

Jan 10

Feb 10

Mar 10

Apr 10

May 10

Jun 10

Jul 10

Review target definitions and marketing strategy in light of the lessons learned from the first bidding round (team workshop)

Invite submission of CNs & provide facilitation services to grant applicants

Review & process CNs :update database, conducting due diligence and presenting the CNs to the Investment Panel

Investment Panel assesses the CNs and meets; feedback is provided to the Applicants and DFID is advised of the Investment Panel's recommendations

Feedback to bidders - Provide follow-up advice for selected and non-selected applicants

Receive and process full application

Review & process FAs :update database, conducting due dilligence, liaising with DFID country offices and presenting the CNs to the Investment Panel

Investment Panel meets and assesses Applications

Inform Applicants of decisions & provide feedback

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Month of Implementation Jun 09

Jul 09

Aug 09

Sep 09

Oct 09

Nov 09

Dec 10

Jan 10

Feb 10

Mar 10

Apr 10

May 10

Jun 10

Jul 10

Draw up contracts with grantees in accordance with the UK Laws– contract approved by DFID

Implement Processes for Disbursing Funds and Monitoring Expenditure and Project Implementation

Fiduciary Management

Agree implementation agreements with successful bidders Prepare and issue contracts and provide training to grantees to ensure monitoring &reporting requirements are adequately understood and completed Administer disbursement of FEF grants Financial monitoring - adequate audit trail/monitoring use of funds Liaise with DFID re budget provisions - adequate funds available for timely disbursements)

Monitoring & Evaluation

Establish project base- lines -including purposeful focus groups and primary data collection. Develop the database/ e-tools to be used for collection and analysis of the M&E data Establish the timetable and responsibilities for providing the required data/indicators on each project Review quarterly project progress reports from grantees Conduct M&E project visits – M&E reports Invite and encourage independent evaluations – evaluation reports Analyse performance of bidding rounds

Learning and Dissemination

Story-Telling: capture lessons learned during the implementation of the projects - based on technical reports Disseminate lessons learned to key private sector, Governments, NGOs, DFID (including DFID local offices) and other donors Disseminate editorials and case studies in specialised publications/ relevant business editions Participate in relevant events (public and private) Maintain project website

Mobilising Support from Potential Donors & Private Sector

Develop strategy for mobilising additional support from donors and private sector – Strategy discussed & approved

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Month of Implementation Jun 09

Jul 09

Aug 09

Sep 09

Oct 09

Nov 09

Dec 10

Jan 10

Feb 10

Mar 10

Apr 10

May 10

Jun 10

Jul 10

with DFID) Build upon existing relationships held by DFID, EMG and Genesis with potential co-funders Develop new relationships with other potential co-funders (public & private sector) Maintain regular contact with stakeholders through face-to-face meetings, attending relevant workshops/seminars/conferences, and by sharing information on FEF on a regular basis

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ANNEX 3: CASH FLOW PROJECTIONS

• Projected cash flow projects

Summary by Year Dec-08 Dec-09 Dec-10 Dec-11 Total£ £ £ £ £

Management Fee [last installments paid in the following quarter] 240,000 224,000 112,000 64,000 640,000

Performance Fee [paid in the following quarter] 100% 42,000 64,000 32,000 22,000 160,000

Subtotal Service Fee 282,000 288,000 144,000 86,000 800,000

Fund Disbursements 0 856,250 1,475,000 618,750 2,950,000

Pump Priming Grants 40,000 10,000 0 0 50,000

Financing Charges 7.0% 230 4,984 8,486 3,560 17,260

Subtotal Fund Costs 40,230 871,234 1,483,486 622,310 3,017,260

Total Service Fee and Fund Costs 322,230 1,159,234 1,627,486 708,310 3,817,260

DFID target figures 500,000 2,000,000 1,500,000 0 4,000,000

Shortfall on spend from DFID target figures 177,770 840,766 -127,486 -708,310 182,740

Assumptions

Fund Management

Start date 01/07/2008 = assumption to edit

Performance fee (%) 100%

Base rate (%) 5.0%

Average period of financing (days) 30

Performance period is to 31 March each year

Projects Round 1 Round 2 Total

Number of projects approved 15 8 23

Value of projects approved (£) 1,950,000 1,000,000 2,950,000

Average project size (£) 130,000 125,000 128,261

Average project duration (quarters) 8 8 8.00

Expected date projects contracted 12/06/2009 01/11/2009

Pump Priming Grants

Number of pump priming grants approved 8 2 10

Value of pump priming grants approved 40,000 10,000 50,000

Average pump priminig grant size 5,000 5,000 10,000

Expected date of pump priming grant payment 01/02/2009 01/09/2009

Total value of commitments 1,990,000 1,010,000 3,000,000

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ANNEX 4: PHASE 1 OF THE FUNDING CYCLE: CONCEPT NOTES

CN Recorded 2 days

Concept Notes due 5 December 2008

CN Evaluated Against Eligibility Criteria

7 days

1. Unique project number awarded to each complete CN received and captured on database. 2. Project no communicated to applicant as part of acknowledgement of receipt. 3. CN checked for completeness – all the fields completed and all the required information received. 4. If CN received well before deadline and information lacking, request applicant to send information. 5. Incomplete CNs and CNs received after deadline returned to applicants.

7 D e c 1 2 D e c 1 9 D e c 1 9 J a n 2 7 J a n2 3 D e cOperational Fund

Manager

Team Leader. Consults with the Strategic

Advisor. Administrative support from Operational

Fund Manager

Applicants’ identity verified 14 days

CN assessed against assessment criteria

18 days

1. The standard information on the CN Assessment Form is completed (eg

name of applicant, country, and short description of project). 2. The CN is evaluated against the eligibility criteria to determine whether it qualifies for FEF funding. If it qualifies, it is categorized as being a Category A, B or C project. Applicants that do not meet the eligibility criteria are advised by email with a short reason for their ineligibility given-after the investment panel has met.

Applicants are called by telephone to do personal verification of location, legal identity and contact person. Information received is entered into the CN Assessment Form.

Investment Panel Meeting: Decision on CNs 19 January 2009

Feedback on CN Applicants

7 Days

The CN is assessed using the assessment criteria. Scores are awarded and the CN Assessment Form is completed. All projects (Categories A, B and C) are ranked according to their scores. The CNs, CN Assessment Forms and ranked list are forwarded to all the members of the Investment Panel together with blank Assessment Forms to be used by the Investment Panel.

The Investment Panel decides which CNs will be invited to make application for funding. Guidance is given to

applicants on necessary adjustments to their project ideas. Reasons are provided for rejecting CNs.

All CN applicants are advised of the decision of the Investment Panel together with reasons. Successful applicants receive Full Application forms as well as guidance documents. Team

leader discusses Investment Panel feedback with successful applicants.

50 Days

Assessment performed by minimum two persons, one must be the Team Leader, to ensure comparability of

assessment.

Operational Fund

Manager

Investment Panel. Records kept by

Team Leader and Operational Fund

Manager. Team Leader and Operational Fund Manager

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ANNEX 5: PHASE 2 OF THE FUNDING CYCLE: FULL APPLICATIONS

Full Applications due

9 March 2009

1 6 M a r 2 3 M a r 3 0 M a r 3 0 A p r 1 2 J u nFA Recorded

7 days

FA forwarded to DFID Country Offices

14 days

Perform due diligence on applicants

21 days

FAs assessed against Selection Criteria

21 days

Acknowledgement of receipt sent to applicant. FA checked for completeness

and supporting documentation received. If FA received well before deadline

and information lacking, request the applicant to send information. Incomplete FAs and FAs received after deadline returned to applicants.

Complete FAs are forwarded to the relevant DFID country offices and the team leader for assessment. DFID is requested to respond, which is optional, within 14 days.

Full due diligence is performed on all applicants. The Due Diligence Report is completed. This

process can be commenced after the decision by the Investment Panel to invite a CN application to submit a FA. However, the process must be completed within the timeframe indicated here.

Investment Panel Meeting: Decision on grants awarded

13 April 2009

Feedback on FA Applicants

7 Days

FAs are evaluated against eligibility criteria to check if revised proposals still comply. FAs are assessed and scored using the assessment criteria. Thereafter the following is forwarded to the Investment Panel: a ranked list of

FAs; completed and scored FA Assessment Forms for all FAs; additional comments on the technical quality of the

FAs prepared by technical experts and the complete FAs. Any comments received from the DFID country offices.

Feedback to Operations Committee

and DFID Country Offices 7days

Grant Agreements Finalised

45 Days

35 Days

FA applicants are advised of the Investment Panel decision. Successful applicants receive draft grant agreements and conditions imposed. Team

leader discusses IP feedback with grantees. Reasons for being turned

down supplied to failed FAs.

Minutes of IP meeting forwarded to Operations Committee. DFID offices

appraised of outcome of applications of their countries.

Negotiated with grantees & signed, incorporating conditions imposed by Investment Panel

To decide which applicants are awarded grants and

impose conditions if appropriate.

Operational Fund

Manager

Operational Fund

Manager

Team leader,

Operational Fund

Manager and regional

support persons.

Team Leader and one technical expert. Evaluation Plans of all the FAs are assessed and scored by

the M&E Expert. In case of difficult proposals,

Team Leader has the discretion to refer these to a Technical Expert for an opinion.

Investment Panel

Team leader & Operational fund manager

Team leader & Operational fund manager

Team leader. Operational fund manager &

EMG admin support.

1 3 A p r

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ANNEX 6: FEF RATIONALE AND FOCUS

1. INTRODUCTION

More than 2 billion poor people around the world do not have access to financial services to improve their lives. There are many reasons for this and many strategies to address the problem. One of the reasons is the pervasive lack of financial capability found amongst poor communities – financial capability being the knowledge, skills, attitudes and practices that allow persons to manage their personal finances and use financial services in a manner that builds lives and livelihoods.

The Financial Education Fund sets out to answer the question whether financial education can improve financial capability and do so at scale. In designing a program to answer this question convincingly and with impact, we follow a sequential approach:

• We begin by asking the question: why spend money on financial education at all? Is there a need

for financial education (increased financial capability) and who will benefit from such an

increase?

• Having established the need, we consider the existing supply of financial education in the African

countries targeted by the FEF. We find a glaring mismatch between need/demand and supply.

• We then consider the reasons for this supply deficit, finding a mixture of classic market failure

and inadequate public resources.

• Having scoped the market, we characterise how the FEF, with the particular strengths of a

challenge fund, responds to these market dynamics.

• Finally we describe the proposed selection criteria and marketing approach to deliver a pipeline of

fundable projects with the highest likelihood of answering our core question.

2. NEED FOR FINANCIAL EDUCATION

Why should the FEF be spending money on financial education? Put differently: is there a need or demand for financial education and, if so, what does it entail?

Financial education as public good – needed but not necessarily demanded by the target audience. First of all, it is important to highlight the difference between need and demand. As the analysis below will show, and as is commonly accepted in the financial education and financial inclusion literature, people clearly do have a need for education regarding their personal finances as well as for information about different financial products, how they work, how and where to access them, etc. As the current global financial crisis is showing, this need is by no means limited to the low-income market. Even in OECD countries, levels of financial literacy are worryingly low26 and surveys frequently show a substantial lack of knowledge of financial concepts and products among even the rich.27 It is however particularly severe for those operating in highly budget-constrained circumstances, as the opportunity cost of uninformed financial decisions will be so much higher.

More often than not, need however does not translate into demand (with demand being defined as proactive seeking of financial education by the consumer, or even a willingness to pay for it). The

26 OECD, 2005. 27 Various presentations at International Financial Literacy Conference hosted by the Russian G8 Presidency in Cooperation with the OECD, 2006. Among many examples: 67% of individuals in an Australian survey indicated that they understood the concept “compound interest”. When asked to do a simple calculation based on the concept, only 28% however demonstrated a real understanding (OECD, 2005)

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problem is that most persons do not recognise their deficit of knowledge or skills. There are furthermore information asymmetries between consumers and suppliers of financial education. Hence individuals (often not collectively organised in the first place) are not familiar with how their need for greater financial literacy can be met through financial education and what benefits can accrue to them from participating in financial education. As the benefits of financial education are not known or quantified to its target consumers, the need for it does not translate into demand. Indeed, very seldom have financial education initiatives been developed in response to expressed demand originated by the client/public (except in response to specific usage-related demand generated when selling financial products or services). This emphasises the public good nature of financial education. In the absence of willing consumers prepared to pay for the financial education service, it has to be provided as a public good.

What is the need for financial education in the low-income market? This need, or the benefit to be had from financial education, has three dimensions:

1. The need to increase personal welfare, reduce poverty and achieve economic growth

through personal income and asset growth: It is a commonly accepted fact that low-income

persons (and in fact individuals across the income spectrum) manage their personal finances in a

sub-optimal way. Microfinance Opportunities (2005) worked with partner organisations to

conduct market research on financial education needs in five countries. In all countries, it was

found that poor people have a limited knowledge of financial planning for the future28. Due to

their poverty they are continually “catching up”, reacting to shocks and even expected life cycle

events after the event rather than planning ahead.

Sub-optimal personal financial management leads to lower incomes, lower asset formation and reduced household welfare. If personal financial (and resource) management can be improved, it will lead to increased household welfare. Based on evidence from five countries (Vietnam, Mexico, South Africa, Botswana and Namibia), Rühle (2007) finds that “basic financial knowledge can enhance personal living conditions – because more money can be put aside as savings, because budgets are under control, because the best priced money transfer options can be identified or because loans can be handled ‘sensibly’, i.e. no untenable levels of credit are taken on and offers of credit can be compared instead of succumbing to the one that looks cheapest at first sight”.

One of the ways of improving personal financial management is to increase the target audience’s knowledge of, skills and confidence in financial management and to induce them to increase their usage of financial services in a way that is appropriate to their needs (thus: increased financial capability). One can identify four main components of this need for improved management of personal finances:

a) Personal resource management: It is a basic need of each person to know how to apply the

resources that they have (financial/cash and other such as livestock, housing and land) optimally

to improve the welfare of their household. This implies the need to empower consumers with a

base of knowledge – through education on life cycle planning, budgeting, etc – that will enable

them to assess their financial position and manage their personal finances accordingly.

The financial education interventions that need to be provided to meet this need:

28 In the case of the low-income population, it must be taken into account that personal financial management may also entail resource management rather than pure financial management (where persons are for example subsistence farmers and do not or cannot convert all of their produce into cash which can be slotted into a budget or financial planning).

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i. Information on what is understood by life cycle financial planning (building knowledge),

on why life cycle planning is important (to change attitudes) and on how to plan ahead

(building skills)29;

ii. Information and skills on budgeting;

iii. Financial or money concepts such as the interest rate and compound interest;

iv. Information on different types of financial services (transaction banking, savings, credit,

insurance) that are available and how they can they assist him/her to improve his/her life,

manage risks, etc;

v. The relative advantages and disadvantages of using formal vs informal financial services

(eg saving in cash vs. saving in cow);

vi. Information on what the various services cost.

b) Transactional and other basic banking needs: Like all individuals, the poor need to execute a host

of transactions which require financial payment as opposed to barter. This is mostly done in cash

and locally. However, there are also major needs for transactions over a distance (for example,

cross-border or domestic remittances of migrant workers that play such an important role in the

livelihoods of the poor in many countries30, or as for example showed in a recent study on money

transfers in Zambia31, payments for school fees for children or relatives, or for agricultural

inputs). As the Zambian research showed, the poor are often quite resourceful in finding and

utilising various informal channels of transferring money (such as sending money with a bus

driver or even via informal cell phone airtime balance transfers). It was however highlighted that

large security, efficiency, cost and hence welfare gains could be had from switching to formal

financial services, most notably via branchless banking solutions32. In many countries, South

Africa’s urban townships being a case in point, crime furthermore makes cash transactions

increasingly risky.

A number of affordable formal financial services are available to overcome these constraints – significantly more so than a decade ago33. The most significant outreach has occurred where the complexity to the client has been minimized. This has entailed either:

29 Knowledge, skills, attitudes and eventually changed behaviour are identified as the four components of financial capability among individuals. See the discussion in the FEF Monitoring and Evaluation Framework for more detail.

30 In many poor countries, remittances are the largest and most stable source of external financing, exceeding even export revenues. Recorded remittances are more than twice as large as official aid and represent nearly two-thirds of foreign direct investment flows to developing countries (Ratha et al, 2007). At the micro level remittances provide a livelihood to many families and money sent home by migrant labourers is an expression of family bonds (Leibsohn, 2004).

31 Cenfri (2008)

32 Surprisingly, the cost of informal channels was shown not to be significantly cheaper than traditional non-account money transfer services. Informal services are also not always time-efficient and convenient. The formal financial sector distribution footprint (along with issues of consumer awareness and trust) however largely constrains formal uptake. Should branchless solutions be found in the formal sector, this therefore has the potential to increase welfare. In a recent focus note, CGAP (2008b) postulates that branchless banking can reduce the cost of providing basic banking services by at least 50% by bringing down the cost of banking infrastructure roll-out and of handling low-value transactions.

33 It must however be noted that the current international financial crisis, triggered by the collapse of the sub-prime mortgage market in the USA, is likely to make banks more cautious about reaching out and extending credit. It can be expected that, as a result, the expansion of financial access and inclusion will move down the priority list of large financial institutions and at the same time financial regulators and supervisors will increase their focus on financial stability – which in many cases will include a suspicion (mostly wrongly) that extending financial inclusion poses a threat to financial stability. The momentum

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• The use of well established infrastructure to introduce a new commoditised product launched

specifically for the low-income market, using all of the existing infrastructure to distribute the

same product. For example, the Mzansi account in South Africa. It is an industry-wide

initiative whereby different financial institutions launched different accounts under the same

branding. In this way the full financial sector distribution network has been employed. The

success of the Mzansi account has been remarkable, with 25% of the low income market

incorporated in this way and with about 3m account holders thus far since its launch towards

the end of 2004 (FinScope, 2007). Education about the use of the product could be

standardized across all the market players.

• Or the use of an alternative technology /distribution channel. The best example here is M-

Pesa in Kenya. Launched by network operator Safaricom as an m-payment system operated

through a network 4,000 agents, it has registered more than 2.3m customers since its

introduction in March 2007 (CGAP, 2008a) – a remarkable feat in a country with fewer than

4 million bank accounts.

This added variety may however create confusion among the target audience, as well as more opportunity for abuse by unscrupulous operators. These and other challenges are illustrated by the fact that formal usage remains very low despite supply initiatives. For example:

• In Tanzania FinScope (2007) showed that only 9% of adults use formal financial services.

Counting semi-formal (2%) and informal services (35%), this rises to 46%, implying that

54% of the population do not use any form of financial services.

• In Uganda, likewise, FinScope (2007) showed very low usage: only 18% of adults use formal

financial services. Counting semi-formal and informal services, this rises to 38%, implying

that 62% of the population do not use any form of financial services. The survey found a high

correlation between financial literacy and usage of financial services.

• The picture is even bleaker in Zambia: only 15% of adults use formal financial services.

Counting semi-formal (used by 8% of adults) and informal services (11%), this rises to 34%,

implying that 66% of the population do not use any form of financial services.

Though the distribution footprint of formal financial services remains a big challenge, it is often also consumers’ lack of knowledge and skills regarding the use of formal services, as well as a distrust of the formal sector and a sense of being intimidated by formal institutions, that drives current behaviour. The Tanzanian Finscope survey found a high correlation between financial literacy and usage of financial services: 64% of females and 57% of males had never heard of an ATM, 31% of females and 28% of males had never heard of a savings account. On average more than 80% of the sample indicated that they are in need of financial education on a range of issues, from how to manage your money effectively, to how to open a bank account, to how interest rates work and how to insure your assets/life. This was also broadly the finding of the other Finscope surveys. For example: in Zambia about 90% of the population has never heard of or do not understand what a debit card is, more than 80% what a credit card is and more than 70% what an ATM is. Just more than 80% do not know what a “premium” is (FinScope, 2005). T h e f i n a n c i a l e d u c a t i o n i n t e r v e n t i o n s t h a t m e e t t h i s n e e d :

for extending access over the next 2 to 3 years is therefore likely to move to MFIs and alternative providers (e.g. cell phone network operators or dedicated payment/money transfer providers) who have a stronger business case to do so than traditional banks.

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i. The services available to meet transactional and other basic banking needs;

ii. How these financial services can be accessed and where (channel information). This

includes awareness of the different technologies which can be used to access financial

services e.g. mobile phones, ATMs, electronic cards;

iii. The functionality of products, i.e. how they work (e.g. the difference between different

types of bank cards - there is much confusion between debit and credit cards), for which

transactions or purposes a product can be used (e.g. that debit cards can also be used for

store purchases and cash back);

iv. The ability to use the relevant technology (e.g. how to use a PIN, ATM, mobile phone for

transactions);

v. Basic literacy and mathematical skills required for financial calculations;

vi. Knowing where to go and who to approach to access specific services;

vii. Knowing what to take along, what to ask, and what to refuse.

c) Provision for major future expenses and risks: The need to plan for bulky expenses in future

(expected, e.g. retirement, or unexpected, e.g. disability, loss or damage to assets, death of a

breadwinner) applies to all members of society. Focus group research in a number of countries

has shown that people adopt various strategies to deal with this34: some plan ahead by investing in

long-term savings vehicles (true for a very small proportion of the low-income population35), or,

on a more short-term basis, by belonging to rotating savings clubs. Others plan for unexpected

risks by buying an insurance policy (or joining an informal risk-pooling group) to cover them

against future risks such as death, accidents or serious illness. Most often, however, people do not

plan formally in this way. Instead, they resort to their family or community, or to borrowing,

should an unexpected or even expected lump sum be required of them. This leads to over-

indebtedness and hardship showing that, while access to credit has the potential to increase

welfare36 through asset formation, this is often not the outcome37 To encourage better planning for

future expenses and risks, more knowledge on how the services work is needed, but more than

that also the skills to actually access such services in a sustainable, responsible way.

The financial education interventions that need to be provided to meet this need:

i. Information on what a budget is, training (building skills) on how to budget and what the

benefits to the individual are of more systematic personal financial management (in order

to change attitudes and increase the chance of behavioural change);

34 See the overview of the focus group findings quoted in Bester, Chamberlain et al (2008).

35A report on old age savings in South Africa (Hendrie, Hobden et al, 2008) finds that there are behavioural (the fact that people tend to over-discount future needs in favour of current expenditure needs) as well as income constraints (high opportunity costs) to long-term savings for the poor. Often, the poor would prioritise building an asset such as a home or investing in their children’s education rather than saving in a long-term savings vehicle. The expectation of state provision in old age or provision by children further disincentivises own long-term savings.

36 As illustrated for example in the Nobel prize-winning work of the Grameen initiative.

37 In a recent note, the European Commission emphasises the threat of overindebtedness, even in a relatively high-income region such as the European Union. In South Africa, a public awareness campaign on the prevention of overindebtedness was launched in 2004 after research showed that about 15% of the population is in a debt trap. This was followed by legislation (the National Credit Act of 2005) aimed at reducing overindebtedness.

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ii. Information on how savings and insurance can meet the need for future expenses and how

this contrasts with using credit;

iii. Information about the institutions offering savings and insurance products, where these

can be accessed, the relative costs, etc.

d) What to do when I am in trouble: Personal finances often go wrong. Clients can be and are

abused. Personal welfare is as easily reduced through such ills as they are enhanced through

responsible and extended use of financial services. And low-income clients are more at risk from

such ills, simply because they have fewer resources to seek redress and cannot buy themselves out

of their problems. Many low-income people are in chronic debt. The cross-country market

research quoted in Microfinance Opportunities (2005) indicates that microcredit is not only used

for productive purposes, but also to respond to crises and smooth consumption. “Typically, crisis

management through borrowing can lead to an over-commitment to debt and problems repaying

creditors. Common in all countries was the observation that when poor people experience a crisis,

they go straight to their creditors, formal and informal. They take on debt with limited knowledge

of the cost of borrowing from different sources.” As discussed by Rühle (2007), this situation is

aggravated by the fact that in many countries the financial sector is not fully regulated and is

complex to understand, implying that even informed consumers have a hard time comparing loan

offers. It is found that, even if people manage to repay loans, their indebtedness seriously affects

their ability to save and build assets. Often, people commit to further and even more expensive

credit to pay off existing debt or, in the absence of savings, to purchase consumables –

culminating in a debt trap.

The financial education interventions that need to be provided to meet this need:

i. Understanding concepts related to borrowing, e.g. interest and the implications thereof,

and understanding repayment terms, implications of skipped payments, etc;

ii. Informing the consumer of their rights and responsibilities, including bridging the

knowledge gap with regard to consumer protection laws, disclosure requirements, client

privacy, recourse options, etc.

iii. Training to enable the consumer to compare between different product offerings and

choose the one best suited to their needs and repayment abilities;

iv. Training on the dangers of over-indebtedness and what is needed to ensure responsible

borrowing (aimed at changing behaviour). This type of assistance normally needs to take

the form of one on one counselling, implying that it’s a very expensive form of financial

education.

2. Financial market growth: The second need relates to the growth of individual financial

institutions and the financial markets as a whole. The basic hypothesis is that more financially

capable individuals will be better and more lucrative clients of financial services. Therefore

financial education has a “financial market making” benefit. This implies a need for the provision

of financial education that often translates into actual demand for or provision of financial

education by financial institutions. For example:

• Client repayment of debt will improve if they are better able to budget. Widdowson &

Hailwood (2007) find that, to the extent that financial literacy facilitates more prudent

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management of household balance sheets, it could reduce lending risks for banks and other

providers of credit.

• Clients will not use a supplier if they do not know about it.

• Clients will not use a service unless they know about it. Insurance is one of the least known

financial services, as confirmed in interactions for the various country scoping reports and as

is commonly accepted in the international literature. For this reason, the Self-Employed

Women’s Association (SEWA, 2007), a large MFI-organisation in India (to name just one

example), has identified the need for financial education specifically pertaining to

microinsurance among their target audience. It was found that awareness needs to be created

on why insurance is important, but also on how insurance works – what is covered and what

not, why regular premiums are required, how claims procedures work, etc. Financial

institutions have an incentive to provide or support such awareness creation efforts in order to

grow their client base.

• Clients will not use the full functionality of a service if they do not have the skills or

confidence to do so. Mobile financial services are a case in point. A recent study by

Microfinance Opportunities (Cohen at al, 2008), based on in depth case studies of various

branchless banking initiatives across four countries, finds that usage of mobile financial

services remains limited, even among the banked, due to: (i) a lack of understanding of formal

financial services; (ii) low levels of technical knowledge among consumers; and (iii) weak

trust in mobile banking by consumers. One consumer is quoted as saying “how can a phone

take my money”? According to Booz Allen Hamilton (2008: 8) the need exists for “client

graduation”. Low-income individuals usually start by using very specific services (such as

money transfers, buying airtime or just checking balances), but do not graduate to a greater

variety or more value-adding services. In the m-payments sphere, for example, this will entail

moving from using only cash-in/cash-out services, to transactional payments via the mobile

handset, to savings. This progression allows for the building of trust and capability through

usage. This highlights that usage in itself is not an end-goal. The quality of usage must be

such as to really impact on the welfare of the individual. In many case this will require the

low-income client to use more than just the basic functionality of a financial product, such as

mobile banking.

Similarly, employers or employers’ associations often have a vested interest in providing financial education to their employees. As stated by one commercial bank in Zambia: they provide financial education to their own employees, because if the people interfacing with the clients do not believe in the merits of sound financial management and practice it in their own lives, they will not be able to communicate that message to others.

In summary: financial education can improve the bottom-line of private financial services providers/employers. They therefore, in principle at least, have an incentive to spend money on generic financial education, i.e. on financial education as public good in addition to the financial education as private good (related to specific products) that they may conduct as part of their marketing efforts.

3. Public interest benefits: Lastly, there are potentially also major macroeconomic or community-

wide benefits to be had from improved financial capability, implying that there is a public need

for financial education. These include:

• Increased national levels of savings, which lead to increased capital formation and increased

economic growth. Consumers who are more financially literate are more likely to save using

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financial products than their less financially literate counterparts. For example, a 2006 study

showed that large economy-wide benefits are to be had from improved financial literacy via

an increase in the savings rate in Australia38. Though evidence of existing macroeconomic

impact of financial literacy gains is still scare in Sub-Saharan Africa (largely due to the fact

that financial literacy remains low), it is safe to conclude that improved financial literacy

could play a positive role in boosting the low savings rates in the FEF’s target countries.

• Higher levels of financial intermediation. Knowing how finance works empowers consumers

to use financial services and protects them against deceit. In general economic terms, this

should lead to greater usage of financial services and strengthen national financial sectors

(Rühle, 2007). The importance of financial literacy to the wider economy via higher

intermediation is also highlighted by Widdowson and Hailwood (2007), who argue that

financial literacy can result in a more discerning choice of usage of financial products among

consumers, with more regard for risk and return. This, in turn, through its impact on

investment, could lead to a more productive allocation of resources, which could lead to more

financial stability, less cyclical volatility and , ultimately, economic growth.

• Consumer protection and empowerment. By helping to build the capacity of the poor to gain

control, become proactive, and use information and resources to enhance their economic

security, financial literacy not only increases financial intermediation, but enables consumers

to use services more effectively, thereby reducing their vulnerability to over-zealous retailers

or fraudulent schemes (as discussed under personal financial management needs in 1. above).

In this sense, financial education equals financial empowerment39. Therefore, for regulators of

financial services, helping people make informed financial decisions is central to protecting

consumers, promoting public awareness and maintaining market confidence more broadly.

• Reduced demands on the fiscus via a reduced need for social welfare, as people provide for

their own needs in old age and other risks that then need not be covered from tax income40.

• Increased usage of formal remittance channels (relevant to many developing countries as

discussed in footnote 5 above), which will imply that greater foreign exchange resources are

available to the formal economy. For example: due to the importance of remittances as a

source of foreign exchange to the country, the Pakistani central bank (State Bank of Pakistan)

has implemented various measures to increase the flow of remittances through formal

channels, including a subsidy to reduce formal transfer fees41.

3. SUPPLY OF FINANCIAL EDUCATION

International literature shows that most efforts towards financial education have so far taken place in developed countries. It has emerged even there that financial literacy is sorely lacking – as the ongoing sub-prime mortgage crisis demonstrates. Moreover, as pointed out in a review of financial education initiatives by Martin (2007), the bulk of financial literacy initiatives are still quite new, even in developed countries. Several developed countries have recently adopted national financial literacy strategies and the OECD has issued a number of recommendations on principles and good practices

38 See Commonwealth Bank (2006). 39 See the presentation by Crear (2008), as quoted in Miller et al (2008 – joint World Bank, OECD, DFID note on the case for financial literacy in developing countries). 40 See Messy (2007) for a more detailed discussion on the macro benefits of greater financial literacy evident from OECD members’ experience. 41 As discussed in Bester, Chamberlain et al (2007).

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on financial education42. The literature however points out few if any broad-ranging financial education initiatives in Sub-Saharan Africa – despite the need established in Section 2. Moreover, most Sub-Saharan African countries lack a coherent national strategy on financial education.

As part of the FEF’s inception phase eight scoping studies were conducted, one for each target country of the FEF. The purpose of this exercise was to establish the level of interest in the FEF in the various countries and to identify current and planned activities in the financial education sphere. With a few exceptions, the insights from the international financial education literature were confirmed: though a significant need for financial education has been identified in all the countries, financial education initiatives are as a rule still few and far between:

Scoping country Financial education interest/activity

Botswana There are some existing financial education initiatives by the banking sector, by private sector employers, and by the Bank of Botswana’s public education department. No scale has however been reached and there is no coordinated effort. The focus of existing programs is largely on savings promotion, the nature of money and to a lesser degree on business finance and subjects related to non-bank financial institutions (e.g. hire purchase agreements, insurance).

Ghana There is a general sense of awareness of financial education needs. The government (Mofep) has indicated its commitment to developing a national strategy on financial education other parties seem committed as well (for example Ghamfin, SPEED, Citigroup, IFAD, etc.). This commitment is however still new and few on the ground projects have been launched yet.

Kenya Enthusiasm for financial education appears to be high, although the interest is still very new and has not translated into many actual financial education projects. Current initiatives are mostly in the NGO field. There are however relatively few private organisations involved in financial literacy and organisations who do provide training do so as part of their service offering (before accessing a loan for instance), and usually only to their clients. There are now plans to draft a national strategy, coordinated by FSD Kenya, which is organising stakeholder meetings and commissioning scoping studies on financial literacy programs.

Namibia A few existing initiatives in financial education, mostly undertaken by financial service providers (who tend to be subsidiaries of South African financial institutions). The financial sector regulators have also financed some initiatives. However, there is no comprehensive programme focusing on financial education as such. None of the existing initiatives is broad and systematic enough to cover all subjects required to improving financial literacy levels or to reach out fully to the rural and illiterate population.

South Africa The target country with the highest level of current financial education activity. Many of the organizations active in financial education furthermore have networks or branches in neighbouring Southern African countries, implying scope for regional scalability. The recent implementation of consumer credit legislation has highlighted the need for financial education regarding responsible borrowing. Financial inclusion policy as embodied in the Financial Sector Charter for the past five years committed private sector players to investment in financial education. The non-bank financial regulator, the FSB, acts as coordinating body43.

Tanzania Very low levels of usage of formal financial services as well as very low levels of awareness of financial concepts and products (as illustrated by FinScope) highlight the need for financial education. Supply to the low-income market is gradually increasing, and with it the realisation that a lack of financial literacy may be a stumbling block. However, there are not many financial literacy initiatives yet among private and NGO players. This also holds true for the public sector, where awareness of the need for financial education is concentrated mostly in the Bank of Tanzania, which itself has internal coordination problems. The FSDT Tanzania is currently working with the Bank of Tanzania to develop a national strategy on financial literacy.

Uganda The lack of financial literacy highlighted by FinScope is experienced as a main stumbling block by private and public players in the financial sphere and there is therefore a strong interest in financial education. There have been a number of financial education initiatives driven by industry associations, donors and NGOs. These initiatives, by their own admission, are however only scratching the surface in terms of the need for financial education. A cross-industry coordinating entity for financial education, the FinLit Foundation, is now being set up. To date there have been no broad ranging public sector initiatives.

42 http://www.oecd.org/dataoecd/8/32/37087833.pdf. 43 A national strategy was developed in 2001, but current efforts appear not to be guided by this strategy. As such, the FSB’s role in financial literacy appears to be marginal in practice, especially in the private sector.

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Scoping country Financial education interest/activity

Zambia Zambia has a relatively underdeveloped financial sector with a very low level of financial intermediation. There is however increasing market activity on the supply side and it is realised that a lack of financial literacy may be a stumbling block. There are not many current or previous financial literacy initiative sin the private and NGO sector, though some ideas are emerging. As far as we could identify, only one of the largest commercial banks is embarking on a large-scale public education campaign and one insurer is using mass media for financial education. The Bankers’ Association and Insurers’ Association both see financial education as important, but initiatives are still in their infancy. In the public sector, likewise, there is increasing awareness of the need for financial education, but no concerted efforts yet.

Table 6. Scoping report findings: financial education supply in the target countries.

Supply gaps highlighted by the scoping reports. Table 1 indicates that there are still financial education supply gaps in the target countries:

• There is still limited private/non-governmental sector provision, despite the fact that, as

Section 2 indicated, financial institutions have an incentive to grow their client base through

financial education. This partly correlates with the low levels of financial inclusion. Those

initiatives that do exist are often run by industry associations, NGOs or by financial service

providers as corporate social responsibility initiatives (i.e. not profit-driven). Some financial

service providers also engage in financial education as part of their marketing efforts. In quite a

few instances programmes are targeting the youth. This indicates that immediate or direct returns

are often not expected, as children most often do not yet qualify as users of financial services. In

most instances, financial education initiatives are run independently, with no single entity

coordinating financial education supply for maximum scale and impact.

• At the same time, there is very limited state provision of financial education, implying that state

funding does not fill the gap left by private provision. Some countries (Ghana, Kenya, Tanzania)

are starting to work towards a national strategy on financial education. Often the state however

does not yet fulfil a key coordination role and the push for a financial education strategy rather

emanates from the industry association (e.g. Uganda) or donor (e.g. Kenya, Tanzania) space. In

the one country that has developed a public strategy, South Africa, the strategy seems to have

little coordinating effect in practice.

Why does neither the private sector nor the public sector deliver a socially beneficial amount of financial education? Below, four main reasons are postulated.

4. REASONS FOR LACK OF SUPPLY

The insufficient supply of financial education identified above is due to two main reasons:

• Market failure – lack of supply by private providers

• Lack of public interest and public resources to be allocated to financial education

A number of reasons (not mutually exclusive) can be identified for these market and public failures in providing financial education:

i. Policy deficit. To date, policy makers have primarily tackled financial exclusion through "supply

side" measures such as the development of new products targeted at lower income segments of

the market and encouraging the mainstreaming of micro-finance to bring affordable banking

services to the rural poor. Throughout the “microfinance revolution” and the more recent

emphasis on branchless banking solutions and next generation financial services, the emphasis

has been on the supply-side or the expansion of access to affordable, appropriate products within

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easy reach of the target audience, rather than the demand-side. This has been the case at national

level as well as internationally, at donor level. Improvements in financial access have led to

significant increases in the usage of financial services by the poor. However, these increases have

either (1) not been as significant as expected or (2) lead to patterns of usage which have not

necessarily improved the welfare of the users (as in the case of over-indebtedness). Whilst

massive advances remain to be made in the extension of financial access, converting access to

usage (through financial education) is emerging as an equally important problem. As the country

scoping studies indicated, public policy is only now starting to consider the demand-side aspects

of financial inclusion. This is also the case internationally, where donor and foundation-funded

financial education initiatives remain a relatively recent phenomenon.

ii. Quasi-public good nature of financial education. In economics, a public good is a good that is

non-rivalled and non-excludable. This means, respectively, that consumption of the good by one

individual does not reduce availability of the good for consumption by others and that no one can

be effectively excluded from using the good. Generally, public goods are goods for which the

consumer does not pay directly in order to use it (e.g. streetlights). Conversely, private goods can

then be defined as goods where the cost of providing the good increases at least proportionally to

the number who benefit from it, and where it is feasible to exclude from the benefit those who do

not pay for it.

There is however an important middle ground between public goods and purely private goods that can be referred to as “quasi-public goods”44 sharing some but not all of the characteristics of public goods. In the case of financial education, this would imply that some people can indeed be excluded from the benefit (e.g. those not within the target audience), and one person’s use can decrease the availability of the good to another person (if e.g. there are only a fixed number of places in a financial education course).

Yet financial education is still quasi- public in that end-beneficiaries can as a rule not be required to pay for it (and will indeed not have a willingness to pay as highlighted in Section 2). It is also “public” in that suppliers cannot capture all the benefit emanating from financial education. Positive externalities are generated that cannot be appropriated by the suppliers. Such external benefits include financial market stability and other aspects as highlighted under the public benefit discussion in Section 2. Financial education generally also does not directly generate revenue (though it does imply significant long-term gains for financial service providers through greater usage as highlighted in Section 2, this is often undermined by the uncertain returns of such interventions as discussed below). All of this limits the incentive for provision by private providers. Where they do provide financial education, this most often has a marketing drive (to promote uptake of their products) or is provided under corporate social responsibility (hence is not a core focus for the player from a financial bottom line point of view).

iii. Uncertain returns. It can be argued that, if public and private players had the reassurance that

financial education would pay off in terms of greater usage (of interest to private and public

players) and welfare gains (of interest to public players), the supply deficit would have been

removed. This is however not the case. There is a lack of evidence on the effectiveness of

financial education thus far. In a comprehensive literature review of financial education

evaluations, O’Connell (2007) finds that little evaluation is currently taking place and that the

evaluations conducted so far show mixed and inconclusive results. This, she argues, can either

indicate poor evaluation methods and the difficulty of capturing the impact of financial education,

or that financial education works only patchily. Atkinson (2008), in a review of financial

44 See: http://william-king.www.drexel.edu/top/prin/txt/Infoch/inf12.html for a discussion.

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education commissioned by the UK’s Financial Services Authority, confirms that not only has

there been relatively little work in the past on financial capability, but also that rigorous, credible

evaluation showing the incremental impact of financial education (what the FSA terms “financial

capability work”) is difficult to find. Benefits from financial education are not necessarily

apparent over the short term and are inherently difficult to measure. Though some examples are

emerging indicating that financial education programmes are indeed worthwhile or can at least

bring across the message to a large target audience45, the positive experience reported is mostly of

a general nature, implying that it remains difficult to predict “hard numbers” on the effectiveness

of financial education in terms of reaching the projected benefits such as actual increases in usage.

iv. Information asymmetries and limited understanding of behavioural drivers. Potential suppliers of

financial education are furthermore exposed to information asymmetries: they are not familiar

with the exact extent of the lack of financial knowledge and skills and face great uncertainty about

the drivers of financial behaviour. Though there is evidence that much of sub-optimal financial

behaviour can be ascribed to a lack of knowledge, not only about the specific financial service and

how it is delivered, but also about the management of money generally, as well as misplaced

perceptions about financial services, these are not the only factors driving behaviour. The extent

to which other behavioural characteristics, such as (1) trust in the delivery mechanism, (2) the

high discount rate applied by poor persons to potential future receipts of money in cash, (3)

cultural preferences, or (4) fear of financial services and financial institutions (the threshold

barrier), determine whether a person will use a service or not, is less well known.

In an attempt to better understand consumer behaviour when making financial management decisions and/or choosing financial products so as to inform the likely impact of financial education initiatives, the UK’s Financial Services Authority (FSA) recently commissioned a review of the behavioural economics literature. It is found (De Meza et al, 2008) that psychological rather than informational differences may explain a significant proportion of a person’s financial capability. Exactly how the various drivers combine to shape a person’s financial management and financial services usage profile is however still unknown.

Along with more information on the possible returns to be had from financial education, placing more information on the need for and drivers of financial education at the disposal of potential suppliers of financial education (public as well as private) could therefore contribute to improved provision of financial education46.

v. Limited public resources available in developing countries. The relative newness of the emphasis

on financial education in developing countries and the thus far uncertain returns as highlighted

above imply that the public resources dedicated to financial education in developing countries are

still limited. African governments are typically faced with resource constraints. In the face of

pressing other budget priorities, resources have been slow in starting to flow into financial

education. As discussed in Section 3, financial education policy development is still in the

conceptual stage in most African countries and direct supply of financial education by

governments is limited.

45 Such as such as the DFID FSDU/AMFIU microfinance financial education project in Uganda or some of the other projects mentioned in the supply overview above – though none of these projects produced rigorous evaluation. Also see the example of Nampost Savings Bank quoted by Rühle (2007:12), which illustrates how savings, technology and skills increased as a result of financial education and how it leveraged other players into the market as well. 46 Therefore one of the outcomes of the FEF will be its impact measurement and learning and dissemination elements – to overcome the information asymmetries, thereby triggering a supply response wider than just the FEF’s remit – see Section 5 below.

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Information asymmetries, uncertain returns, the public good nature of financial education and the presence of externalities combine to lead to market failures. At the same time, the policy deficit and limited public resources as well as the uncertainty of returns and information asymmetries may lead to a lack of public supply. This underlines the challenge for the FEF to unlock resources (public and private alike) and catalyse policy. In this way, it will be able to trigger the innovative supply of financial education initiatives.

5. FEF RESPONSE

The core response is to provide public/donor funding to catalyze both private and public supply.

The FEF is designed to respond to the market/public sector failure and resource constraints in the supply of financial education. In doing this is seeks to address the demand-side challenges in the quest for increased financial inclusion in Africa’s low-income communities. It is a path finding program designed to start out with a maximum focus on distilling new learning and good practices in the financial capability environment. In the medium term its focus will change to support successful interventions and take them to scale. It is intended to be a multi-donor instrument. Given the imperative for coordination in financial education initiatives, there is a strong need for donor coordination in this space.

The following aspects of the FEF design are intended to respond to the current state of the financial education provision in African countries:

i. The challenge fund mechanism: The challenge fund mechanism has proven very useful to explore

pioneering areas in the financial sector. A challenge fund awards one-off grants according to pre-

determined selection criteria to successful applicants on a competitive basis over multiple funding

rounds that are widely and publicly advertised. A fund manager is appointed to market the fund,

develop a pipeline and support interested applicants. The grants are awarded by an independent

Investment Panel, in this case with expertise in financial education and related fields. The

challenge fund is particularly suitable to the financial education area for the following reasons:

• It can blend a demand-driven approach with a social entrepreneurial role played by the fund

manager. The fund manager can trigger and shape applications that are suitable to achieve the

fund’s objectives;

• It is flexible, allowing different funding windows to be opened and closed as experience

grows;

• It builds knowledge through experience rather than research. The existing base of experience

with financial education in developing countries is so slim and what there is so thoroughly

researched, that additional research will add very limited value. Rather, what is required now

are financial education interventions designed to generate maximum information on what

works and what not;

• The grant-making mechanism, depending as it does on a grant agreement between the fund

and the grantee, allows the Investment Panel to impose any number of conditions on grantees,

ranging from a requirement for matched funding to minimum levels of impact evaluation.

ii. Targeting designated low income countries in Africa. The FEF started out with a wide focus on

Sub-Saharan African countries. Through a series of country scoping studies designed to identify

the presence or not of minimum requirements for productive financial education interventions, the

broad focus have been narrowed down to 8 initial target countries: Botswana, Ghana, Kenya,

Namibia, South Africa, Tanzania, Uganda, and Zambia. Initial experience in these countries will

determine when and how the scope is expanded. The multiple funding round character of the

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challenge fund as well as the presence of an established fund management capacity, makes such

expansion a relatively simple and cost effective step.

iii. The different funding windows: The discussion of the need for and benefit of improved financial

capability in Section 2 above reveals an overlapping set of potential benefits that are illustrated in

figure 1 below. The figure illustrates that there are overlapping areas of personal, public and

provider (as in financial services providers) benefit. Since one of the FEF’s objectives is to trigger

sustainable financial education interventions, these are likely to be triggered in the areas of

overlap (A, B, C and D) since it is in these areas that there are strong motivation for either public

funds (areas A, B and D) or private funds (areas A,C and D) to be expended on financial

education. The challenge therefore is to define the types of financial education interventions that

fall within these areas or categories. What is certain from existing experience is that the improved

financial capability in the areas of savings, insurance and responsible credit certainly falls in the

sweet spot (i.e. area A):

Figure 1. Financial education: overlap of benefit to various players.

Source: authors’ representation. Note: “FE” denotes financial education

Moreover, the FEF responds to these areas of overlapping benefit through the creation of dedicated funding windows. Where the public and personal benefits are clear (all the areas excluding F), the motivation for public institutions and NGOs to undertake financial education is strongest. Category A projects (see Section 6 below) meet this need. Where private institutions also derive potential benefit (areas A, C and D) the FEF will provide funding through Category B projects (see Section 6 below). Such projects will require grantees to provide matched funding. The FEF will not fund any projects that fall entirely in area F – where the benefit accrues largely to the financial services provider.

iv. Test alternative approaches: A core reason for the FEF’s existence is to evaluate the relative

effectiveness of financial education interventions in terms of the personal, public and provider

benefit that is derived from it. This is intended to address some of the major causes of market

failure – both in the private and public provision of financial education. This will require the

rigorous evaluation of existing approaches and supporting innovative new approaches. Category

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C projects (consisting entirely of evaluation exercises) were included in the FEF armoury to

support evaluations of existing projects that lend themselves to ready and credible evaluation.

However, it is anticipated that the bulk of learning will come from FEF funded projects that will

build minimum levels of evaluation into them from the outset.

Areas of innovation that will be supported by the FEF will focus in particular on all the areas of overlap highlighted in Figure 1. For example, if new technologies hold some of the greatest potential for growing financial inclusion, then there has to be focus on agent networks and using these for financial education purposes. Both POS and mobile phone distribution channels rely on agents for cash-in and cash-out services. The effective use of agent networks is therefore integral to the expansion of formal financial services. At the same time they present one of the best avenues which can take financial education to scale. To date, very little if any work has been done in this area. The FEF will seek to catalyse such applications.

The focus on evaluation also has another implication for project selection: The FEF will only fund projects that focus on direct communication. It will not fund projects consisting of the development of materials only.

A final benefit of the testing agenda, is that it created the opportunity to learn a lot more about behavioural change, in particular about the factors that impact financial usage. This will be probed in particular as part of the in-depth qualitative evaluations to be built into FEF-funded projects (see FEF Monitoring and Evaluation Policy and Procedures).

v. Funding strategic projects: Finally, the market research shows that a vast chasm exists between

the need for and provision of financial education by governments in African countries (with very

limited exceptions) Most governments have not put the most basic policy frameworks and data

sets in place to support financial education initiatives. The FEF will therefore also fund strategic

interventions designed to catalyse improvements in the enabling environment for financial

education. Such projects will not be funded on a competitive basis, but on the basis of clear

opportunities identified by the Fund Manager.

6. ELIGIBILITY CRITERIA

The project selection criteria flow directly from the FEF’s response to the need for and market failure in the provision of financial education.

Funding windows:

The FEF will allocate funds in four categories: i . P r o j e c t s p r o v i d i n g f i n a n c i a l e d u c a t i o n i m p l e m e n t e d b y n o n - p r i v a t e s e c t o r e n t i t i e s ( C a t e g o r y Ap r o j e c t s )i i . P r o j e c t s p r o v i d i n g f i n a n c i a l e d u c a t i o n i m p l e m e n t e d b y p r i v a t e s e c t o r e n t i t i e s ( C a t e g o r y Bp r o j e c t s )i i i . P r o j e c t s w h i c h w i l l f o c u s e x c l u s i v e l y o n t h e e v a l u a t i o n o f e x i s t i n g f i n a n c i a l e d u c a t i o ni n t e r v e n t i o n s i m p l e m e n t e d b y t h i r d p a r t i e s t h a t a r e n o t f u n d e d b y t h e F E F ( C a t e g o r y C p r o j e c t s )i v . P r o j e c t s d e s i g n e d t o c r e a t e a n e n a b l i n g e n v i r o n m e n t f o r f i n a n c i a l e d u c a t i o n i n a c o u n t r y a n dw h i c h d o e s n o t e n t a i l t h e d i r e c t p r o v i s i o n o f f i n a n c i a l e d u c a t i o n ( C a t e g o r y D p r o j e c t s )Funding allocations to Category A, B and C projects will be made on a competitive basis by the Investment Panel, i.e. applications will compete with other applications for the available funding. It is anticipated that the Fund Manager will have to trigger applications for Category C projects through interaction with existing projects funded by third parties. However, Category C projects will compete on an equal basis with Category A and B projects.

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Category D projects will be identified by the Fund Manager in discussions with potential applicants, but approved by the Investment Panel. Although trade-offs between different category D projects will have to be made, given limited funding, Category D project funding will not be awarded on a competitive basis.

It is proposed that at least 80% of all funds available for project funding be allocated to Category A, B and C projects and no more than 20% of funding to Category D projects.

Eligibility Criteria

The following eligibility criteria will apply to Category A, B and C projects:

14. Capacity to implement: The FEF is not prescriptive regarding the nature of applicants.

Applicants can be private sector employers, financial services providers, private foundations,

government institutions, NGOs, local community organizations, training institutes,

professional and industry umbrella associations, consumer bodies, etc. Moreover, consortia

will be encouraged. However, applicants must have the capacity to implement the full project

or must be able to source the necessary expertise from external service providers where this is

required.

Where consortia are brought together for an application, a lead applicant must be identified who will be the contracting party for the FEF and who will be required to enter into subcontracting arrangements with members of the consortium.

Larger private sector employers are considered eligible where they are well placed through their scale and capacity to deliver increased financial capability to their employees and others.

15. Direct provision of financial education: Projects must provide financial education directly to

beneficiaries of such education with the intention to improve their financial capability.

Projects that propose to only develop financial education materials without applying these

materials in education interventions will not be funded. Similarly, the bulk of FEF funding

must be applied to education interventions or communication events rather than to the

development of materials.

16. Must improve financial capability: The FEF will support projects that improve the financial

capability of individuals and households. The FEF considers a financially capable individual

to be one who has the knowledge, skills and confidence to be aware of financial opportunities,

to know where to go for help, to make informed choices, and to take effective action to

improve his or her financial well-being. Financial capability therefore has four dimensions:

(1) knowledge, (2) skills, (3) attitudes and (4) behavior and the FEF seeks to impact all of

these. Please note that the focus is on personal financial management, not the financial

management skills related to a business. (For more information on the various dimensions of

financial capability, applicants are referred to the draft FEF evaluation framework.)

17. Must target increased/ changed usage of financial services: The FEF will fund projects that

seek to impart not only personal financial management skills (such as budgeting), but also

seek to trigger increased and/or enhanced usage of financial services that will extend current

levels of financial access in the target countries.

18. Must primarily target low-income groups: Projects must focus on improving the financial

capability of low-income persons, families and communities. Whereas interventions using

mass-based communication mediums will inevitably be available to all income groups, the

content and orientation must be towards low-income clients.

19. Potential for scale: The FEF will fund projects that have the potential to impact large

numbers of persons, either through direct communication with large groups or through the

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presence of multiplying factors such as the training of individuals who will be involved in

advising or influencing others in the target market.

20. Ability to credibly measure impact: A primary objective of the FEF is to test the relative

success of different approaches to financial education. All FEF projects must therefore be able

to measure the impact of their financial education interventions. Projects proposals must

include budgeted proposals for impact evaluation, including, amongst others, the collection of

baseline data, target outcomes and proof of expertise to undertake the evaluations. (Applicants

are referred to the FEF Project Evaluation Framework for more information.)

21. Leverage: Projects must leverage the applicants’ own resources and existing networks,

particularly networks of trust used by low-income persons. All applicants must demonstrate

some leveraging of other resources, internal capacity, or partners’ resources alongside FEF

resources.

22. Implemented in the FEF target countries: Projects must be implemented in FEF target

countries being Botswana, Ghana, Kenya, Namibia, South Africa , Tanzania, Uganda, and

Zambia so as to cluster initiatives and build multiple interventions that feed off each other.

Regional projects will also be eligible provided the majority of FEF resources are applied

within FEF target countries. The geographical focus of the FEF may extend in the future,

depending on demand and the availability of resources.

23. Maximum implementation period of 24 months: FEF projects should be implemented over a

period of no more than 24 months, including final impact assessment activities. This will

require early implementation of the financial education interventions themselves to allow

sufficient time for impact assessment.

24. Maximum grant size of £250,000: Due to the focus on testing alternative approaches to

financial education, the FEF will not contribute more than £250,000 to any single project.

The following additional eligibility criteria will apply to Category B projects:

25. Privately owned grantees must contribute matched funding on a 1:1 basis: When funding

privately owned businesses (as grantees or leading applicants of a consortium), the FEF

requires private applicants to share the risk of the project by providing matched funding equal

to the contribution of the FEF. In this regard, additional (rather than sunk) investments are

sought from private sector partners. A substantial proportion of the private contribution must

be in cash and the FEF must be able to verify the full extent of the contribution. Resources

such as intellectual property and existing materials would not be considered as a suitable

match for FEF resources.

26. FEF resources cannot be allocated to product marketing: Private sector applicants that

provide financial services must demonstrate that FEF funds will not be used to market their

own products. They need to apply FEF resources to more generic financial education or

training in the use of products that have application beyond their branded product range.

While FEF funds cannot be applied to marketing, the resources that the applicant is bringing to bear alongside FEF funds may relate more directly to the promotion of the applicants products or services. However, it should be noted that the degree to which public goods (rather than private goods) are developed will be a consideration in the competition (see Assessment Criteria below)

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7. MARKETING STRATEGY

The FEF’s marketing strategy is designed to develop a pipeline of projects that will contribute to achieving the objectives set out in this paper. The marketing strategy has two dimensions: the message and how we intend putting the message across.

The FEF message

The FEF message consists simply of communicating what we seek to achieve (growing financial capability and financial usage amongst low-income clients in selected African countries) and how we propose to do so (the selection criteria and assessment process). The message needs to be tailored to ensure that we dissuade ineligible applicants from applying to the FEF for funding, whilst encouraging and guiding eligible applicants.

Communicating the message

The FEF will employ both proactive and reactive marketing strategies.

Proactive marketing: The Fund Manager will drive the proactive marketing strategy. It has the following key thrusts:

• Generic publicity to establish a public profile for the FEF. The focus here will be on regional

newspapers and selected publicity events, the latter being chosen on an opportunistic basis. We

are cautious about this approach, since it may generate many ineligible Concept Notes.

• Direct interaction with institutions able to deliver financial education projects falling within the

shaded areas in figure1. The Fund Manager has already completed scoping studies of all 8 target

countries and has identified an initial list of target institutions. The Fund Manager will also assist

potential applicants to find suitable partners where these are required to perform specialist

functions, particularly independent evaluation, that the main applicant is not able to perform. The

Fund Manager has already completed in-country launches in Zambia, South Africa and Uganda.

A fourth in-country launch will be undertaken in Kenya later in November. High potential

institutions in other countries will initially be contacted by phone and email until country visits to

these destinations are scheduled.

• Opportunistic marketing, i.e. in response to invitations and at events organized by third parties.

Reactive marketing: The Fund Manager is called upon to respond to enquiries on an ongoing basis. Most of the verbal enquiries are fielded from the FEF operational office in Johannesburg, South Africa. The FEF website will however serve as the key source of information and ongoing communication with potential applicants as well as grantees. It provides sufficient background information on all aspects of the FEF, including a comprehensive briefing document on Project Evaluation and the minimum standards set by the FEF in this regard. Another key source of feedback will be the Investment Panel who will adjudicate all FEF applications, both at the Concept Note and Full Application phases. The Investment Panel will interpret the selection criteria on an application by application basis. They will set the definitive standard to be met by applicants for funding. It is important that the Fund Manager provides full feedback on these standards to all applicants and potential applicants.

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8. REFERENCES

Atkinson, A., 2008. Evidence of impact: An overview of financial education evaluations. Prepared for the Financial Services Authority by the Personal Finance Research Centre University of Bristol. Consumer research: 68.

Banking Council of South Africa, 2004. Consumer awareness campaign on over-indebtedness: media release. Available at: http://www.banking.org.za/documents/2004/FEBRUARY/consumerawareness.asp

Bester, Chamberlain, De Koker, et al, 2007. Implementing FATF AML/CFT standards in developing countries and financial inclusion: findings and guidelines. Genesis Analytics report prepared for the FIRST Initiative. Available at: http://www.finmark.org.za/Research.aspx?uno=3

Bester, Chamberlain, et al, 2008. Making insurance work for the poor: microinsurance policy, regulation and supervision. Report prepared for the IAIS/CGAP Joint Working Group on Microinsurance.

Booz Allen Hamilton, May 2008. Mobile Financial Services for the Poor: Overview and Analysis, Post Conference Report, Cairo Convening.

CGAP, 2008. Why has M-Pesa become so popular in Kenya? Blog by Jim Rosenberg: 17 June 2008. Available at: http://technology.cgap.org/2008/06/17/why-has-m-pesa-become-so-popular-in-kenya/

Cohen, M, Hopkins, D & Lee, J, 2008. Financial education: a bridge between branchless banking and low-income clients. Microfinance Opportunities Working Paper No. 4. 29 August 2008.

Commonwealth Bank Foundation, 2006. Improving financial literacy in Australia: benefits for the

individual and the nation. Available at: http://www.commbank.com.au/about-us/download-printed-forms/FinancialLiteracy_KeyFindingst2004.pdf

Crear, P., 2008. Chief Executive – World Council for Credit Unions. Presentation at OECD – U.S. Treasury International Conference on Financial Education, Washington, D.C., May 8, 2008. http://www.oecd.org/dataoecd/16/58/40607821.pdf

De Meza, D., Irlenbusch, B. & Reyniers, D., 2008. Financial Capability: A Behavioural Economics Perspective: Review of behavioural economics literature. Prepared for the Financial Services Authority. London School of Economics.

European Commission, 2008. Access to financial services and over-indebtedness. Factsheet. Available at: http://ec.europa.eu/employment_social/spsi/docs/spsi_factsheets/fs8_over-indebtedness_en.pdf

Hendrie, S., Hobden, T. et al, 2008. Old age savings in the low-income market in South Africa. Genesis Analytics report prepared for the Finmark Trust. Available at: www.finmark.org.za.

Hougaard, C., 2008. The remittances landscape in Zambia. Cenfri report prepared for the Finmark Trust Zambia. Available at: www.finmark.org.za

Ivatury, G. & Pickens, M. (CGAP), 2006. Mobile phone banking and low-income customers. Evidence from South Africa.

Ivatury, G. & Mas, I. (CGAP), 2008b. The Early Experience with Branchless Banking. CGAP Focus note no. 46. Available at: www.cgap.org.

Leibsohn, D.M., 2004. International remittances: characteristics and comparisons. Prepared for the Fannie Mae Foundation.

Martin, M (2007) A literature review on the effectiveness of financial education. Richmond: Federal Reserve Bank of Richmond (Working Paper 07-3)

Microfinance Opportunities, 2005. Market research for financial education. Working Paper #2. Available at: www.microfinanceopportunities.org

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Miller, M (World Bank), Godfrey, N. (DFID), Levesque, B. (OECD), & Stark, E. (Consultative Group to Assist the Poorest, CGAP), 2008. The Case for Financial Literacy in Developing Countries:

Promoting Access to Finance by Empowering Consumers. Available at: www.ifc.org/ifcext/economics.nsf/.../CON...2008.../Godfrey-Levesque-Miller-Stark_CaseForFinLiteracy_SeminarDRAFT.pdf

O’Connell., A (2007) Measuring the effectiveness of financial education. Wellington: Retirement Commission.

OECD, 2005. Improving Financial Literacy - Analysis of Issues and Policies. Available at: www.oecd.org/document/28/0,3343,en_2649_15251491_35802524_1_1_1_1,00.html

OECD and Russian G8 Presidency, 2006. G8 International Conference on Improving Financial

Literacy. Various presentations. Available at: http://www.oecd.org/document/15/0,3343,en_2649_15251491_37583951_1_1_1_1,00.html

Messy, F-A. (OECD), 2007. OECD International Principles on Financial Education. IVth International Forum on Financial Consumer Protection and Education. Budapest, 15-17 October 2007. Available at: www.pszaf.hu/resource.aspx?ResourceID=cpforum_pres_messy

Ratha, D. et al, 2007. Migration and Development Brief 3. Development Prospects Group, Migration and Remittances Team November 29, 2007 Remittance Trends 2007. Available at: siteresources.worldbank.org/EXTDECPROSPECTS/Resources/476882-1157133580628/BriefingNote3.pdf

Rühle, I., 2007. “Financial Literacy” – a comparative study in selected countries. Sparkassenstiftung fuer Internationale Kooperation (English: Savings Bank Foundation for International Cooperation – SBFIC), Bonn.

SEWA, 2007. Financial literacy for micro insurance: SEWA’s experiences. Presentation at Citi-FT Financial Education Summit, India, 2007. Available at: www.financialeducationsummit.org.

Widdowson, D. & Hailwood, K., 2007. Financial literacy and its role in promoting a sound financial

system. Reserve Bank of New Zealand: Bulletin, Vol. 70, No. 2. Available at: http://www.rbnz.govt.nz/research/bulletin/2007_2011/2007jun70_2widdowsonhailwood.pdf

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ANNEX 7: MONITORING AND EVALUATION POLICY AND PROCEDURES

Financial education fund

Monitoring and Evaluation policy and procedures47

LEARNING AS WE TEACH

Date: 4 November 2008

NOTE TO READERS: Please note that this is a living document. The FEF is tasked to implement rigorous evaluation of all the projects which it funds. The sound evaluation of financial education projects is an evolving field. As our knowledge grows and as we learn from others this document will change and evolve. For those accessing the document on the internet, the date above reflects the most recent date of amendment.

47 This document draws extensively on Kempson 2008 which was prepared as part of the design of FEF.

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CONTENTS

1. PURPOSE..................................................................................................................................3

2. OBJECTIVES ............................................................................................................................ 3

3. TERMINOLOGY ........................................................................................................................ 4

4. FINANCIAL CAPABILITY ......................................................................................................... 5

5. PROJECT MONITORING........................................................................................................ 10

6. PROJECT EVALUATION........................................................................................................ 11

6.1 CATEGORIES OF INTERVENTIONS ................................................................................................. 11

6.2 EVALUATION METHODOLOGY........................................................................................................ 11

6.3 THREE STANDARDS OF PROJECT EVALUATION .............................................................................. 13

6.4 PRINCIPLES ................................................................................................................................ 14

6.5 EVALUATION PROCESS FOR INDIVIDUAL PROJECTS ....................................................................... 14 Setting the objectives.............................................................................................................................. 14 Design of Evaluation Plan and feedback into project design .................................................................. 15 Baseline assessment .............................................................................................................................. 16 Redesign following baseline assessment ............................................................................................... 16 Roll out of financial education or project ................................................................................................. 16 Mid-term process evaluation................................................................................................................... 16 Post-implementation evaluation of process, outcomes and impact ........................................................ 17 Follow-up assessment of impact............................................................................................................. 17 Feedback into FEF processes ................................................................................................................ 17

6.6 PROJECT EVALUATION STAKEHOLDERS AND BUDGET PRINCIPLES...................................................17

7. MONITORING OF PROGRAM IMPLEMENTATION .............................................................. 18

8. PROGRAM EVALUATION...................................................................................................... 18

8.1 TRACKING GLOBAL INDICATORS.................................................................................................... 18

8.2 OUTCOMES AND IMPACT AT A PROGRAM LEVEL ............................................................................. 19

8.3 FUND MANAGER PERFORMANCE EVALUATION ............................................................................... 19

9. TASKS, RESPONSIBILITIES AND BUDGET ........................................................................ 19

ANNEX 1 TO MONITORING AND EVALUATION POLICY AND PROCEDURES: OUTLINE OF AN EVALUATION PLAN: A HYPOTHETICAL PROJECT EXAMPLE......................................................................................... 21

ANNEX 2 TO MONITORING AND EVALUATION POLICY AND PROCEDURES: MONITORING MATRIX EXAMPLE........................................................................................................................................................ 22

ANNEX 3 TO MONITORING AND EVALUATION POLICY AND PROCEDURES: EVALUATION MATRICES FOR RESPECTIVELY OUTCOME AND PROCESS EVALUATION ......................................................................... 24

ANNEX 4 TO MONITORING AND EVALUATION POLICY AND PROCEDURES: REFERENCES ........................ 30

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1. PURPOSE

This document sets out the policies and procedures in respect of monitoring and evaluation that apply to the Financial Education Fund. These policies and procedures will guide the Fund Manager, the Investment Panel as well as applicants for funding and grantees. It also forms the basis for external and independent evaluations of individual projects as well as the program as a whole. These policies and procedures will be amended during the course of the program as our experience grows.

2. OBJECTIVES

Monitoring and evaluation are essential to the success of the FEF. The specific objectives of these functions are the following:

1. To establish the relative effectiveness of financial education interventions. A core objective of

the FEF is to generate learning on the relative effectiveness of financial education

interventions in developing countries. The only way to do this is through the rigorous

application to individual projects, both projects funded by the FEF as well as projects

independently funded, of a sound, best practice evaluation framework that will stand up to

international scrutiny. Similarly, projects which target the same aspect of financial capability

but deliberately use different channels and target different audiences and test various options

will go a long way to extend our learning. The FEF will thus encourage such multi-

dimensional projects. Where the FEF funds strategic interventions, the impact of these

interventions need to be similarly evaluated

2. To understand the determinants of behavioural change that either extend or restrict

increased/more appropriate usage of financial services amongst low income clients. The

evaluation objectives of the FEF go beyond just establishing the relative effectiveness of FE

interventions. In selected FEF projects the evaluation process will be used to probe the

reasons for behavioural change or the lack thereof. This information will be used not only to

inform future design of financial education interventions, but also the general strategy for the

extension of financial access.

3. To track the progress and efficiency of the implementation of individual FEF-funded projects.

The monitoring process must deliver the management information required by the fund

manager as part of its continued oversight of the implementation of individual projects.

4. To track the progress, efficiency and effectiveness of the management of the program by the

Fund Manager. A core objective of the monitoring and evaluation functions is to keep the

Fund Manager accountable, both in terms of the efficiency of the operations of the FEF and

the outcomes which it seeks to produce

5. To determine the performance-related remuneration of the Fund Manager. The remuneration

of the Fund Manager is linked directly to fund performance (operational as well as,

importantly, in terms of actual project outcomes). The monitoring and evaluation functions

must deliver the necessary independently verified information on which the performance-

based fee of the Fund Manager will be determined.

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3. TERMINOLOGY

This section defines certain key terms used in this document.

Monitoring vs. evaluation. Monitoring involves the regular collection of data on a programme or service. It tends, therefore, to result in a regular flow of information on the progress being made towards the intended outcomes. Generally speaking this is quantitative and can look at both the programme/service processes (e.g. number of courses run, number of people attending and the types of people attending) and changes that have occurred in the participants (e.g. number of people opening a bank account as a result of the programme) (Kempson, 200848). Monitoring will be done by both the grantees and the Fund Manager.

Evaluation, in contrast, involves a periodic or one-off in-depth analysis of programme/project performance against pre-determined objectives and anticipated outcomes. It may also look at process. It will almost certainly use monitoring data as an input, alongside other information, to learn lessons from the service being evaluated. Evaluations are often (but not always) carried out by independent evaluators (Kempson, 200849). The FEF encourages independent evaluations to ensure the credibility of data.

Programme vs. project. Monitoring and evaluation takes place at two levels: that of the programme as a whole (i.e. monitoring and evaluating the actions and performance of the fund manager) and that of each individual project (i.e. monitoring and evaluating the actions and performance of the grantees). Evaluation of individual projects also feeds into the synthesised evaluation of the programme as a whole.

At the programme level, monitoring therefore answers the question “is the fund manager doing its job efficiently and effectively?” (relevant to objectives 4 and 5 above) whereas evaluation answers : “what is the total impact of the fund manager’s job, i.e. what difference has the FEF as a whole made?” (relevant to objectives 1 and 5 above)

At the project level, monitoring answers the question “is the project being implemented efficiently and effectively?” (relevant to objective 3 above) whereas evaluation answers “what is the impact of the project on the lives of the target audience?” (relevant to objectives 1 and 2 above)

Outputs vs. outcomes: An output is an activity or deliverable implemented or produced by either the fund manager or a grantee. An outcome is the result of the activity in terms of increased financial capability of the target audience of the intervention or an improved national enabling environment for increasing financial capability amongst the low income population.

Whether the objectives are met or not is measured by setting specific outputs and outcomes for the project. It is important that such outputs and outcomes be measurable and realistic. The FEF prefers modest and realistic outcomes and outputs rather than ambitious and unrealistic targets. We will use existing information on comparable projects to assess whether targets are realistic.

Outputs can for example entail:

� The number of people reached

� The cost efficiency (cost per person reached)

� Whether the project is implemented on schedule

Outcomes will relate to the desired changes in the knowledge, skills, attitudes and behaviour of the

target audience, for example:

� “the public education campaign has led people to better understand and trust formal financial

48 Quoted directly 49 Quoted directly

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services, as reflected in a 10% increase in new account openings of the major bank branches in the target areas vis-à-vis the same period in previous years”

� “the number of m-banking transactions per client per month has increased by at least 5%”

� “Cases of credit blacklisting due to a lack of debt management declined by 15% in the target area”

� “Insurance penetration increased by 10% among the target audience, illustrating a better understanding of the value proposition of and procedures relating to insurance”.

4. FINANCIAL CAPABILITY

The purpose of the FEF is to find effective approaches to increase financial capability using financial education. This requires an understanding of the different elements or components of financial capability and how these can be measured. The fund hopes to develop a calibrated financial capability index that can be applied to different countries, markets and financial services.

The following definition of financial capability is proposed: “A financially capable person is one who has the knowledge, skills and confidence to be aware of financial opportunities, to know where to go for help, to make informed choices, and to take effective action to improve his or her financial well-being while an enabling environment for financial capability building would promote the acquisition of those skills50.

Financial education is one of the ways51 in which financial capability can be improved. Financial education is defined by the OECD as “the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being”52.

Given these broad definitions there are various ways to segment financial capability for measurement or evaluation purposes. We will use two types of segmentation: (1) the content domains of financial capability and (2) the functional components of financial capability. Various approaches to segmenting the content domains exist. The UK Financial Services Authority53 recognises the following five domains:

� keeping track

� making ends meet

� planning ahead

� choosing products, and

� staying informed.

Whereas the content domains relate to the “financial” content of what is being taught, the functional components relate to the cognitive, psychological and behavioural elements which are prerequisites for action and which require measurement in different ways to ensure credible evaluation. We distinguish four such functional components54:

� Knowledge

50 See Orton (2007:7) for various definitions. 51 There are also various other and potentially more powerful ways in which financial capability grows, for example parents modeling financial behaviour, personal experience and interaction with friends, family, financial services providers and others being the main ones. 52 OECD 2005. 53 FSA 2008. 54 In line with the work done by Microfinance Opportunities (2005)

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� Skills

� Attitudes, and

� Behaviour.

Below we map examples of the content domains of financial capability to these functional components:

5. Knowledge: This refers to the actual knowledge or understanding which an individual has of the

different aspects (content domains) of personal financial management and use of financial

services (both formal and informal):

� Personal financial management, for example how to budget and do financial planning over a normal life cycle;

� Financial or money concepts such as the interest rate;

� Different types of financial services (transaction banking, savings, credit, insurance) that are available and how they can they assist him/her to improve his/her life;

� The relative advantages and disadvantages of using formal vs informal financial services;

� How these financial services can be accessed and where (channel information). This includes awareness of the different technologies which can be used to access financial services e.g. mobile phones, ATMs, electronic cards;

� The functionality of products, i.e. how they work (e.g. the difference between different types of bank cards - there is much confusion between debit and credit cards), for which transactions or purposes a product can be used (e.g. that debit cards can also be used for store purchases and cash back);

� Knowing where to go and who to approach to access specific services;

� Knowing what to take along, what to ask, and what to refuse.

� What the various services cost;

� What your rights are as a client and what they mean; and

� Where to go and what to do when things go wrong – the various recourse options.

When a person has the necessary knowledge, he or she is able to start exploring usage. However, the person may not yet have the necessary skills to convert knowledge into usage.

6. Skills: Refer to the practical ability of the individual to apply the knowledge in the use of an actual

product or service or in personal financial conduct. It includes the following:

� The ability to prepare a budget, keep records of spending, plan ahead (specific allowance will have to be made for African countries, particularly rural areas, where much of consumption and saving is not cash-based. Providing instruction in purely cash-based budgeting will therefore not meet the needs of these target audiences.);

� The ability to use the relevant technology (eg how to use a PIN, ATM, mobile phone for transactions);

� Skills to use product comparison information

A person with the necessary skills is technically equipped to start using a particular financial service or to undertake certain personal financial management tasks.

7. Attitudes: Even with the necessary knowledge and skills many persons are not prepared to use

certain financial services. This may be due to perceptions, personal orientation, behavioural traits

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or other psychological factors. These condition the attitudes and thus behaviour of the individual.

Key attitudes conditioning the usage of financial services, include:

� Trust in (1) the service, (2) the service provider, (3) the delivery channel/technology, for example, the perception that paper documents are better proof than electronic documents, a preference for face-to-face banking; a preference for cash transactions as opposed to electronic money that cannot be touched; trust through familiarity and use over time;

� Confidence to approach the service provider, ask for assistance, etc, i.e. finding formal financial services intimidating;

� A high discount rate characteristic of low-income behavior, leading to a consistent under-evaluation of future cash payments or receipts;

� Convenience – “this is what I’ve always done and how everybody around me does it, so I am not really interesting in learning about formal services”;

� Loss/risk aversion, lack of self-discipline “Hassle factor” – “why fill out forms, disclose personal information, queue, when I can just transact in cash? Or: “why budget/plan for old age when I always get by in the end?”

� Price or perception of price.

The measurement requirement here is to determine whether the person’s attitude dissuades them from using a particular financial service. The test is whether the person is committed to use the service in the near future. Commitment is short of actual changed behaviour and must serve as sufficient indication of the success of a financial education intervention where a person does not have the resources to start using the service immediately, need to jump through other hoops to start using the service, e.g. apply for necessary formal identification, or the service is not available to the person in that area.

8. Behaviour: Refers to actual changes in financial behaviour55. Changes may be due to the financial

education intervention or another cause. Controlling for other influences on behaviour is therefore

an important part of evaluation. Examples of behaviour change would include:

� Budgeting and regular financial planning;

� Starting to use a formal financial service, such as a savings product, a transaction bank account or insurance;

� Starting to use other transactions or functionality offered by a financial product which the person has had access to for some time.

� Planning for financial security

� Using credit responsibly

Behaviour also needs to be put in the context of other relevant behaviour. For example, if a financial education program has a single aim (e.g. to increase savings in an employer-sponsored vehicle) can it be said to be a success for an individual employee if he or she does increase contributions but affords that greater saving by getting more into debt? If the increasing debt is not measured, the apparent effectiveness of the education may hide that the household is in a worse position overall56.

The following table, taken from Microfinance Opportunities (2005) and adapted, gives further examples of current and desired behaviour for various content areas:

55 Note that sometimes, not changing behaviour might actually make sense. 56 See O’Connell (2007:20).

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THEMATIC AREA EXAMPLES OF UNDESIRABLE BEHAVIOUR EXAMPLES OF DESIRED BEHAVIOUR

Budgeting

• Live day to day • Reactive financial behaviour • Lack of financial planning for the future

and according to life stage

• Plan ahead for expected and unexpected expenditures

• Draw up a budget • Manage your personal finances according to the

budget

Saving - short-term and long-term

• Wasteful expenditures • Irregular savings • Regularly drawing on savings for

consumption purposes • Savings not linked to goals (e.g. asset

building, risk events, old age) • Not saving long-term

• Avoid unnecessary spending (in line with budgeting above)

• Have a savings plan that takes your needs in various life stages into account

• Save regularly and impose savings discipline - also in ability to withdraw

• Explicitly save for long-term goals, distinguishing e.g. old age savings from savings for consumption needs

Borrowing

• Borrow for consumption purposes or emergencies

• Over-indebtedness • Borrow with little understanding of terms

• Maintain an emergency savings account • Make a plan to reduce debt - seek advice/guidance

where necessary • Avoid excessive debt • Borrow with full understanding of terms (e.g.

interest charged, repayment terms, penalties, etc)

Use of formal financial services

• Uses cash and informal money transfer options for all transactions

• Uses limited functionality of existing products

• Lack of confidence in dealing with financial institutions

• Lack of knowledge on how products work, where to access them, etc

• Unable to find recourse if things go wrong

• Know which services can meet which needs • Know about financial options and their terms and

conditions • Familiar with variety of financial service providers • Have the confidence, knowledge how to use and

desire to use bank services to support financial goals

• Actual usage of financial services appropriate to needs

• Familiar with recourse options and able to use them.

Table 7: Examples of current versus desired behaviour for various possible financial education

content areas.

Source: Adapted from Microfinance Opportunities (2005)

The various components of financial capability are illustrated in Error! Reference source not found. below. The development of financial capability does not necessarily always follow this sequence. However, there is a need to standardise our measurement approaches. We therefore propose to systematise financial capability in this manner (to be refined as experience grows) for measurement purposes (and thus also for the purpose of project design).

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Figure 1: The components and growth of financial capability over time.

The following adapted extract from a table provided in Microfinance Opportunities (2005) provides

some examples of indicators of knowledge, skills and attitudes for three example types of financial

education content areas:

KNOWLEDGE SKILLS ATTITUDES DESIRED BEHAVIOURS

Budgeting

• The purpose of a budget • The elements of a budget • The benefits of tracking cash

flow • The benefits of a spending

plan • Money beliefs • Financial goals

• Track cash flow • Construct a budget • Make a spending plan

• Commitment to work towards a financial goal

• Commitment to follow a budget

• Discipline to stick to a spending plan

• Confident about managing money

• Motivated to plan ahead

• Identifies a realistic financial goal • Budgets according to a written

budget • Follows a spending plan • Has a plan for future expenditures

(expected as well as unexpected)

Savings

• The purpose of savings • Elements of a savings plan • Different ways to save • Different places to save • What to consider in shopping

around for a savings account (accessibility, fees, etc)

• Understanding the elements of a savings product, including the interest earned and fee structure

• Make a savings plan • Apply to open a

savings account • Can reconcile a

savings account

• Belief in the benefits of savings

• Willingness/desire to plan ahead

• Discipline to save regularly

• Avoids unnecessary spending • Spends less than income • Has a realistic savings plan • Owns a savings account and saves

regularly - in different vehicles for different saving goals where appropriate

• Puts aside savings as soon as money comes in

• Has an emergency fund

Mobile financial services57

57 While we note that mobile financial services is just one form of transaction banking usage, it is included given the importance of next generation financial services/branchless banking in serving the unbanked market (who are often outside of the reach of traditional bank branches).

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KNOWLEDGE SKILLS ATTITUDES DESIRED BEHAVIOURS

• That a mobile phone can be used to access formal financial services

• Different providers of mobile financial services

• Different places and means to transact against a mobile phone-based account

• Know how to open an mobile-enabled account

• Can transact with a mobile phone

• Can use the full functionality of the account

• Trusts branchless banking and the technology interface as opposed to traditional

• Committed to using mobile banking as a money transfer and savings tool

• Obtains access to a mobile phone • Subscribes to a mobile financial

service • Uses the full functionality of the

channel and continues usage over time

• Leverages use of technology to access range of financial services and products (i.e. loans, savings, payments, transfers) - i.e. "graduation" to more advanced/value-add services based on mobile services as entry point

Table 8. Examples of knowledge, skills, attitudes and desired behaviour for three example content areas.

Source: Adapted from Microfinance Opportunities (2005), also drawing on Microfinance

Opportunities (2008) and Booz Allen Hamilton (2008)

5. PROJECT MONITORING

Grantees will be required to undertake ongoing monitoring of their projects. The information

generated will be used by the Fund Manager to track progress in line with the project plan and the

output targets that need to be achieved (captured in the Project Monitoring and Evaluation Plan).

Project progress must be reported to the Fund Manager on a quarterly basis and will be specified in

the grant agreement. A project completion report will be required. In addition, the Fund Manager will

visit grantees from time to time to monitor progress with project implementation.

However, of equal importance is the generation of sufficient monitoring information to feed into the

evaluation of the project. Output monitoring techniques58 can be used to record who uses the service

(their characteristics and patterns of behaviour that the programme is seeking to modify) and the costs

involved in doing so. While the exact details to be monitored will depend on the specific project, it

will generally include (for direct contact financial education projects):

� Overall level of use of the project

� Profile of users and contact details (measured at registration)

� Behaviour prior to programme (measured at registration)

� Cost

� Behaviour as result of programme (where possible measured through bank/credit records)

For mass media and other non-direct contact channels, the techniques remain the same, except that the

overall level of use, the profile and contact details of users and the behaviour following the

intervention cannot be measured unless gauged through population-wide surveys over time (in which

case it will still be difficult to single out the impact of the specific intervention on overall trends).

58 See Appendix 2 for a matrix of possible types of info that might be collected through monitoring programmes as contained in Kempson (2008).

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Applicants are required to propose as part of the Evaluation Plan at Full Application stage (not at

Concept Note stage) what information they will monitor. Guidelines will be provided on what

information needs to be tracked and in what format (e.g. reporting age bands as 15-20, 21-30 vs. 15-

25, 26-35, or reporting income bands as $0-10, $11-20 per month vs. per week) .

6. PROJECT EVALUATION

6.1 Categories of interventions

From an evaluation design point of view, the FEF will fund four categories of interventions:

1. Primary financial education projects, i.e. projects entailing actual financial education which

results in communication with end-users.

2. “Hothouse” interventions, refer to multiple multiple projects undertaken in the same

jurisdiction and where there is some linkage between the various projects. This may be

because various projects are coordinated through a coordinating entity, or that the fund

managers facilitate linkages between different projects if the applications received point

towards possible synergies. In these cases where the intention is for the sum to be greater than

the parts, the fund manager (in partnership with the local coordinating entity if appropriate)

will need to design the overall evaluation approach to which individual projects need to

adhere.

3. Evaluation projects, i.e. projects that consist purely of the evaluation of existing financial

education interventions funded by third parties.

4. Strategic projects, namely projects aimed at establishing the baseline of information on the

state of financial literacy (such as a national survey), or at ensuring greater synergies between

individual initiatives to achieve scalable impact (such as the funding of a national financial

education strategy or support in establishing a coordinating entity).

The different categories will entail different project objectives, which in turn will inform the outcomes

to be measured and the way in which to do so.

6.2 Evaluation methodology

This part of the framework discusses the various evaluation techniques that can be applied in FEF

projects. It does not seek to be comprehensive, but simply to give an overview of the main evaluation

techniques appropriate to financial education services.

The specific measurement methodology has to be defined by each project based on the outputs,

outcomes and objectives of the project and the component of financial capability targeted. The fund

manager will however engage with the proposed methodologies to ensure comparable evaluation

outcomes across projects. The rest of this section sets out the guidelines for project evaluation,

including the techniques to be applied, the stages of the project at which evaluation should be

conducted and the process to be followed.

The broad approach to project evaluation is to be set out at the Concept Note stage, to be refined into

a full Evaluation Plan (as part of the Monitoring and Evaluation Plan) in the Full Application. The

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project implementers must take the specific set-up and objectives of the project, as well as the project

budget and that which is realistically measurable for the project into account in drawing up the

Evaluation Plan. The Fund Managers and/or Investment Panel reserve the right to request

improvements in the Evaluation Plan as prerequisite for a funding allocation, providing guidance on

what changes are required.

A combination of quantitative and qualitative measurement techniques should, wherever feasible, be

used:

� Qualitative techniques offer the opportunity to develop a detailed understanding of the impact of a programme or service. But because they involve small numbers of respondents they cannot be used to quantify it or to generalise from the findings.

� Quantitative techniques can be used to derive generalised findings, but will only be successful if the sample is robust (as discussed below).

To ensure meaningful results, it is important that impact evaluation techniques (be they qualitative or

quantitative) meet the following criteria as far as possible:

Need for before and after measurements. In order to assess the impact of a financial education

intiative, it is important to know what the baseline of knowledge, skills, attitudes or behaviour is.

Only then will it be possible to determine the subsequent change in the desired aspect of financial

capability after involvement in the project. Furthermore, measurement of impact needs to take place

immediately after project implementation to test its impact as well as, preferably, 3-6 months after the

intervention to measure the sustainability of the impact (e.g. whether a person that opened a bank

account has sustained that account, or whether a person that developed a budget is still using some

time after the financial education intervention.

Need for control or comparison groups. A common pitfall in impact evaluation is the fact that, by

only studying participants and their reported change in behaviour, one does not know whether the

reported impact would have occurred regardless of the intervention of a programme or service. For

example, an increase in bank account-holding might be due to a move by government to pay social

grants electronically rather than in cash, rather than the impact of a course about the importance of

banking and using a bank account among social grant recipients. This measurement challenge can be

overcome by incorporating either a control group or a comparison group in the evaluation.

� When survey participants are randomly selected from the population being studied, and then randomly assigned to either undergo the intervention or not, a control group is created – i.e. a randomly selected group of people who have not undergone the financial education and whose knowledge, skills attitudes and behaviour can therefore be tracked to isolate the actual impact of the intervention on those who did undergo it. In practice, however, it may not be possible either to select participants at random or to assign them randomly to the control group. There can also be ethical objections to denying the control group access to a programme or service if its effects are likely to be very beneficial (Kempson, 2008).

� These practical and ethical challenges can be overcome by not attempting to control who takes part in a programme or uses a service. Thus, though surveys are still administered to both “experimental” and “control” groups, these groups are not randomly assigned according to pure experimental survey methodology. Such a “quasi-experimental” technique may lack the precision, but if carefully constructed can provide relatively robust findings. In this instance one would refer to a non-project comparison group rather than a control group (Kempson, 2008).

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Need for a robust sample & independent analysis. Where quantitative techniques are used, it is

furthermore important to ensure a robust sample is selected, test of statistical significance are carried

out and reported and the integrity of the research and its conclusions protected. The robustness of the

sample depends on not only the number of people surveyed, but also on their representativeness of the

population from which they are drawn. Results need to be analysed correctly, be evaluated for their

statistical significance and be accepted as independent, not biased by the desired outcomes in the

minds of those conducting the survey. This generally calls for professional third party evaluation, by

persons with the necessary statistical skills.

It should be noted that quantitative surveys will usually rely on self-reported behavioural changes.

Some evaluations build in the collection of more objective data. The evaluations of the two Saving

Gateway pilots in the UK, for example, obtained details of account opening and subsequent deposits

and withdrawals directly from the provider. It is, however, important not to rely on statements of

intended behaviour in quantitative surveys, as it is known that they often differ significantly from

actual behaviour. While qualitative techniques are also subject to this caveat, one can at least probe

actual intentions or behaviour further. Quantitative techniques should therefore preferably go hand in

hand with actual measurement of usage (where applicable) or other “objective” methods to gauge

change where available.

Note that the technique(s) applicable and the degree to which the various criteria highlighted above

can be met will vary between projects and will depend on a number of parameters:

� The cost of the various techniques (dependent on project scale and local circumstances).

� The skill set in various research techniques available in each project environment.

� Type of intervention. Certain techniques lend themselves better to certain types of interventions than others. For example: quantitative and qualitative before & after surveys/interviews are difficult to conduct when it is not known which people were reached. This will be the case for mass media campaigns. Instead, outputs such as number of brochures distributed, feedback on radio shows, quality of messages, etc should be tracked. In drawing up the evaluation framework, project implementers should therefore distinguish whether financial education projects entail direct contact with recipients or not. Furthermore, strategic interventions will have different evaluation criteria than primary financial education projects.

6.3 Three Standards of project evaluation

Due to limited resources it will not be possible to apply the same standard of evaluation to all projects.

We have therefore identified three different standards of project evaluation to different projects in

order to optimise resources and learning. The parameters according to which the standards of

evaluation are determined as well as the proposed differentiation are contained in Table 3 below.

Evaluation parameter Level 1 – “Gold”

Level 2 – “Silver”

Level 3 – “Bronze”

9. Survey administered before and after the intervention (Y/N) Y Y Y

10. Control group/comparison group/national baseline survey data only Control group

Comparison group

Baseline data only

11. Conducted by grantee or professional third party (Grantee/ Prof 3rd) Prof 3rd

Prof 3rd Grantee

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12. Additional follow-up survey after defined period (e.g. 3 or 6 months) (Y/N)

Y N N

13. Quantitative and/or qualitative method used Both Both Quantitative only

14. Reasons for financial behavior beyond FE intervention probed further (Yes/No)

Y Y Y

15. Verification of usage of financial services verified with financial service provider

Y, where relevant

Y, where relevant

N

16. Practical test administered, e.g. test of whether can use an ATM or a mobile phone or can draw up own budget (where relevant)59 Y/N

Y Y N

Table 9. Evaluation parameters for different standards of evaluation.

Project applicants will need to indicate at Concept Note stage which of the three standards they propose to apply. The FEF will not fund any projects that propose to apply anything less than Bronze standard; while the Gold standard is the ideal. At full application stage, the applicants will need to provide full details of their proposed approach to evaluation as part of the Monitoring and Evaluation Plan.

6.4 Principles

In assessing whether an Evaluation Plan proposed by an applicant is acceptable, the FEF will apply

the following general principles:

1. Comparability: The same evaluation techniques should as much as possible be followed in

projects that are similar in nature. This is essential to make valid comparisons across different

projects and to compare financial education approaches for effectiveness. Consequently the

Fund Managers will work with applicants to ensure that the methods used and data collected

will permit these comparisons.

2. Integrity: The evaluation technique used as well as the manner in which it is applied must

have integrity and be internationally credible. This includes the professionalism of the

evaluators.

3. Efficiency: Evaluation methods chosen for particular projects need to be appropriate for that

project and produce the most useful information at the lowest cost.

6.5 Evaluation Process for individual projects

The evaluation process for individual projects will usually follow the sequence set out below:

SETTING THE OBJECTIVES

The first step is to set the objectives for the project as a whole and to make these measurable. These

include output and outcome objectives.

Output objectives need to relate to the critical elements of a typical FE intervention. These include the

following:

59 Especially important for next-generation financial services.

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1. Message – what is being communicated

2. Material – if more than direct communication (e.g. in a small group set-up), how is the

message captured – written or spoken on radio spots or video spots

3. Trainer/communicator – who communicates the message to the target audience – e.g. all the

evaluations to date point towards the fact that levels of trust do play a role here

4. Setting/channel – e.g. class room, employer’s facility, etc (together with

trainer/communicator, setting forms the channel for financial education)

5. Target Audience – those who hear the message

Outcome objectives need to relate to the various components of financial capability set out in section

– above. The most important outcome objectives will relate to targeted changes in behaviour.

For strategic projects output objectives will typically relate to processes and institutions that are

established or data that is generated, whereas outcome objectives will relate to the overall enabling

environment for the improvement of financial capability, increases in public and private funding for

FE and an increase in FE activity in the country concerned.

Note that while this applies to full applications, at the Concept Note stage a limited version of this

process will already be required as set out in the Concept Note application/guidance form.

DESIGN OF EVALUATION PLAN60 AND FEEDBACK INTO PROJECT DESIGN

Once the objectives and targets have been set, the next step is to determine how these will be

monitored and the impact measured. The monitoring process was described above. The evaluation

will utilise one or more of the measurement techniques set out in section 6.2 and 6.3. Each applicant

must design a detailed Evaluation Plan asking “what? where? when? how? by whom?” the

measurement will be conducted. The three levels of evaluation set out in Error! Reference source

not found. provide a guide for applicants.

Inevitably the design of the evaluation plan will feed back into the overall project design, leading to

some refinements to the project scope/target audience/channels/techniques, or even in some cases a

reconsideration of the entire project.

Research has shown that good quality outcome evaluation requires the following:

• Clear objectives (and target audience) for the programme and the evaluation

• Careful consideration and identification of outcomes that are measurable (the general

consensus is that this should be changes in behaviour)

• It is essential that the programme or service’s objectives, operation and evaluation are

designed at the same time and with reference to one another

60 There will be two main source documents for monitoring and evaluation for the FEF: monitoring and evaluation plans for each project; and the

logframe for the programme as a whole.

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• Collection of good quality data, including administrative records and monitoring data. This

should be focussed on key measures and background information to reduce the burden on

programme participants and providers.

• Quantitative data collection with a high response rate giving a sample that is broadly

representative of the target population. This may be supplemented by qualitative information

to provide case-studies and more detail.

• Careful consideration of the sample size, taking into account the analysis that will be needed

to understand the outcomes.

• Well-designed data collection instruments that are appropriate to the target group, to the

initiative under evaluation and to the outcome that is being measured.

• A benchmark measure of prior knowledge, attitude and behaviour (before the initiative) and a

subsequent measure to identify any changes (after the initiative). Ideally it should also include

a follow-up measure to identify whether any change has been sustained and any medium-term

changes in behaviour.

• Consideration of the time period necessary to identify change, balanced with consideration of

the likelihood of collecting reliable data over extended periods of time.

• A ‘control’ group to show the changes that would have taken place in the absence of such an

initiative.

BASELINE ASSESSMENT

Following the detailed design of the Evaluation Plan, baseline measurement should be conducted to

establish the base of knowledge/current behaviour against which impacts/changes can be assessed.

Prior assessment of a control group representative of the target population will be essential in most

cases. It may also entail a strategic intervention to establish the baseline information for the

country/sector as a whole. Should more than one financial education project be funded in one area at

the same time, it could be feasible to jointly fund a single baseline survey.

REDESIGN FOLLOWING BASELINE ASSESSMENT

The baseline survey may point out certain phenomena that necessitate a reassessment of the project’s

design, or further refinements to ensure maximum impact.

ROLL OUT OF FINANCIAL EDUCATION OR PROJECT

Once the project design has been finalised, fully informed by the need for and practicalities of the

measurement of implementation progress, outputs and outcomes relative to the project objectives, the

financial education project is ready for roll-out.

MID-TERM PROCESS EVALUATION

As project implementation gets underway the monitoring and evaluation processes will respectively

kick in – from the start through monitoring and reporting, and at pre-defined intervals for process

evaluation purposes. Mid-term process evaluation aims to improve the delivery/implementation

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process. Evaluation processes must be as defined in the Evaluation Plan and progress on Evaluation

should be reported to the fund manager.

POST-IMPLEMENTATION EVALUATION OF PROCESS, OUTCOMES AND IMPACT

Post-project evaluation of outcomes is required of all projects. It must be allowed for (and monitored

by the fund manager) in the project budget and that project implementers be held accountable for

satisfactory evaluation outcomes. As far as possible, outcome evaluations should be done by

independent third parties. Evaluation of the process outputs achieved will be done by the grantee and

the Fund Manager. As far as possible independent third parties contracted to perform outcome

evaluations should also evaluate process.

Final assessment of impact (project closure assessment) will be done by the fund manager based on

the inputs received from the project implementers/evaluation practitioners. It will include reported

data on project implementation, outputs and outcomes relative to objectives, as well as findings from

the qualitative assessments. The fund manager will assess and weight all of the inputs to derive an

overall score of the impact of the project, accompanied by a qualitative description of the success/not

of the project in reaching its goals.

FOLLOW-UP ASSESSMENT OF IMPACT

It is important to conduct a follow-up assessment of impact three to six months after project

completion. In this way it can be ascertained whether the impact has been lasting. Where follow-up

evaluations are done, the project closure evaluation done by the Fund Manager and referred to in the

previous section will only be done after the results of the follow-up assessment are received.

FEEDBACK INTO FEF PROCESSES

These individual project assessments will feed into the FEF processes, including the decision to

implement further funding rounds, the eligibility and application criteria for future projects, etc.

6.6 Project evaluation stakeholders and budget principles

The following parties will be involved in the project evaluation cycle:

� Grantees

� Third party evaluation specialists

� Fund manager

� Independent third party institutions who wish to commission and fund evaluations of FEF-funded projects.

Budget principles. The various tasks to be performed as part of the evaluation process will be funded according to the following guidelines:

� The evaluation function performed by the grantee is funded as part of the grant. This includes the costs of independent professional evaluators contracted by the grantee to perform part of the project evaluation.

� Independent evaluations of FEF projects commissioned by interested external parties will be funded by such parties.

� The overall evaluation assessments made by the Fund Manager is funded from the fund management fee.

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Financial Education Fund Inception Report 18

7. MONITORING OF PROGRAM IMPLEMENTATION

The Fund Manager will continually monitor progress with the implementation of the fund’s activities based on the output performance criteria contained in the logframe as well as the reporting requirements contained in the fund management agreement. Monitoring information will be captured in the FEF electronic database.

The Fund Manager will provide quarterly reports to the Operations Committee on the following dates:

• 15th February,

• 15th May,

• 15th August, and

• 15th November.

8. PROGRAM EVALUATION

The evaluation of the program as a whole has three distinct components:

� Tracking of global indicators for all projects implemented with FEF funding;

� Evaluation of outcomes and impact at a program level;

� Evaluation of the performance of the Fund Manager for purposes of the payment of the annual performance fee to the Fund Manager.

Whereas the evaluation and monitoring functions at a project level is guided by the Project Monitoring and Evaluation Plans, which are incorporated in the grant agreement, the monitoring and evaluation functions at the program level are guided by the logframe which is annexed to the Fund Management agreement.

8.1 Tracking global indicators

The evaluation of individual projects will be synthesised by the fund manager into an overall assessment of the outcomes and impact of the fund relative to its stated objectives. This will be done through quantitative indicators that are captured and assessed for all projects (referred to as global

indicators), reported quarterly by the projects. Such data are then added across the portfolio to result in quantitative data for FEF as a programme. For example, for projects that involve direct contact with beneficiaries of financial education, global indicators will include:

� Overall numbers of people reached

� Profile of people reached (gender, age, level of education, economic activity, income level, engagement with financial services)

� Engagement with financial services of people reached (money management, banking, credit, savings)

� Monitoring of key external developments that might have an impact on levels of engagement with financial services or levels of financial capability.

Additional information with regard to the FEF programme to be tracked includes:

� Types of delivery agent

� Method of delivery

� Types of recipient of financial education (individuals/families vs. small businesses; male vs. female; age groups, etc)

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Financial Education Fund Inception Report 19

� Countries of implementation

� Programme size and duration

� Leverage of matching funds

Of particular interest when looking across the portfolio of projects will be the costs related to the key indicators tracked – for example, the cost of directly reaching individuals through a range of different delivery mechanisms, and the costs of more indirect engagement through mass media and other approaches.

8.2 Outcomes and impact at a program level

At the program level, not as an aggregation of individual project assessments, but through the

generation of insights and conclusions when individual projects are examined and compared with

other projects and learning from other sources, the following outcomes are intended to be generated

and reported:

� The relative cost-effectiveness of different types of financial education interventions;

� Greater insight into the drivers of behavioural change that lead to the extension of financial access; and

� The impact of different interventions and recommended strategies to create enabling environments for the promotion of financial capability.

These outcomes will be monitored and evaluated using the materials and communications produced as

part of the learning and dissemination function of FEF.

8.3 Fund Manager performance evaluation

The performance criteria and targets for the Fund Manager are set annually in terms of the procedure

set out in section 5 of the Fund Management Agreement. The performance of the Fund Manager in

terms of these criteria and targets is determined on an annual basis by an independent evaluator

instructed by DFID and the Fund Manager. Should there be any dispute on the determination of the

independent evaluator, this is settled in terms of a dispute resolution procedure set out in section 5.

9. TASKS, RESPONSIBILITIES AND BUDGET

The following parties will be involved with either or both of monitoring and evaluation in the FEF:

1. Operations Committee

2. Fund Manager

3. Investment Panel

4. Applicants at Concept Note stage

5. Applicants at Full Application stage

6. Grantees

7. External evaluators

8. Independent evaluator as referred to in the Fund Manager Agreement.

Table 8 below captures the monitoring and/or evaluation functions to be performed and the

responsible party and funding arrangement for each:

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Financial Education Fund Inception Report 20

MONITORING AND/OR EVALUATION FUNCTION RESPONSIBLE PARTY FUNDING

Prepare Monitoring and Evaluation Policies and Procedures

Fund Manager Fund Management Fee

Approve Monitoring and Evaluation Policies policies and procedures (this document)

Operations Committee DFID/Donors

Develop outline of Monitoring and Evaluation Plans for Concept Note (not as detailed as full Monitoring and Evaluation Plans)

Applicants at Concept Note stage Internal to applicants

Prepare detailed Monitoring and Evaluation Plans as part of Full Application (might have to be completed during the inception phase of the project)

Applicants at Full Application stage • Internal to applicant unless pump priming grant made available to applicant;

• Assistance from Fund Manager as part of Fund Management Fee

Approve/ amend Monitoring and Evaluation Plans Investment Panel (as part of assessing the Full Application).

Fund Manager approves/suggests amendment to the detailed Monitoring and Evaluation Plans.

FEF resources

Design Monitoring and Evaluation Plans for “hothouse” interventions with various individual projects

Fund Manager (incorporating local coordinating entity where appropriate)

Fund Management Fee

Implement project-specific monitoring Grantees and Fund Manager • Grant for grantees

• Fund Management Fee for Fund Manager

Project evaluation Grantee or professional third party Grant

Programme monitoring Fund Manager Fund Management Fee

Program evaluation Fund Manager Fund Management Fee

Performance-related programme evaluation External Evaluator FEF Resources

Table 8. Monitoring and evaluation functions, responsibilities and funding.

Page 115: Financial Education Fund Fund Management Inception Report

Annex 1 to Monitoring and Evaluation Policy and Procedures: Outline of an evaluation plan: a hypothetical project example Pr o je c t e x a m p l e :In s u r a n ce a w a r e n e s s cr e a t i onI m p l e m e n te r : c o m m e r c ia l in s u r e r, in pa r tn e r s h i p w i t h an e t w o r k o f pa r tn e r M F I s wa n t in g t o e x t en d t h e i r s e r v i c e s t oin c l u d e d i s t r i b u t i on o f in s u r ea n c e t o m e m b e r sM & E r e s p on s i b i l i ty : M a r k e t r e s ea r c h c o m pa n y in c o r p o ra t e din t o c on s o r t i u m 1. Se t o b je c t iv e s in t e r m s o f t h e kn o w l e dg e , s k i l l s,a t t i t u d e s o r be h av i o u r t ha t w e wa n t t o c h a n g e ,e. g. :* t o in c r ea s a wa r en e s s o f in s u ra n c e , i t s va l u ep r o p o s i t i on a n d p r o c e d u r e s ( kn o w l e dg e & s k i l l s )* t o en s u r e t h a t t h e ta r g e t a u d i en c e i s e m p o w e r e da n d c o m m i t t e d t o m a k e in f o r m e d f in a n c ia ld e c i s i on s a n d p l a n a h ea d ( a t t i t u d e s )* in c r ea s e d in s u ra n c e p en e t ra t i o in in t h e l o w-in c o m e m a r k e t ( be h av i o u r )

T a r g e t a u d i e n ce :* g en e ra l p u b l i c ( h i g hl e v e l m e s sa g e s )* c l i en t ba s e o f2 0pa r tn e r M F I s ( m o r ed e ta i l e d en ga g e m en t ) C h a n n e l s :* r u ra l ra d i o a d v e r t s on w h a t in s u ra n c e i s a n dw h y i m p o r ta n t* s t r e e t t h ea t r e in a n u m b e r o f c o m m un i t i e s* h o u s e - t o - h o u s e c o m m un i ca t i on f o r an u m b e r o f h o u s e s in ea c h c o m m un i t y* M F I s ta f f t ra in in g f o r c l i en t in t e ra c t i on s* t ra in in g s e s s i on s a t M F I m e m b e r g r o u pm e e t in g s

2. De s ig n o f m on i t or in g an de v a l u a t i on p l an s a n d fe e d b a c kin t o pr o j e c t d e s ig n :M on i t or in g : o u t p u t s* n u m b e r o f ra t i o s p o t s a i r e d* n u m b e r o f a t t en d a n t s a t s t r e e t t h ea t r e s* n u m b e r o f h o u s e - t o - h o u s e c on ta c t s m a d e* n u m b e r o f M F I s ta f f t ra in e d* n u m b e r o f M F I c l i en t s r ea c h e d b y t ra in in g* i m p l e m en ta t i on on s c h e d u l e ?* c o s t p e r p e r s on r ea c h e d f o r t h e va r i o u sc h a n n e l s ?

Ev a l u a t i on : o u t c o m e s* s i gn i f i ca n t i m p r o v e m en t in a wa r en e s s o fin s u ra n c e & va l u e p r o p o s i t i on ( kn o w l e dg e )* ta r g e t a u d i en c e in a p o s i t i on t o f i l l o u tin s u ra n c e p o l i c y f o r m a n d m a k e c l a i m s ( s k i l l s )* c h a n g e d be h av i o u r : a t l ea s t h a l f o fr e c i p i en t s n o w b u d g e t a n d p l a n a h ea d , ta k in gin t o a c c o un t p o s s i b l e r i s k e v en t s* c h a n g e d be h av i o u r : u p ta k e o f in s u ra n c ea n d r e t en t i onb )H o w be s t m e a s u r e d ?M on i t or in g te c h n iq u e s :Q u a n t i ta t i v e :* r e g u l a r m on i t o r in g o f p r o j e c tf in a n c e s a n d i m p l e m en ta t i onp r o c e d u r e s* m on i t o r in g o f o u t r ea c h b y p r o j e c ts ta f fQ u a l i ta t i v e :* in d e p t h s ta f f in t e r v i e w s h a l f wa yt h r o u g h a n d a t en d o f p r o j e c tEv a l u a t i on te c h n iq u e s :* Q u a n t i ta t i v e : u s e r s u r v e y c on d u c t e d b y m a r k e t r e s ea r c hc o m pa n y o f :- M F I c l i en t s r ea c h e d b y c l i en t g r o u p s e s s i on s / in d i v i d u a l s ta f fc on ta c t- n on - M F I c l i en t s ( c o m pa r i s on g r o u p ) l i v in g in t h e sa m ec o m m un i t y- t h o s e r ea c h e d b y h o u s e v i s i t s , a s w e l l a s a sa m p l e o f h o u s e h o l d sin t o wn s n o t r ea c h e d b y t h e p r o g ra m m e ( c o m pa r i s on g r o u p )- i f f i t s w i t h in p r o j e c t b u d g e t : a sa m p l e o f p e o p l e in t h e g en e ra lp u b l i c , a s w e l l a s a sa m p l e o f p e o p l e in t h e g en e ra l p u b l i c o fs i m i l a r c o m m un i t i e s o u t s i d e o f t h e r ea c h f o r i m pa c t o f m a s sm e d ia ca m pa i gn* Q u a l i ta t i v e : ra n d o m l y s e l e c t e d in d e p t h in t e r v i e w s / f o c u sg r o u p s w i t h sa m p l e o f M F I c l i en t s w h o pa r t i c i pa t e d in t h es e s s i on s , a s w e l l a s c o m pa r i s on g r o u p sDe t a i l s o f M & E* w h a t ? in - p e r s on s u r v e y s ; in d e p t h in t e r v i e w s* h o w ?q u e s t i on s t o ga u g e l e v e l o f a wa r en e s s o f in s u ra n c e , un d e r s ta n d in g o f va l u e p r o p o s i t i on , d e g r e e o fp l a n n in g a h ea d , u p ta k e o f in s u ra n c e* w h e n ? b e f o r e ca m pa i gn , i m m e d i a t e l y a f t e r, t h r e e m on t h s a f t e r* w h e r e ? a t M F I v en u e ( ba s e l in e a n d i m m e d ia t e l y a f t e r ) , a t p e o p l e ' s h o m e s (3 - m on t h f o l l o w - u p a n d h o u s e -t o - h o u s e s u r v e y s* by w h o m ? f i e l d w o r k e r s o f m a r k e t r e s ea r c h c o m pa n y e x p e r i en c e d in s u r v e y a d m in i s t ra t i on ; M F I s ta f f in t h eca s e o f in d e p t h in t e r v i e w s

4. C on d u c t b a se l in e a s se s s m e n t : u p fr on t s u r v e y s5. Fe e d f in d in g s b a c k in t o M & E a s we l l a s pr o j e c t d e s ig n6. Pr o j e c t r o l l- o u t7. M i d - te r m pr o ce s s e v a l u a t i on / m on i t or in g8. P o s t- i m p le m e n t a t i on e v a l u a t i on o f pr o j e c t i m p a c t9 . F o l l o w- u p e v a l u a t i on o f i m p a c t a f te r e . g . 3 m on t h s1 0. Fe e d b a c k in t o F E F pr o ce s se s

a ) W h a t d o we w an t t o m e a s u r e ?

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Annex 2 to Monitoring and Evaluation Policy and Procedures: Monitoring matrix example61

Monitoring

Programme type Broad area Specific information How recorded How collected

Overall level of use Overall numbers of people reached

Proportion of those reached in target group

Proportion of target group reached

Retention rate if appropriate e.g. a course

Retention rate among target audience

Attendance records

Calculated from user statistics and national statistics as appropriate

Who uses For each person:

Age

Gender

Economic activity

Income - level and stability

Literacy & schooling

Engagement with financial services

Standard pre-coded Qs

Draw on Finscope surveys or standardise against national statistics

Simple Q here – detail below

Face-to-face with user

Behaviour prior to programme

To reflect objective of the

programme

For each person:

Money management

Banking

Credit

Saving

Risk management

Makes ends meet?

Has bank account?

Level of credit use?

Has saving account?

Amounts saved?

Regular saving? Amount?

Savings? Amount?

Insurance?

Face-to-face with user

User contact details Name address etc Face-to-face with user

Courses/ classroom-based programmes

Seminars and presentations

One-to-one information and advice

Cost Total cost per user Calculated from provider cost records

61 Source: Kempson (2008)

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and user statistics

Behaviour as a result of the programme

To reflect objective of the

programme

For each person

Banking

Credit

Saving

Risk management

It may be possible to monitor usage of financial products e.g. payment records for credit, usage of current account, amounts deposited or withdrawn from savings accounts

Programme type Broad area Specific information How recorded How collected

Overall level of use Overall numbers distributed

Cannot monitor numbers in

target group

From provider records

Who uses Indicative information on types of people

Gauged from target audiences of distributors

Behaviour prior to programme

Cannot easily be monitored

Audio-visual materials

Printed materials

Cost Total cost per user Calculated from provider cost records and estimates of users

Overall level of use Potential audience reach

Cannot monitor numbers in

target group

From provider records

Who uses Indicative information on nature of audience

Gauged from target audiences

Behaviour prior to programme

Cannot easily be monitored

Mass media

Cost Total cost per user Calculated from provider cost records and estimates of audience

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Annex 3 to Monitoring and Evaluation Policy and Procedures: Evaluation matrices for respectively outcome and process evaluation62

Outcome Evaluation: Courses/ classroom-based programmes; Seminars and presentations; One-to-one information and advice

Broad area Information required How collected - users How collected – control group When collected

User characteristics Age

Gender

Economic activity

Income - level and stability

Literacy & schooling

Engagement with financial services

Behaviour prior to programme

To reflect objective of the programme

For each person:

Money management

Banking

Credit

Saving

Risk management

User contact details Name and address

Face-to face with users

Can use info collected for monitoring

Sample survey (face-to-face) with a control or comparison group of non-users

Note: sample size to be

determined for each programme

At time of recruitment to programme

Behaviour after the programme

i.e. outcome

To reflect objective of the programme

For each person:

Money management

Banking

Credit

Follow-up survey face-to-face with users

Note: sample size to be

determined for each

programme - if numbers small

Follow-up survey (face-to-face) with the control or comparison group.

Note: could contact a new sample

but far better to re-contact

After the programme – time frame to be decided.

Note may want two follow-ups

one immediately after

programme and one sometime

62 Source: Kempson (2008)

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Saving

Risk management

Any other factors that might explain outcome

Changes in circumstance

Economic activity

Income - level and stability

Other information/advice received

original group

User views of the programme

How relevant to needs

Aspects most and least useful

How has impacted on behaviour

will attempt to interview all

Not applicable

later.

Outcome evaluation: Audio-visual materials; Printed materials; mass media

Broad area Information required How collected - users How collected – control group When collected

User characteristics Age

Gender

Economic activity

Income - level and stability

Literacy & schooling

Engagement with financial services

Behaviour prior to programme

To reflect objective of the programme

For each person:

Money management

Banking

Credit

Saving

Sample survey with potential users/target audience

Note: sample size to be determined for each programme, taking

account of percentage of target audience likely to be reached

At time of recruitment to programme

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Risk management

Behaviour after the programme

i.e. outcome

To reflect objective of the programme

For each person:

Money management

Banking

Credit

Saving

Risk management

Any other factors that might explain outcome

Changes in circumstance

Economic activity

Income - level and stability

Other information/advice received

Sample survey face-to-face with non- users

Note in practice this will be a single

survey with users and non-users

routed through the questions

relevant to them

Sample size and design to be decided

when know proportion of users in

population – may need to pilot

User views of the programme

How relevant to needs

Aspects most and least useful

How has impacted on behaviour

Sample survey face-to-face with users

Not applicable

After the programme – time frame to be decided.

Note may want two follow-ups

one immediately after

programme and one sometime

later

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Process evaluation: Courses/ classroom-based programmes; Seminars and presentations; One-to-one information and advice

Broad area Information required How collected When collected

Inception stage

Objectives and plans Objectives of programme and specific goals

Target audience

Planned service

Depth interviews with staff/fund manager/DfID

Before service established

Formative stage

Setting up the service Hurdles encountered and how overcome Depth interviews with staff 2-3 months after service established

Details of service set up (and any deviation from plans)

Partnership arrangements and links with similar initiatives

Hurdles encountered and how overcome

Strengths of the programme/areas for development (and changes in practice)

Suggestions for change

Depth interviews with staff 3-15 months after service set up – assuming that programmes are funded for 3 years

Running the service

User views on the programme content

User views on programme delivery

User views on impact on their behaviour

Depth interviews/focus groups with users

As they finish the programme

Depth interviews with staff 3-15 months after service set up Recruiting users The routes by which participants arrived at the programme

Barriers to participants’ access or full involvement

Use levels relative to expectations User monitoring Ongoing

Achieving planned outcomes Additional support to achieve successful outcomes Depth interviews with staff 3-15 months after service set up

Summative stage

Effectiveness of programme Effectiveness of programme Depth interviews with At end of programme

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Any changes that have taken place

Factors that have helped or hindered effective service delivery.

staff/fund manager/DfID

Depth interviews/focus groups with users

As finish their participation in the programme

User views on the programme content and its appropriateness to their needs

User views on programme delivery

Data on user views from outcome evaluation survey

At end of programme

Views on achievement of successful outcomes and what has influenced this

Depth interviews with staff/ fund manager/DfID

At end of programme

Depth interviews/focus groups with users

As they finish their participation in the programme

Achieving planned outcomes

User views of what they gained from the programme

User views of programme’s impact on their behaviour

Data on user views from outcome evaluation survey

At end of programme

Process evaluation: Audio-visual materials; Printed materials; mass media

Broad area Information required How collected When collected

Inception stage

Objectives and plans Objectives of programme and specific goals

Target audience

Planned service

Depth interviews with staff/fund manager/DfID

Before service established

Formative stage

Setting up the service Hurdles encountered and how overcome Depth interviews with staff 2-3 months after service established

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Running the service Details of service set up (and any deviation from plans)

Partnership arrangements and links with similar initiatives

Hurdles encountered and how overcome

Strengths of the programme/areas for development (and changes in practice)

Suggestions for change

Depth interviews with staff 3-15 months after service set up – assuming that programmes are funded for 3 years

Recruiting users The routes by which participants arrived at the programme

Barriers to participants’ access or full involvement

Use levels relative to expectations

Depth interviews with staff 3-15 months after service set up

Achieving planned outcomes Additional support to achieve successful outcomes Depth interviews with staff 3-15 months after service set up

Summative stage

Effectiveness of programme

Any changes that have taken place

Factors that have helped or hindered effective service delivery.

Depth interviews with staff/fund manager/DfID

Outcome survey at end of programme

Depth interviews/focus groups with users

At end of programme (and selected from survey respondents)

Effectiveness of programme

User views on the programme content and its appropriateness to their needs

User views on programme delivery

Data on user views from outcome evaluation survey

At end of programme

Views on achievement of successful outcomes and what has influenced this

Depth interviews with staff/ fund manager/DfID

At end of programme

Depth interviews/focus groups with users

At end of programme (and selected from survey respondents)

Achieving planned outcomes

User views of what they gained from the programme

User views of programme’s impact on their behaviour

Data on user views from outcome evaluation survey

At end of programme

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Annex 4 to Monitoring and Evaluation Policy and Procedures: References

Case studies on monitoring and on evaluation, market research for monitoring and for evaluation, and

financial education design can be found in:

Hilgert, M.A., Hogarth J.M. & Beverly, S.G., 2003. Household Financial Management: the connection between knowledge and behaviour. Federal Reserve Bulletin, July 2003.

Kempson, E., 2008. Monitoring and Evaluating the DFID Financial Education Fund. Personal Finance Research Centre, University of Bristol. May 2008.

Martin, M., 2007. A literature review on the effectiveness of financial education. Federal Reserve Bank of Richmond WP 07-03. Available at: http://www.richmondfed.org/publications/economic_

Microfinance Opportunities, 2005. Market research for financial education. Working Paper #2. Available at: www.microfinanceopportunities.org

Microfinance Opportunities, 2008. Financial Education: A Bridge between Branchless Banking and Low-Income Clients. Working Paper #4. Available at: www.microfinanceopportunities.org

O’Connell, A., 2007. Measuring the effectiveness of financial education. Paper prepared for the New Zealand Retirement Commission.

Orton, L., 2007. Financial Literacy: Lessons from International Experience. CPRN Research Report, 2007.

The following presentations from the Citi-FT Financial Education Summit, 2007 (India), provide valuable

insights and case studies:

• Building and protecting assets: a role for financial education. Monique Cohen, Founder-President,

Microfinance Opportunities.

• Building and Accumulating Assets—Credit and Remittances: A Role for Financial Education.

Kathleen Stack, Vice President, Freedom from Hunger.

• Establishing the basics early - Financial Literacy Education in Taiwan. Ovid J.L. Tzeng.

• Financial literacy for micro insurance: SEWA’s experiences. SEWA India.

• Increasing Financial Literacy In Rural Areas. Jayshree Vyas, Managing Director, SEWA Bank India.

All can be downloaded from: www.financialeducationsummit.org

The following presentations from the OECD conference on Financial Education (New Delhi, 2006), provide valuable insights and case studies:

• Financial Capability in the UK: Establishing a Baseline. Brenda Gibson, Financial Services

Authority UK.

• Financial Education: What Makes a Successful Public Awareness Campaign? Barbara Smith,

Consultant to the OECD.

These and other presentations can be downloaded from www.oecd.org/document/59/0,3343,en_ 2649_1525191_37107899_1_1_1_1,00.html