Measuring financial literacy in Asia:

Tools and Results [The Malaysia’s Experience]

by

Suhaimi Ali

Bank Negara Malaysia (Central Bank of Malaysia)

16 December 2014

OECD/Thailand Seminar on Financial Inclusion and Financial Literacy in Asia

16-17 December 2014, Mandarin Oriental Hotel Bangkok, Thailand

Financial education in Malaysia forms an important

component of the consumer protection regime

2

Effective assistance &

recourse

Responsible conduct and

fair treatment

Transparency

Financial Consumer

Empowerment

FE Network

Enabling infrastructure:

5

Assessment

Framework

(FEAF)

Access to

information

4 3

Financial Capability

Programmes (FCP) throughout

life stages

FCP for

adults

FE in

schools

2 1

Consumer protection regime

core policy objectives

FEAF is an important enabler to support effective

financial education strategies

3

Financial Literacy &

Capability

Measurement of

Malaysian

Consumers

Evaluation of

Specific FE

Initiatives

Study on

Consumers’

Behavior &

Vulnerability

Ensure investments in

FE are justified

Support evidence-based

FE policy formulation

and implementation

Better prioritize

resources by focusing

on FE initiatives with

outcome and impact

Monitor progress &

identify areas of

consumer

vulnerabilities

Identify effective FE

delivery channel and

mechanism

Components of FEAF FEAF Objectives Malaysia’s FE

strategies

2

1

3

Efficiency Effectiveness

How do we think what we expect will happen? What do we expect to

achieve?

Why are

we doing

this?

Each FE initiatives can be assessed based on the intended

objective focusing on efficiency & effectiveness

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Output evaluation - for above the line FE initiatives

Targeting general public and broad target group

Focus on short term, one-off, touch and go,

Suitable to evaluate products of the programme:

i.e. no. of participants, materials

Follow-up on consumers’ feedback of FE

information/ advice may be challenging

Targeted audience

Focus on application/ use of output

Suitable to evaluate knowledge level and skills

Where follow-up actions and further

engagement with consumers are possible

Outcomes evaluation – for below the line FE initiatives

Targeted audience, possibility of a controlled group

for comparison

Focus on longer term engagement, addressing

certain financial issues/ vulnerability

Suitable to evaluate behavior and attitude

Possible to follow-up through regular engagement

with consumers & perform evaluation over time

Impact evaluation – for specific FE programme/

initiatives

• Identify vulnerable groups & risk areas for FE initiatives

•Monitor changes in financial literacy & capability level

over time

•Baseline measurement (first done in 2010)

•Repeat measurement every 3 years

•Duration to complete: 4-6 months

Key Focus:

•Financial literacy & capability [knowledge & skills, attitude & behavior, socio

economic environment)

Add-on:

•Financial inclusion (WB) [convenient accessibility, take-up rate, responsible

usage, satisfaction level]

•Financial consumer protection (WB)

•Nation wide survey - Samples representative of Malaysian population

- a minimum of 1,000 samples (2014: 3000 samples, with 3 booster groups)

- individuals aged 15 and above

- face-to-face and/or personal interviews . No internet or online surveys

•Whole process ~60 minutes (need to ensure good attention span of

respondents)

•BNM commissions an independent survey company to conduct the survey

Broad based nation wide baseline assessment provides

measurement of progress over a longer time horizon

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Why

When &

how often

Coverage

Approach

•Measure efficiency - FE initiatives use resources

wisely?

•Measure effectiveness - FE initiatives are making

a difference?

•For every FE initiative at early stage of development of programme

•Plan & agree on what to evaluate

•Duration to complete each evaluation: 1-3 months (depending on

scope)

•Outcomes or impacts of each FE initiatives

•Or a combination of 2

•Customised approach for various FE initiatives ranging from

consumer outreach programme, FE website/ portal, specific financial

capability programme (FCP), train-of-trainer session

Program specific evaluation provides immediate

feedback & allows tracking of progress by target groups

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Why

When &

how often

Coverage

Approach

• Identify factors affecting financial literacy & capability of

consumers:

- What influence consumers’ behaviour in money mgmt

- How consumers choose and decide on fin. products

& services

- What are the effective measures to deliver FE and to elevate

the literacy & capacity of consumers

- How best to support development of specific FE programme to address

vulnerability & risk identified

- What are consumers’ preferences in learning & accessing FE

• Target 3 studies to be conducted per year

• Duration for each study between 3-6 months

• Financial literacy & capability

• Financial inclusion

• Financial consumer protection

• BNM to indicate/ propose specific topics/ focus areas

• Options:

- Study commission by BNM

- Industry associations’ collective efforts

- Initiatives of consumer groups/ other FE providers

• Study observation/ recommendation ready to be published in relevant journals, media

channels, websites

Studies on consumer behaviour provides in depth

understanding of behaviour for policy & learning intervention

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Why

When &

how often

Coverage

Approach

Various measurements, at the aggregate level, provide

holistic insights on financial consumer issues & behaviours

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2010-2011 National

Financial Literacy

Survey using

OECD/INFE’s

methodology

2014 Financial

Capability & Inclusion

Survey

POWER! Programmes

(output, outcome,

impact)

Friday sermon (output –

adoption by different

states)

Media campaign

(output, outcomes)

Malaysia Investment

Week (output,

outcomes)

Outreach programmes

Preparedness for income

shock

Financial distress & debt

management

Effectiveness of the

Mandatory Disclosure

Regime

Effectiveness of Responsible

Lending Guidelines

Portability

Technology risks & consumer

vulnerabilities

current & future work

The findings from past measurements have several

important implications for FE in Malaysia The need to intensify education at

school levels

The need for financial literacy initiatives

to ensure effective planning for

retirement and ability to sustain through

retirement

Need to educate households on the

minimum level of emergency funds

required, as 2/3 of households are

poorly prepared for income shocks with

savings of less than 3 months.

To look beyond financial education in

changing the behaviour as cultural

biases and lifestyle pressures also play

a role in decision making process

Rethinking of disclosure regime

required especially in the distribution

process and navigability of content

Low earning power (of the young) +

rising costs – importance of

educating the young on better

financial management & to cultivate

the habits of living within one

means

Need to focus education on risk

diversification & management,

including to diversify savings by

investing part of savings funds (for

those with financial capability) and

risk mitigation via insurance.

To re-examine measurement for

financial behaviour and attitude

with less reliance on self

assessment.

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Thank You (sali@bnm.gov.my)

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