people and planet

13
A Standard & Poor’s module with numeracy-based
questions related to interest, compound interest,
inflation and risk diversification was attached to
the Gallup World Poll and administered in more than
140 countries in 2014. The survey defined people as
financially literate if they correctly answered questions
on at least three of these four financial concepts. It
found that 33% of adults worldwide were financially
literate, from a low of 13% in Yemen to a high of 71% in
Norway (Klapper et al., 2015).
There is wide variation in the level of financial development
around the world. For example, the percentage of people
with a bank account varied from 89% in high income
countries to 24% in low income countries, and just 7%
among the poorest fifth of the population in Northern
Africa and Western Asia (Demirguc-Kunt and Klapper, 2012).
However, the survey showed no evidence that income
was associated with financial literacy for countries with
the gross domestic product (GDP) per capita below
US$12,000. This suggests the limited relevance of some
knowledge in poorer countries.
More critically, knowledge does not lead directly to
particular behaviour; other factors play a role, including
traits such as decisiveness and the social contexts in
which decisions are made. The World Bank, accordingly,
differentiated between a knowledge-based measure of
financial literacy and a measure of financial capability,
which looked at how knowledge interacted with skills
and attitudes to generate behaviour that led to positive
outcomes. In a study of five countries, knowledge
was not always positively correlated with capability. A
notable example was that, in some cases, women had
lower levels of financial literacy but higher levels of
financial capability (Holzmann et al., 2013).
Unlike assessments that targeted the entire adult
population, the 2012 PISA measured financial literacy
among 15-year-olds. It referred to ‘knowledge and
understanding of financial concepts and risks, and
the skills, motivation and confidence to apply such
knowledge and understanding in order to make effective
decisions across a range of financial contexts, to improve
the financial well-being of individuals and society, and to
enable participation in economic life’ (OECD, 2014a).
At level 2, the minimum proficiency level, students
would be able to apply their knowledge of common
financial products and commonly used financial terms
and concepts, and use information to make financial
decisions in relevant contexts. They would recognize
the value of a simple budget and interpret features of
everyday financial documents. By this definition, 15%
of students in participating countries fell below level
2, ranging from 5% in Estonia to 23% in Israel. But in
Colombia, 56% of 15-year-olds fell below level 2 (OECD,
2014a) (Figure 13.4).
Other factors influencing financial literacy include whether
it is part of the intended curriculum, the prevalence of
appropriate teaching and learning materials, and teacher
knowledge. In general, evaluations demonstrate that
education programmes can improve financial literacy.
A meta-analysis of 21 experimental studies found that
interventions led to modest improvements in financial
knowledge and smaller effects on financial attitudes and
behaviours (O’Prey and Shepherd, 2014).
Few financial literacy programmes targeted at adults
have undergone rigorous evaluation. Results are mixed,
although this may be the result of the diversity of
content, training, medium of instruction and outcomes
studied. One study among urban households in India
found that traditional financial education alone did not
affect long-term financial behaviour (Carpena et al., 2015).
FIGURE 13.4:
Financial literacy skills are unequally distributed across countries
Distribution of 15-year-old students by level of financial literacy, selected
countries, 2012
Distribution of 15-year-olds by financial
literacy proficiency level (%)
100
80
60
40
20
0
Estonia
Latvia
Source: OECD (2014a).
Poland
Czech Rep.
Australia
New Zealand
Croatia
Spain
Russian Fed.
Slovenia
United States
France
Italy
Slovakia
Israel
Colombia
Level 4+
Level 3
Level 2
Level 1
and below
2016 • GLOBAL EDUCATION MONITORING REPORT 251