Publication: Measuring Financial Capability : A New Instrument and Results from Low- and Middle-Income Countries
Date
2013-06
ISSN
Published
2013-06
Author(s)
Kempson, Elaine
Perotti, Valeria
Scott, Kinnon
Abstract
In 2008 the Ministry of Finance of the
Russian Federation established a Trust Fund to be
administered by the World Bank with the goal of advancing
financial capability in low-and middle-income countries.
This report documents the multiyear effort to develop
measures of financial capability and summarizes the findings
of this project. The generous funding of the Russia Trust
Fund (RTF) allowed for the application of a very rigorous
research-based process of defining the concept of financial
capability and developing data collection survey methods and
analytical procedures to measure the level and distribution
of financial capability within low- and middle-income
countries. This involved the active participation of World
Bank staff, expert consultants, country-based teams,
government officials, and researchers from 12 middle and
low-income countries. Financial capability, the capacity to
manage financial resources and use financial services in a
way that best suits individual needs and the prevalent
social and economic conditions, can contribute significantly
to both the level and efficacy of financial inclusion. The
multistep process used to develop tools to measure financial
capability in low and middle-income countries entailed: 1)
development of an operational definition of financial
capability through identification of its key manifestations;
2) development and cognitive testing of survey questions to
measure the manifestations; 3) data collection; 4)
identification of the key components and domains of
financial capability; and 5) identification of potential
target groups for policy interventions. The goal of the
World Bank's RTF financial capability survey is to
capture information on the manifestations of financial
capability through individuals' behavior, skills, and
attitudes related to managing the finances for which they
are responsible. Because it focuses on behaviors and
actions, the survey instrument cannot be used to assess the
financial capability of people who neither manage their own
finances nor participate in household financial decisions.
Finally, populations of individual countries can be
segmented into groups with varying levels of capability
across all components. The strengths and weaknesses of these
groups can be determined-as can their characteristics. These
groups can be as fine-tuned as is required to inform
approaches to increasing levels of financial capability.
Link to Data Set
Citation
“Kempson, Elaine; Perotti, Valeria; Scott, Kinnon. 2013. Measuring Financial Capability : A New Instrument and Results from Low- and Middle-Income Countries. © World Bank, Washington, DC. http://hdl.handle.net/10986/16296 License: CC BY 3.0 IGO.”