What constitutes financial health? Defining this conceptually, and constructing a simple empirical measure, is challenging. The idea of financial health is abstract and combines multiple indicators and concepts. Moreover, financial health is not necessarily tied to the usage of formal financial products, and thus cannot be measured solely through financial access indicators as it is possible to be financially healthy outside of the formal financial system. Any measure of financial health must also be able to capture less easily observable indicators such as financial management behaviors, as well as informal planning and coping mechanisms such as social networks. Financial health may also include subjective measures of wellbeing, stress, or satisfaction with one’s own position in life.
We argue for a simple, transparent conceptualization of financial health. We start with a theoretical, almost definitional, assertion: finance is about moving money across time, space, and risky outcomes. We propose three primary concepts that encompass financial health: Access-to-Funds, which is a final outcome construct, and Access-to-Finance and Financial Behavior, which are intermediate constructs that each incorporate several components.
There is a lack of consensus between different researchers and organizations on how exactly to define and measure financial health. As a result, it is difficult to understand the relative impact of different policies and interventions on improving financial health, as the way progress is measured will vary from case to case. This paper proposes a solution to this problem by introducing a quantitative measurement tool for financial health. The tool can be adopted globally to benchmark progress on financial health as well as to better understand the impact of specific policy interventions and product solutions. As part of this tool, we propose three primary concepts that encompass financial health: Access-to-Funds, which is a final outcome construct, and Access-to-Finance and Financial Behavior, which are intermediate constructs that each incorporate several components. Between 2018 and 2019, IPA tested this measurement tool in eight countries: Afghanistan, Bangladesh, Colombia, the Dominican Republic, Ghana, Peru, the Philippines, and Uganda. This paper describes the response patterns in the data from these eight countries, as well as correlations between our Access-to-Funds questions and our Access-to-Finance and Financial Behavior questions. The behavior and access questions explain a non-trivial part of the variation in Access-to-Funds, even after controlling for demographic and socio-economic variables.
Global efforts are underway to improve education quality—to ensure children are not only in school but learning and developing to their full potential. Although many theories exist on the best approaches to improve education quality, policymakers and implementers need evidence on which programs are effective at helping children actually learn while in school. Innovations for Poverty Action (IPA) is a research and policy nonprofit that discovers and advances what works to reduce poverty and improve lives. In addition to conducting rigorous research, IPA reviews and consolidates research for policymakers and practitioners. The objective is to distill complex, nuanced, and dynamic research findings into focused and actionable recommendations. This brief summarizes and provides key lessons from multiple meta-analyses and over two-dozen randomized evaluations (both IPA and non-IPA studies) on improving learning outcomes in low-income countries, with a focus on basic education.
With the support of the Citi Foundation, the Financial Capability Initiative at IPA incubates, develops, and rigorously evaluates products and programs that improve the ability of the poor to make informed financial decisions and adopt healthy financial behaviors. The Initiative conducts tests and evaluations of innovative, product linked financial education interventions and financial products that aim to improve financial capability.
In 2013 IPA celebrated ten years of producing high-quality evidence about what works, and what does not work, to improve the lives of the poor. It was a year of celebration for our accomplishments. More so, it was a time to prepare our organization for the next phase as we continue to pursue our vision of a world with More Evidence and Less Poverty.
View an online version of the report at annualreport.poverty-action.org/2013annualreport/