International remittances are an important financial tool for many developing countries, and many organizations offer financial products or financial education services to help families manage the remittances they receive. Innovations for Poverty Action worked with researchers to provide families with financial products and financial education in the Philippines to test whether the two services influenced each other. They found that financial education did not affect take-up of financial products, and that access to financial products did not affect demand for financial education. Neither intervention had an impact on household savings, remittances, consumption, or well-being.
The Philippines is the second largest migrant-sending country and the third largest remittance-receiving country in the world. This evaluation took place in and around Cabanatuan City in Central Luzon. Participating households had at least one member who had moved to another country in the past three years. Although average education levels were quite high among participating households, financial literacy was quite low—only one in five household heads answered two financial literacy questions correctly, suggesting that financial education could benefit these households. Before the interventions began, 52 percent of households had formal bank accounts, 31 percent had some form of formal credit (from a bank, microfinance lender, or private lender), and 29 percent had some form of informal credit (from family, friends, or neighbors). Forty-two percent of the sample indicated they were satisfied with their savings.
- Financial education (517 households): Households were offered 500 pesos (about US$11) to attend a one-day workshop on financial education administered by local microfinance institution Alalay sa Kaunlaran Inc. Global Ltd. (ASKI). The workshop covered topics including financial planning, budgeting, savings, and credit management.
- Financial products (369 households): Households were invited to open bank accounts at the Bank of the Philippine Islands (BPI). ASKI also offered households microloans for small enterprise investments and a micro-insurance product, which covered losses caused by accidental death or bodily injury. Households received 100 pesos (about US$2) per financial product they took up.
- Financial education + financial products (488 households): Households were invited to attend the financial education workshops and offered the same BPI and ASKI financial products. Households were offered the same financial incentives as the education and products only groups.
- Comparison group (434 households): Households received no financial training and were not offered financial services or products.
- Financial products: By providing access to three types of financial products, researchers found that households did not lack access to savings accounts or loans, but that they might lack access to insurance. Only nine individuals opened savings accounts and only two took out micro-loans, suggesting that access to financial products may not be a barrier for households who would like to save or borrow money. On the other hand, households who were offered micro-insurance with or without financial education were 28.0 and 25.1 percentage points more likely to take it up, respectively, than the comparison group, in which zero households purchased insurance.
- Financial education: Households that were offered financial education held more bank accounts and took out smaller loans than households that were not offered financial education. Among households who took out loans, those offered financial education were more likely to borrow from formal credit sources.