Why Financial Literacy is Crucial to Microfinance Staff
by Denise Subido
Microfinance Institutions (MFIs) face a myriad of issues in running their day-to-day operations. One problem they are constantly faced with is delinquency. Delinquency is a prevaling problem that has negative repercussions for an institution. One peculiar finding, however, is that when there is delinquency, there are also cases of fraud. In fact, SEDPI President and CEO Vince Rapisura states, “One hundred percent of our MFI clients experiencing delinquency problems also have problems on fraud.” When MFIs address fraud, they could also address their delinquency problems.
Fraud happens when there is heavy financial burden on an MFI staff. MFI staff who were caught to have committed fraud cited that they needed money because they were experiencing emergencies in the family. This shows, then, that financial need comes from the fact that personal money is not properly managed.
Given this reality, it is crucial that MFI staff are well-versed in personal financial management. Financial literacy trainings for MFI staff can achieve this goal. It promotes people to make better personal financial choices to manage day-to-day expenses, prepare for emergencies, and take advantage of opportunities to achieve financial goals. These trainings can help equip staff with skills and knowledge to manage their personal finance.
In addition, MFIs should also create policies that enable and encourage staff to practice good personal financial management. Some policies that do so are automatic savings with the institution; adding counterpart from the institution to the staff’s savings; providing adequate insurance protection to the staff and their family; and an option for the staff to increase their SSS contributions.
Once these policies are put in place and are coupled with financial literacy trainings, staff can become better equipped to manage their own finances. This will direct them to be able to better handle financial emergencies and will, eventually, give the staff peace of mind since they are now able to achieve financial freedom. The staff can then have more focus at work and will no longer need to turn to desperate measures just to make ends meet. An added benefit to this is that the staff will also patronize the financial products of the institution.
Last November 12, the Social Enterprise Development Partnerships, Inc. (SEDPI) conducted an Innovation Meeting with the top management of Ramon Aboitiz Foudation, Inc. (RAFI) – Microfinance. RAFI Microfinance is the microfinance and entrepreneurship focus of RAFI. They provide financial products such as loans, savings, and insurance to low-income households in Cebu, Bohol, and Leyte. During the innovation meeting, the team found that their staff needed interventions in terms of financial literacy. RAFI-MF aims to improve the financial literacy of their clients, but their staff, however, are not financially literate. This needs to be addressed first so that they can walk the talk in terms of financial literacy.
Vince adds, “MFI staff can serve better in delivering pro-poor financial products services if they are financially stable. They become true examples of financial empowerment and they can actively share their personal experiences to their clients.”