Effectiveness of free financial education provided by for-profit financial institutions: Experimental evidence from rural Peru

Abstract

The rural poor in developing countries often save and borrow in the non-formal financial sector. Providing financial education and access to formal savings products can help to improve their livelihoods. Nonetheless, financial education has traditionally been delivered on a not-for-profit basis. This paper experimentally evaluates the impact of a free in-person financial education program for rural women in Peru, implemented by a for-profit microfinance institution along with the marketing for a new microsavings account. We find very high take-up of the free financial education program (57.7% participation in at least one session), and using data collected 3 to 6 months after the intervention we observe a significant increase in the familiarity with and trust in the implementing financial institution. Also, we observe a significant positive impact on formal savings with the implementing financial institution, but no significant negative impact on savings with other formal financial institutions. These findings suggest that free financial education provided by for-profit financial institutions, paired with financial products tailored to the target population, could be a viable alternative to promote formal savings among the poor. However, we do not observe a significant short-term impact of the program on credit, income, assets, consumption, poverty, or female empowerment.