Combating Financial Illiteracy, One SMS at a Time

Sara Cohen
Apr 30 · 5 min read

“Financial literacy is like a global passport that allows individuals to make the most of the plethora of financial products available in the market and to make sound financial decisions. Financial literacy should be seen as a fundamental right and universal need, rather than the privilege of the relatively few consumers who have special access to financial knowledge or financial advice. In today’s world, financial literacy should be considered as important as basic literacy…Without it, individuals and societies cannot reach their full potential”.

April is Financial Literacy Month. Haven’t heard of it? You’re definitely not alone. Financial Literacy Month is a national campaign in the US designed to raise awareness of the need to expand the reach of financial education across all demographics. But it also has universal relevance, especially in the African context.

In the simplest of terms, financial literacy is “a basic knowledge of how money works in the everyday world and how to make it work to your advantage”.

The Global Financial Literacy Survey administered by Standard and Poor’s (S&P) in 2014 produced two main generalized findings that are valuable for stakeholders on the continent to dig into during Financial Literacy Month:

  • Woman and people living in poverty have lower levels of financial literacy: Rates of financial literacy differ across a wide range of characteristics, including gender, level of education, and income. While 35% of men around the world are financially literate, only 30% of women can be classified as having basic financial literacy skills.
  • Many people who use financial products and services are not equipped with the skills necessary to derive optimal value from them: When people are not empowered with the knowledge needed to use financial products or services, they are at risk of experiencing a financial disaster, including amassing high levels of debt and insolvency.

The lowest levels of financial literacy were found in Africa — Botswana was deemed 51% financially literate while Somalia came in at a mere 15%.

The personal cost of financial illiteracy is exorbitant. As S&P explains in the Survey report, “Without an understanding of basic financial concepts, people are not well equipped to make decisions related to financial management”. Financially illiterate people tend to incur higher transaction fees, amass larger debts, and agree to higher interest rates on loans. They typically borrow more money and have less savings than financially literate individuals. Financial illiteracy is also a major cause of financial insecurity, and the stress associated with the inability to handle emergency expenses and withstand income shocks can lead to increased rates of suicide, domestic violence, and divorce.

Low levels of financial literacy can be especially detrimental in the face of rapidly increasing access to capital (think, microfinance) and a plethora of (often digitized) financial products. In Kenya, for example, only 14% of the population had access to a bank account in 2006. By 2016, that number had risen to 34.4%, and by 2019, an estimated 41% of people across the country had bank accounts. Globally, however, only 38% of people who have bank accounts are considered financially literate. When account owners are not financially literate, there is a greater chance that they will not reap the full benefits their account offers. Unbanked adults have even lower rates of financial literacy.

Financial illiteracy can also have an impact on a much larger scale, causing negative reverberations that can be felt across financial systems and entire economies. As Refera, Dhaliwal and Kaur explain, “The repercussions of poor personal financial decisions do not only reflect in individuals, but also affect normal operation of the financial system and overall economic stability of a nation”. For example, pairing rapidly expanding access to fintech products with financially illiteracy results in exacerbated wealth inequality. Financial illiteracy can also render economies unable to withstand economic shocks.

On the bright side, achieving financial literacy comes with myriad benefits. Those who are financially literate are able to “make informed financial choices regarding saving, investing, [and] borrowing”. They are better at long-term financial planning, such as saving money for retirement, and diversifying risk by investing in several different entities. They are also able to acquire loans with lower interest rates and keep their debt to a manageable level. On a macro level, pairing financial literacy education with programs aimed at reducing poverty can produce socioeconomic growth that is sustainable in the long term. Increased levels of financial literacy have also been linked to the stability, inclusivity, and efficiency of a country’s entire financial sector.

Research has shown, however, that traditional models of financial education are both costly and largely ineffective, and calls have been made to leverage SMS to improve financial literacy rates. As a stakeholder in the continent’s education ecosystem and a forerunner in providing ultra-accessible learning opportunities, M-Shule recognizes that it is uniquely positioned to help increase financial literacy levels across Africa. Using our research-backed, theoretically grounded approach to learning design, we have developed an SMS-based micro-course for young people and adults that has proven successful in increasing financial literacy levels. The 40 lessons within this micro-course cover everything from basic banking skills to assessing and mitigating financial risks.

“There is an area I didn’t know about capital and profit/loss because you can just do business and think you are making profits. The lessons helped me understand better.” — An M-Shule adult learner

Like all our micro-courses, the Financial Literacy module is ready-to-deliver. It can also be adapted and translated to fit a variety of contexts. To learn more or to discuss partnerships and collaborations, reach out to us on or at +254 799 008 387.

On the Telegram app, you can try out Standard and Poor’s actual financial literacy assessment questions and see how financially literate you are! Click here or search for MShuleDemo_bot on Telegram and enter finlit to begin.

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Sara Cohen

Written by

Expert instructional designer with a background in creating impact-oriented content across East Africa.

M-Shule Stories

Join us in the journey to learn more about M-Shule and how we are playing a role in promoting education access.

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