Do financial management tools improve

1

• Do financial management tools improve
• credit access among
• disadvantaged sectors?
• Evidence from the use of an Integrated Platform
  for Company Management (PIMEX)

.Andrés Cuba Borda .Sharim Ribera
Camacho Center for the Studies of Social and
Economic Realities Washington DC, November, 2014
2
BACKGROUND

• Bolivia has made substantial progress in
  increasing financial services over the last decade

3
BACKGroUND

• The increase in coverage benefited all
  departments in Bolivia

4

MOTIVATION

• We found there is greater inclusion with respect
  to savings than to credit
• Why? Due to the lack of financial understanding
  of the credit application process

5
MOTIVATION

• How can this be improved?
• Overall financial education
• Financial capability and management
• Assessment for credit applications.
• We cover all three

6
Research question

• Do financial management tools improve credit
  access among disadvantaged sectors?

7
Methodology AND FIELD EXPERIMENT

• Identify potential borrowers / credit
  beneficiaries
• Conduct baseline survey
• Small scale field experiment
• Comparison of results

8
Methodology BASELINE survey

• We conducted a baseline survey to all 110
  potential borrowers
• Socio demographic profiles
• Administration of expenses to measure Financial
  Management (FM)
• Savings practices and behavior
• Credit access and credit use
• Use and access to other channels for Financial
  Exposure (FE)
• Greater FE is related to financial education

9
Methodology FIELD EXPERIMENT

• THE TREATMENT GROUP
• 50 randomly selected as part of a treatment
  group
• We give them a short induction on financial
  education
• Basic notions of financial terminology
• Use of a financial calculator and budgeting
• Training on the PIMEX tool
• Three hour session for groups of 10-15 people on
  how to use PIMEX
• We have run the first session, three more to
  come
• Elaboration of credit application
• Use a credit-assessment tool to generate list of
  legal requirements
• Use PIMEX to produce information on
  income/revenue, expenses/costs, cash flow
• Preparation of credit application file

10
Methodology FIELD EXPERIMENT

• THE CONTROL GROUP
• 50 will be part of a regular control group
• We only collect baseline information with our
  initial survey
• No additional training is provided
• Keep track of their credit application with help
  of loan officers from ECOFUTURO AND BCO
• MONITORING
• We check on the status of application of the
  control group with the loan officer every week
• We do not contact the applicants anymore after
  the initial survey
• Credit officers do not know which individuals are
  from the control or treatment group

11
Data collection

• Three sources of data for this project
• Regional Forum Survey
• Measure overall financial inclusion indicators in
  three main metropolitan areas
• Baseline Financial Inclusion Survey
• Applied to control and treatment groups
• Personalized financial assessment reports (Pimex
  Relev)

12
financial TRAINING SESSIONS FOR TG (field
EXPERIMENT)

• Main content of the sessions included
• Financial Education
• Financial and Business Management (Pimex Relev)
• Orientation and assessment on accessing credit.

13
THE Financial Management tool (Pimex Relev)

• The PIMEX Tools produces the following outputs
• Total units sold
• Total amount generated per unit sold
• Total income per product
• Total income
• Average sale prices
• Profit margins
• Product/service destination
• Product Inventory Report
• Packaging Inventory Report
• Stock report
• Use (1) (10) to generate two reports
• Monthly income report detail of production
• Fix and variable costs monthly financial flow

CREDIT EVALUATION
14
Baseline survey results (SOCIO DEMOGRAPHIC
PROFILE)
15

Baseline survey results (SAVINGS BEHAVIOR)
16
Baseline survey results(CREDIT BEHAVIOR)
17
CONCLUSIONS

• How does the result connect with the broader
  objective ?
• There is an interesting and increasing use and
  demand for financial services in Bolivia
• The formal financial system has been expanding
  their financial services, which is reflected in a
  greater number of credit approvals and lower
  rates of credit dismissals
• However, there is an overwhelming number of small
  entrepreneurs that DO NOT ask for credit
• We have designed an experiment to evaluate the
  importance of financial management tools to
  increase credit access
• We implemented two surveys.
• One to document financial inclusion in main
  metropolitan areas in Bolivia
• Baseline survey about financial inclusion
  including savings and credit behavior
• We are currently working on implementing the
  second, third and fourth rounds to administer the
  PIMEX
• Hopefully interesting results from the experiment
  for next time

18

• THANKS!