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1、Delivering Financial Health GloballyA collection of insights,approaches and recommendationsAcknowledgementsThe UN Secretary General established the Task Force on Digital Financing of the Sustainable Development Goals(SDGs)as part of his broader Roadmap for Financing the 2030 Agenda for Sustainable D
2、evelopment:2019-2021.Peoples Money:Harnessing Digitalization to Finance a Sustainable Future is the Task Forces final report.The report outlined the need to focus on outcomes and make the tools of poverty reduction broader than is the current focus.This white paper was initiated to drive discussions
3、 among the global community towards improving the approach in order to create positive impact on individuals and households,thereby realising the SDGs at-large.This white paper has been prepared with support from MetLife Foundation and has drawn on existing research and extensive engagement with the
4、 financial community,experts and civil society groups.It is the result of a comprehensive review of over 60 publications related to financial health and inclusion,and expert interviews with 20+leading organisations in the inclusive finance sector.The report was written by Jaspreet Singh,Ahmed Dermis
5、h,Anne Duijnhouwer,Audrey Misquith representing UNCDF with significant inputs and support by Krishna Thacker from MetLife Foundation.Attribution:Cite the work as follows:Singh,Jaspreet;Dermish,Ahmed;Duijnhouwer,Anne&Misquith,Audrey.2021.“Delivering Financial Health Globally:A collection of approache
6、s,insights and recommendations”.White Paper.UNCDF-Centre for Financial Health&MetLife Foundation.The authors extend sincere thanks to the following individuals who provided inputs at various stages of report development:Mathilde Bauwin,ADA Microfinance;Sheila Okiro,African Development Bank;David del
7、 Ser&Ashirul Amin,Bankable Frontier Associates(BFA);David Kim,Bill and Melinda Gates Foundation;Mayada Elzoghbi&Eric Noggle,Center for Financial Inclusion(CFI);Yibin Chu,Citi;Mohamed Khalil,Commonwealth Bank of Australia;Matthew Soursourian,Consultative Group to Assist the Poor(CGAP);Brenton Peck,Al
8、ejandra Ruales&Sarah Parker,Financial Health Network;Dagmar van der Plas,Dominic Keyzer&Maria Ferreira Sequeda,ING Bank;Elisabeth Rhyne,Independent Consultant,formerly Centre for Financial Inclusion(CFI);Rebecca Rouse&Elliott Collins,Innovations for Poverty Action(IPA),Evelyn Stark&Sarah Willis;Elai
9、ne Kempson and Christian Poppe,Researchers at University of Bristol and Oslo and Akershus University College of Applied Sciences;Genevieve Melford,The Aspen Institute,formerly Consumer Financial Protection Bureau(CFPB)and Paul Nelson,USAID.We are also grateful to Elaine Kempson,Mohamed Khalil,Paul N
10、elson,Sarah Parker,Brenton Peck,Dagmar van der Plas,Christian Poppe,Elisabeth Rhyne,Alejandra Ruales and Evelyn Stark for their additional review;Natasha Scripture for editing;Sheena Deviah for illustrations and Nipun Garodia for design.The views expressed in this publication are those of the author
11、(s)and do not necessarily represent the views of UNCDF,the United Nations or any of its affiliated organizations or its Member States.The designations employed and the presentation of material on the maps and graphs contained in this publication do not imply the expression of any opinion whatsoever
12、on the part of UNCDF or the Secretariat of the United Nations or any of its affiliated organizations or its Member States concerning the legal status of any country,territory,city or area or its authorities,or concerning the delimitation of its frontiers or boundaries.MetLife Foundation funds resear
13、ch and thought leadership in the spirit of generating dialogue on important societal topics.The opinions expressed in this report are those of the author(s)and do not necessarily represent the views of MetLife Foundation.3Delivering Financial Health GloballyExecutive SummaryIn the last two decades,s
14、ubstantial progress has been made towards advancing financial inclusion for the worlds most vulnerable people.Since 2011,1.2 billion people across the globe have obtained a financial account.Most governments now have a financial inclusion strategy and deliver government payments through the formal f
15、inancial system.Youth,women and other historically marginalised groups are accessing and using financial products and services on a more regular basis.That said,the COVID-19 pandemic has deeply exposed the weakness of our economic and social systems.People all over the world,especially low-and moder
16、ate-income(LMI)people are losing their jobs and seeing their income and assets erode.The pandemic has laid bare the financial vulnerability of vast segments of the global population.At the start of this crisis,the majority of the population in many countries were financially ill-prepared to weather
17、a prolonged income shock.According to a study that mapped global financial resilience in 2017,more than two-thirds of adults in Kenya,Vietnam,Greece,Chile,Colombia and Bangladesh would not be able to cover basic needs for three months using just their savings or by selling assets in the event they l
18、ost their incomes1.In light of these vulnerabilities,we need an approach that examines and advances the well-being of individuals and households.Financial health is an emerging topic of research,advocacy and practice that aims to understand,measure and ultimately improve the part of wellbeing that i
19、s associated with the financial life of individuals that we serve.Financial health is a comprehensive approach,and this makes it an effective tool to address the Sustainable development Goals(SDGs).Poverty reduction(SDG 1)is a key objective that motivates government and private sector financing for
20、financial inclusion interventions globally.Examples could include easier or more affordable access to loans that support the income growth or diversification that enables people to overcome poverty.However,to ensure a sustainable impact,the broader lens of financial health is needed because it focus
21、es on preparedness and building resilience as well the big picture,such as long-term financial goals.For example,improving the ability for people to cope with unexpected crises,so they dont reduce essential spending or resort to negative coping strategies,is a key component of financial health,one t
22、hat is connected to a wider set of policies beyond access to financial services(for example,social insurance),in a range of sectors(for example,healthcare or agriculture)and for various population segments.This white paper aims to create a baseline from various discussions on financial health and bu
23、ilds an evidence base from the work done by institutions and individuals globally.The paper explores the constituents and drivers of financial health,how to measure it and the role of various stakeholders.It also serves as an effort towards a common and shared understanding on the subject,while aimi
24、ng to build a coalition of public,government,and private sector actors who could be willing partners in collective learning and action towards enhancing financial health globally.1.Financial Sector Deepening Kenya.(2020).The prevalence and drivers of financial resilience among adults:Evidence from t
25、he Global Findex.Kenya:Gubbins,P.4Delivering Financial Health Globally12345A broader approachFinancial health is not the next panacea but offers a larger,more comprehensive perspective to define,create and measure impact.Financial health is an improved approach,considering the tools for poverty redu
26、ction and economic welfare,for many reasons.Key FindingsPolicymakers and Regulators Governments understand that the financial health of individuals impacts their capacity to be productive citizens.Yet the practice of creating policies that target financial health is still nascent.Figure 1:Key findin
27、gsThe Building BlocksFinancial health is a layered subject,and a distinction must be made between the outcomes of financial health and the drivers of those outcomes.Measuring Financial HealthThe measurement of financial health offers a nuanced alternative to the binary measure of financial inclusion
28、,offering intermediate outcomes to a realization of the SDGs-a policy priority for governments across the world.Financial Service ProvidersFinancial providers can continue to achieve greater growth outcomes and maximize long-term shareholder value by putting customers financial health at the centre.
29、5Delivering Financial Health GloballyFinancial health is not the next panacea but offers a larger,more comprehensive perspective to define,create and measure impact.By definition,financial health encompasses four important aspects of an individuals financial life:financial security,financial resilie
30、nce,financial control and financial freedom.It is state in which an individual can meet current needs,absorb financial shocks,and pursue financial goals.Financially healthy individuals also feel secure about their finances.The following captures these dimensions of financial health:Financial securit
31、y is the ability to meet short-term commitments.Financial resilience is the ability to cope with unexpected or adverse events.Financial control is being confident of ones finances,now and in the future.Financial freedom is the ability to meet long-term financial goals and desires.Financial health is
32、 an improved approach,considering the tools for poverty reduction and economic welfare,for many reasons.For one,financial health is user-centric in that it accounts for both objective and subjective ways to define impact,embodying the principle that impact can mean different things to different peop
33、le and is best defined by individuals themselves.Financial health also measures what matters.While transactional indicators measured under the financial inclusion approach remain relevant,the perceptive indicators of financial health such as the ability to come up with liquid funds in a defined time
34、 frame offer a more nuanced view of an individuals financial life.Financial health also recognizes that a whole range of factors are at play as it relates to peoples financial lives,from individual characteristics such as income and assets to environmental factors such as social capital and public i
35、nfrastructure.Financial health is a layered subject,and a distinction must be made between the outcomes of financial health and the drivers of those outcomes.The outcomes of financial health are rooted in its definition,encompassing financial security,resilience,control and freedom.The determinants
36、of financial health span a range of individual and environmental factors such as income,assets,financial habits such as saving and spending,social capital and the socio-economic environment.These factors are diverse and influence each other as well as financial health outcomes in myriad combinations
37、.For example,two individuals earning the same income and with the same amount of wealth may have different financial health statuses owing to their financial habits and the socio-economic environment they belong to.This makes financial health a complex and nuanced concept but also one focused on the
38、 outcomes wed like to see manifested for end customers.6Delivering Financial Health GloballyFinancial providers can continue to achieve greater growth outcomes and maximize long-term shareholder value by putting customers financial health at the centre.In this white paper(section 4),we provide a hig
39、h-level but practical roadmap that financial providers can adopt and customize to their context as they undertake their unique journey in becoming more customer-centric in a fast-paced environment.The roadmap provides key considerations for financial providers across four strategic pillars:1)financi
40、al health as a strategic imperative;2)reprioritising the metrics and measurement model;3)aligning technology,products,processes and partnerships to serve a common purpose,and 4)deepening customer relationships and building customer trust.Governments understand that the financial health of individual
41、s impacts their capacity to be productive citizens.Yet the practice of creating policies that target financial health is still nascent.Most policymakers and regulators focus broadly on financial sector stability and consumer protection,and while these are necessary,they are insufficient precondition
42、s for financial health.We strongly believe there is a synergy between a financially healthy society and financial sector stability.This synergy can be sought by promoting the right kind of policies,beginning with making measurement the central attribute of the enabling environment of financial healt
43、h and tracking outcomes that can translate to industry level or national targets.Governments also have an opportunity to define expectations from the innovation community and shape the right kind of innovation environment.Additionally,empowering consumer groups or engaging with consumers directly ha
44、s demonstrated consumers capacity to advocate for their needs and ensure service providers act responsibly.The measurement of financial health offers a nuanced alternative to the binary measure of financial inclusion,offering intermediate outcomes to a realization of the SDGs-a policy priority for g
45、overnments across the world.Several frameworks to measure financial health have been tried and tested.Some frameworks rely on self-reported financial health status and behaviours,while others also incorporate observed financial conditions.Some also focus on the subjective dimensions of financial hea
46、lth,such as peoples perceptions of their financial health and their confidence in their financial futures.7Delivering Financial Health GloballyWhile each of these frameworks is helpful in its own right,some key considerations for the measurement of financial health include attention to contextual fa
47、ctors such as social capital,clarity on what is being measured(outcomes versus determinants)and the type of data being used(demand or supply-side).By measuring the financial health of customers,we could inform appropriate public and private sector action that advances the financial health of people,
48、particularly that of marginalised groups,and incentivizes the market to act in favour of customer financial health.It is important to note that financial health and/or well-being are umbrella terms that cover a range of concepts associated with economic welfare and poverty reduction.Typologies aside
49、,the term financial health fundamentally represents impact outcomes for end customers such as meeting daily commitments,resilience and growth.Financial health is not an end in itself.It is an enabler that allows people,societies,and markets to be resilient and innovative.This means that both public
50、and private market actors need to work in concert to achieve financial health outcomes which in turn enable the realization of the Sustainable Development Goals(SDGs).We hope the insights in this report will be used by the private sector,policymakers and governments to design and deliver interventio
51、ns that advance the financial health of individuals and households.Section 1Financial HealthA broader approach to define,create and measure impact9Delivering Financial Health GloballyThis section unpacks the relationship between financial health and financial inclusion and offers perspectives on why
52、 financial health might be a better approach.We take stock of how far we have come with financial inclusion and where we have fallen short,reflecting on the concept of financial health as a possible answer to some of financial inclusions limitations.Is financial inclusion enough?Financial inclusion
53、is often defined as access to and usage of affordable and quality financial products.It has been a focus of governments,central banks,public and private financial institutions,multilaterals,and non-governmental organisations for a couple of decades.As it brought the benefits of payment systems,savin
54、gs and other services to customers,the global community made a core assumption that usage of these formal financial services would enable people to grow their resources and climb out of poverty.In terms of inclusion,we have seen significant progress.Since 2011,some 1.2 billion people have obtained a
55、 basic bank account.The mobile money industry transacts US$2 billion per day,with over a million active accounts.Most governments now have a financial inclusion strategy and deliver government payments through a formal financial system.India,for example,enabled 310 million new bank accounts as part
56、of a massive financial inclusion campaign that began in 2014.Youth,women and other historically marginalised groups are increasingly using savings and payments,and other financial products and services,such as credit and remittances,through digital channels.Upon a closer look,however,it appears that
57、 most of this success comes from first-level financial services,such as making and receiving payments and having a savings account.These might be better than cash,but not 2.The Global Findex Database,20173.https:/ part of the Pradhan Mantri Jan Dan Yojana(PMJDY),a government-led initiative.See:https
58、:/ Financial Health Globallynecessarily creating the preconditions for building financial resilience or wealth.There is an emerging body of evidence that suggests mixed results at best in terms of the impact of financial inclusion on the lives of LMI people.For example,a recent review by CGAP showca
59、sed that while access to bank accounts improved savings among farmers in Malawi,the same exercise in other countries did not find similar results.India,for all its progress in financial inclusion reported the highest dormancy rate in account usage worldwide 48%.Digital credit also faltered in that a
60、lthough access is widespread due to the ubiquity of mobile phones,some undesirable consequences of this progress include increased short-term or“payday”lending,sports betting and unplanned spending.Another argument around financial inclusion relates to its insufficiency.For example,a review has indi
61、cated that although financial inclusion has diverse positive impacts,they are too small to count.In addition,financial inclusion has also failed to reach all people equally.Some consumer segments are lagging significantly behind.Globally,the number of men with financial accounts surpasses the number
62、 of women with financial accounts by 8%.Youth have limited access to financial services.Micro,small and medium enterprises(MSMEs)experience staggering credit gaps 65 million formal MSMEs in 128 countries are credit-constrained.Financially included but not financially healthy A few studies have exami
63、ned the correlation between financial inclusion and financial health,and the results have not been encouraging.A study by the U.S.-focused Financial Health Network conducted in 2020 shows that only 33%of Americans are financially healthy despite near-universal financial inclusion.Similarly,while fin
64、ancial inclusion in Kenya increased from 75%to 83%between 2016 and 2019,the percentage of adults deemed financially healthy declined from 39%to 22%in the same period.Gallups study indicated that there is no clear relationship between account ownership and financial security in low-and middle-income
65、countries.In the development community,there is a general consensus that the ultimate objective of financial inclusion is to improve financial lives through creating financial security and increasing control over finances.Yet we must pause and reflect on what we mean by“improving financial lives.”Fi
66、nancial health as an approach offers a way forward.By definition,financial health encompasses four important aspects of an individuals financial life:financial security,financial resilience,financial control and financial freedom.It is state in which an individual can meet current needs,absorb finan
67、cial shocks,and pursue financial goals.Financially healthy individuals also feel secure about their finances.The following captures these dimensions of financial health:5.https:/www.cgap.org/blog/looking-beyond-average-impact-financial-inclusion6.The Global Findex Database,20177.https:/campbellcolla
68、boration.org/better-evidence/impact-of-financial-inclusion-in-low-and-middle-income-countries.html8.The Global Findex Database,20179.https:/www.ifc.org/wps/wcm/connect/03522e90-a13d-4a02-87cd-9ee9a297b311/121264-WP-PUBLIC-MSMEReportFINAL.pdf?MOD=A-JPERES&CVID=m5SwAQA10.US Financial Health Pulse,Fina
69、ncial Health Network,202011.Inclusive Finance:Headline Findings from Finaccess 2019,FSD Kenya,201912.Gallups Global Financial Health Study,201813.This resonates with UNCDFs own experience from operations in over 20 countries in the past decade.It is also supported by the findings of scores of organi
70、zations that field-tested the concept of financial health in varied settings11Delivering Financial Health Globally Financial security is the ability to meet short-term commitments.Financial resilience is the ability to cope with unexpected or adverse events.Financial control is being confident of on
71、es finances,now and in the future.Financial freedom is the ability to meet long-term financial goals and desires.Lets look at this definition closely.The first part is a measure of an individuals financial security,typified by the ability to navigate ones daily commitments,now and in the expected fu
72、ture.It also includes the ability to respond to and recover from unexpected shocks,or financial resilience.The second part of this definition is an indication of whether individuals feel in control over their finances,and therefore is more perception-based.Individuals may have differing perceptions
73、of their financial health,regardless of objective financial conditions,based on their subjective evaluation or on anticipated changes or anxieties about their future income and expense streams.The third part of the definition emphasizes financial freedom,the ability of going beyond the basic needs o
74、f food,shelter,etc.to meet ones financial goals and afford the things one enjoys.In a sense,financial freedom can be considered a step-up from financial security.Financial health:broadening the approachFinancial health puts the spotlight on the end consumer and how his/her life can be changed for th
75、e better.It is an improved approach over financial inclusion as it enables the following:Defines impact in ways that are more customer-centric:financial health accounts for both objective and subjective ways to define impact,embodying the principle that impact can mean different things to different
76、people and is best defined by individuals themselves.Financial security as outlined above is predominantly an objective measure whereas financial control and freedom are more subjective measures.For example,an individual is financially secure if they are able to live with a level of preparedness for
77、 the future on a daily basis.Financial freedom is a step up from financial security,when an individual is able to go beyond financial security and enjoy life on their terms.Measures what matters:conventional data on number of registered and active accounts and transaction volumes and values will rem
78、ain crucial to understanding how financial products and services can improve or detract from a clear understanding of financial health.However,with a range of perceptive indicators such as ability to come up with liquid funds in a finite time period to having money left over after essential expenses
79、,financial health offers a more nuanced approach to measuring the impact of the products and services offered by financial service providers.In Section 3,we explore the measurement of financial health in more detail.14.Drawing from definitions by Consumer Financial Protection Bureau(2017);Muir et al
80、(2017);Kempson et al(2017);Melbourne Institute and Common-wealth Bank of Australia(2018).15.Financial security can also be subjective as we discuss in Section 3.Most individuals could differ on whether they are financially secure,all else being equal.However,in comparison with financial freedom,fina
81、ncial security has more objective tones.1212Delivering Financial Health GloballyUnderstanding of context:in contrast to financial inclusion,financial health is a multi-faceted concept that offers a more holistic picture of customer outcomes and the associated drivers.For example,financial health rec
82、ognizes that a whole range of factors are at play.From individual characteristics,such as financial capability and psychological biases,to broader socio-economic factors like gender and social norms,availability of work and social safety netsthese all influence the financial well-being or financial
83、health of an individual.This all-encompassing view of the underlying context is imperative to understanding the results we indicated above,such as non-usage and insufficient and varying impacts.Understanding of financial behaviour:recent research has established direct links between financial behavi
84、ours and financial health outcomes.For example,active saving is a financial behaviour essential to financial resilience.Moderate spending is critical to the effective day-to-day management of finances.It is important to note that individual behaviours,however,are influenced by the socio-economic env
85、ironment one inhabits as well as the psychological biases that influence most of us.This is not to say that these individual choices are right or wrong,but that an awareness of biases underlying these choices helps us design products and processes in financial health-centric ways.A fitting example i
86、s Common Cents Lab that factors in psychological biases in the design of financial products and services.What does this mean for financial inclusion?For financial inclusion,the outcome is“to be included”to have access to at least one account,which is being used with some degree of regularity.Financi
87、al health seeks to understand how being“included”(or not)impacts the resiliency and opportunities for individuals to meet their goals.Ultimately,we would hope to learn which solutions,in what bundle,works for whom and in what settings.Financial inclusion is an ongoing pursuit and,in many ways,sets t
88、he stage for conditions of financial health.Enabling the use of financial services,as we will see in the next section,drives financial health.However,financial inclusion is the start of a pathway towards better financial outcomes,but it is not the end of the journey.Financial health goes several ste
89、ps beyond inclusion,towards financial freedom.Financial health therefore,is not the next panacea but offers a larger,more comprehensive perspective to define,create and measure impact.16.Kempson et al.(2017).Financial Well-Being.A Conceptual Model and Preliminary Analysis43Section 2The Building Bloc
90、ks of Financial HealthOutcomes and determinants14Delivering Financial Health GloballyFinancial health is more layered and complex than the relatively straightforward concept of financial inclusion.In this section,we unpack what we mean by financial health and identify its parameters.The following tw
91、o questions in particular help explain the concept of financial health in more concrete terms:1.What are financial health outcomes?2.What are the drivers(or determinants)of financial health outcomes?The outcomes of financial health are often conflated with its determinants.We must disentangle these
92、components to be clear about what we are aiming for(outcomes)and how we get there(determinants).We follow an hourglass framework to explain financial health determinants and their relationship to financial health outcomes.Determinants are classified as environmental,human and individual,which in var
93、ious combinations lead to financial health outcomes.15Delivering Financial Health GloballyFactors common to all humans such as biases of time-inconsistency or procastination or stages of life such as ageing.A feeling of self-efficacy and ease in regards to ones financesSocio-economic factors and hou
94、sehold charateristicsThe ability to meet financial commitments and cope with and recover from shocksFactors particular to an individual such as behaviour,income,age,etcThe ability to meet ones financial goals and enjoy life on ones termsFigure 2:Under the Hood:an hourglass model of financial health
95、outcomes and determinantsFinancial healthDeterminantsEnvironmentalHumanIndividualFreedomControlSecurity and ResilienceOutcomesFinancial health outcomesIn the previous section,we shared a definition of financial health which encapsulates some commonly used characteristics associated with the term(see
96、 Annex 1).To recap:Financial health is a state in which an individual can meet current needs,absorb financial shocks,and pursue financial goals.Financially healthy individuals also feel secure about their finances.The following captures these dimensions of financial health:Financial security is the
97、ability to meet short-term commitments.Financial resilience is the ability to cope with unexpected or adverse events.Financial control is being confident of ones finances,now and in the future.Financial freedom is the ability to meet long-term financial goals and desires.It is through these four com
98、ponents of financial healthfinancial security and resilience,the most universal parameters,financial control and financial freedomthat we hope to enhance financial health for all and achieve the sustainable development goals(SDGs)-particularly ending poverty(SDG 1),which is also the objective of fin
99、ancial inclusion.16Delivering Financial Health GloballyFinancial security Financial security is the ability to meet current and ongoing commitments,including basic needs and planned expenses such as food,rent,bills,debt payments,and health care in the short-term.Financial resilience addresses the ab
100、ility to manage unexpected or adverse events,such as car breakdowns,job loss or sudden health emergencies.This component is often termed as financial resilience,or the ability to respond to and recover from shocks.The following questions help describe whether or not an individual has succeeded in ac
101、hieving financial security and resilience:Financial controlSome definitions of financial health include the ability to feel in control of ones finances,with no or limited financial distress.Financial control is a subjective measure of financial health because the feeling of being in control or stres
102、sing can vary for individuals and households,despite similar financial conditions.The following questions help describe whether or not an individual has succeeded in achieving financial control:Financial freedomFinancial freedom represents a financial condition beyond financial security,and reflects
103、 an individuals ability to meet future financial goals and take advantage of opportunities.It is also more subjective than financial security as it emphasizes individual financial goals and things one values.The following questions help determine whether an individual has reached a state of financia
104、l freedom:Are they able to successfully manage their financial commitments on a day-to-day basis?Are they prepared to handle both small emergencies and large shocks?Are they able to recover from a shock and reorient their lives after the shock?Are they able to stay on track to meet their financial g
105、oals,and pursue opportunities?Are they able to secure their financial future or demonstrate a forward-looking attitude in regards to their finances?After paying off essential expenses and earmarking savings,is sufficient money left over for doing the things they enjoy?Are they confident about their
106、financial situation,presently and looking to the future?Do they believe they have the ability to make changes to their financial lives for the better?17Delivering Financial Health GloballyThe outcomes of financial healthsecurity and resilience,control and freedomcomprise both objective and subjectiv
107、e elements.Financial security can be construed as a more objective measure whereas financial control and financial freedom are more subjective measures.For example,two individuals may feel a different sense of financial control and/or freedom even though they have similar financial conditions such a
108、s the same savings balance or similar types of home ownership.Control and freedom are therefore defined by individuals themselves,and are relative.Financial health outcomes also reflect progression.A state of financial security and resilience could be correlated with a feeling of financial control a
109、nd could ultimately lead to financial freedom.Gallups study,for example,demonstrates the linkages between financial security and financial control,indicating that control could predict financial security.While they define financial security in more objective terms,financial control,in essence,is out
110、lined as a(positive)aggregation of 8 out of 10 subjective questions17.Furthermore,a state of financial security and resilience and a feeling of financial control are essential but not sufficient conditions to realize a state of financial freedom.If an individual cannot meet daily commitments and fee
111、l in control of their financial life,then it is difficult,if not impossible,to enjoy life on ones terms and meet financial goals.On the other hand,a state of financial security and a feeling of control could also mean that an individual is only just getting by,but unable to enjoy life on ones terms
112、or meet certain financial aspirations.In Section 3,we explore these outcome questions,offering perspectives on the nuances they reflect and how to measure them.Financial health determinantsThe outcomes of financial health are influenced by a multitude of determinants or drivers that span both indivi
113、dual characteristics and environmental factors.Consider these two scenarios:Sheila earns income X and is in the top 20 income bracket of her country Y.Y is a low-income country with limited infrastructure and few social safety nets.Sheila is a single mother in her thirties and has many financial com
114、mitments that she is currently able to fulfil.However,she does not set aside regular savings although she saves when she can.So far,her income has been able to hold her over a few difficult times such as when one of her children needed surgery for appendicitis.She knows that she can depend on her fa
115、mily and friends in times of need.Sam,a single male in his twenties earns income B that is below the median income in his country Z(and also lower than Sheilas X in absolute terms).Z is a high-income country with good infrastructure and social safety nets.Sam does not have many spending commitments
116、no children and his rent is reasonable.He is quite financially savvy and regularly puts aside money in savings and investments,though not very much.Sam has yet to encounter serious financial problems and worries he wouldnt be able to weather a major financial emergency.He is proud of his independenc
117、e and does not want to burden family or friends if a financial problem were to arise.16.See:https:/ Financial Health GloballySheila and Sams financial health is influenced by varied drivers.These drivers are a combination of individual and human(or group)characteristics such as income,financial habi
118、ts,age and gender and environmental factors such as household characteristics,social capital,financial services and the broader socio-economic environment.(See hourglass model on page 16).These factors influence each other in myriad ways and their interactions either enhance or undermine financial h
119、ealth.Whats more,these factors themselves evolve,thereby changing a persons financial situation from one day to the next.Lets examine them.Individual characteristics,including factors common to all humansEconomic resources such as income and assets directly influence financial health.Financial Healt
120、h Networks study indicates that financially thriving segments of the population are usually at the highest income bracket level.18 Conversely,data from detailed financial diaries in Kenya reported that 94%of the financially unhealthy respondents were from poor households.19 CFPBs research in America
121、 showed that liquid savings(assets)is a key differentiating factor between the financially healthy and unhealthy,at least in terms of handling small financial shocks.20While income and financial health correlate,income and assets alone do not explain financial health.For example,the thriving,financi
122、ally healthy segments in both the Financial Health Network and financial diaries studies include poorer households as well,indicating that factors other than income are at play.Figure 3:Financial health determinantsIndividual characteristics,including factors common to all humans:Economic resourcesF
123、inancial servicesFinancial habitsHousehold characteristicsAge and life maturitySocial capitalMajor life eventsBroad economic and social conditions GenderEnvironmental factors:18.Financial Health Network formerly Centre for Financial Services Innovation(2015).19.Zollman.J.(2014).Kenya Financial Dairi
124、es:The Financial Lives of the Poor20.Consumer Financial Protection Bureau.(2017).Financial well-being in America19Delivering Financial Health GloballySheila with a high income may not necessarily be better off than Sam from a financial health standpoint because of other factors such as her low prope
125、nsity to save and her socio-economic environment.Financial habits:some research has indicated the impact of financial behaviours such as active saving,moderate spending and not borrowing for financial expenses on the financial health of individuals.21 Financial habits though are influenced by ones s
126、tage in life such as Sheilasthat of a single mom juggling multiple financial responsibilities,ones cultural environment and broad socio-economic conditions.Financial habits are also influenced by psychological biases,that we are all more or less susceptible to.The field of behavioural economics has
127、studied several biases that people operate by.We regularly overestimate our abilities or underestimate potential risks.For example,Sheila presumes she can sail through an exercise routine,the childrens homework and have some family over for dinner this coming weekend,even though she knows that each
128、of these usual tasks take more time than she thinks.Sam presumes he can balance eating sugary treats because he hits the gym a few times a week.He(over)estimates his calorie burn while underestimating caloric intake.In the same way,when it comes to finances,people tend to put off uncomfortable thoug
129、hts until“later”(procrastination)and what is way into the future is less important now(time-inconsistency).These biases come to light when we see how under-prepared people are for their own old age or how surprised people seem to be when an inevitable car repair is needed,or that school fees really
130、must be paid,today.Whats interesting is that those that make up the private sector and policymakers are no less prone to these biases.As the renowned behavioural economist Daniel Kahneman famously remarked,we are all susceptible to these biases whether we are end clients or bank officers who serve e
131、nd clients or policymakers who regulate bank officers.Behavioural sciences,therefore,could be a useful way for all stakeholders to think about human behaviour,product and policy design,and how these products and policies are delivered and/or communicated.A classic example is pension defaults.In most
132、 low-and middle-income countries,policies that require employees to make provisions towards their own pensions exist,attracting high participation.However,given that much of the developing world functions informally,many people,particularly the low-income,are left out and voluntary schemes to loop t
133、hem in have seen much less participation.Age and life maturity:working adults do well on income flows,but they experience escalating spending commitments such as mortgage and childcare costs.Youth have fewer expenses,commonly paid for by the household,but limited income flows,in contrast to working
134、adults.Older adults demonstrate rather mixed financial statuses.22 While some are able to amass assets throughout their working life,others are woefully under-prepared for old age.21.Kempson et al.(2017).Financial Well-Being.A Conceptual Model and Preliminary Analysis and Commonwealth Bank of Austra
135、lia Australia(CBA),Melbourne Institute(MI).(2018).Using survey and banking data to measure financial well-being22.Kempson et al.(2017).Financial Well-Being.A Conceptual Model and Preliminary Analysis;Muir et al,(2017).Exploring financial well-being in the Australian context20Delivering Financial Hea
136、lth GloballyMajor life events such as higher education,starting a family or a chronic age-related disease could influence financial health directly by reducing economic resources.To that end,financial health is not static and varies during the course of an individuals lifetime.Gender:Some research s
137、uggests women and men do not exhibit differences in financial health(CFPB,USA).23 At the same time,other evidence indicates that women do less favourably in managing daily commitments and being prepared for the future.24 Household dynamics and social norms that dictate separate financial responsibil
138、ities for men and women are plausible explanations for this disparity.For example,in most parts of Africa and Asia,men manage significant expenses such as housebuilding,asset purchases and education whereas women manage recurring expenses,such as food and regular bills.Women and men also exhibit var
139、ied literacy levels,earning potential,negotiation and decision-making power,suggesting that their financial health status that derives from these various factors might also differ.Sheila,a working woman with children has a high income but also high spending obligations,owing to her stage in life.She
140、 juggles many financial responsibilities,including caretaking expenses.Sam,on the other hand,is a young,single male with a lower income but fewer spending commitments,and is therefore,able to save and invest more regularly.Environmental factorsFinancial services:the availability of affordable financ
141、ial products and services(financial inclusion)and a reasonable degree of financial capability could impact financial health.Financial inclusion as noted before,has had some modest impacts such as increase in financial resilience,improvement in womens empowerment and business growth and expansion.For
142、 example,the use of commitment savings devices has helped women from low-income families put aside savings for specific goals that they can then access in times of need.This product,by design,addresses several psychological biases such as time-inconsistency,procrastination and mental accounting.Resp
143、onsibly designed short-term digital credit is enabling low-income people running small businesses to address working capital needs at reasonable costs and with minimum hassle.Household characteristics:factors like parental education,household-decision making,households clan/caste status impact the f
144、inancial behaviours and economic resources of individuals.Household characteristics also impact the uptake and usage of financial services(financial capability)as well as psychological attributes of individuals.23.Consumer Financial Protection Bureau.(2017).Financial well-being in America.24.Kempson
145、 et al.(2017).Financial Well-Being.A Conceptual Model and Preliminary Analysis21Delivering Financial Health GloballySocial capital:social capital is an essential determinant of financial resilience,a component of financial security.Evidence indicates that in times of need or crisis,people rely on fa
146、mily and friends the most,and this is especially true in the developing world.25 Cultural factors play a huge role in the use of social capital.For example,in many African countries,it is commonplace for rural communities to rely on immediate family or their community savings group when emergencies
147、arise.In India and most Asian countries,parents invest in their childrens education with implicit or explicit expectations of reciprocity during old age.In Sheilas case,she has her family and friends to bank on in times of need whereas Sam might not count on it.Broad economic and social conditions i
148、nfluence financial health by creating conditions for growth and stability.For example,social safety nets,public health infrastructure,labour market mechanisms like unions or minimum wage laws and conducive policies for entrepreneurship enable a state of financial health.Research suggests that those
149、who live on the margins of the labour market or who engage in part-time employment experience low levels of financial well-being.26 By similar logic,agricultural populations or those in informal businesses are especially susceptible.The underlying factor is unstable income or life situations that,in
150、 addition to putting a strain on finances,also impede the efficient planning of finances,thereby negatively impacting financial well-being.Additionally,those in formal employment have several financial decisions cut out for them;formal jobs come with structured and predictable financial packages suc
151、h as insurance,direct deposit and pension savings,among others,helping secure financial futures for employees without much effort on their part.Informal workers are at a disadvantage as they do not enjoy such benefits.Sheila and Sam belong to very different socio-economic environments.While Sheila i
152、s a high-income earner,she belongs to an environment where social safety nets are not as prevalent or where public infrastructure is not as developed as in Sams environment.So,if Sheila were to lose her job for instance,she might be worse off than if the same were to occur with Sam,all else being eq
153、ual.What now?Outcomes and determinants make up the building blocks of financial health.The determinants of financial health are diverse and influence each other as well as financial health outcomes in myriad combinations.This makes financial health a complex and nuanced concept but also one focused
154、on the outcomes wed like to see manifested for end clients.More research is needed to understand the relative importance and interaction of different drivers.This initial discussion on the building blocks of financial health is a stepping stone to programming efforts towards financial health.Equippe
155、d with this understanding,we now proceed to discuss approaches to measuring financial health in Section 3 exploring how stakeholders could use the concept of financial health to create suitable financial programs and policies.25.Global Findex Database,2014 and 201726.Kempson et al.(2017).Financial W
156、ell-Being.A Conceptual Model and Preliminary Analysis;Muir et al,(2017).Exploring financial well-being in the Australian contextSection 3Measuring Financial Health Different approaches,key considerations and guidance for private and public sector stakeholders23Delivering Financial Health GloballyIn
157、sections 1 and 2 we introduced the concept of financial health and its building blocks.In this section we discuss various approaches to measuring financial health,lay out some key considerations and introduce guidelines for stakeholders to get started on measuring financial health.Financial inclusio
158、n is largely a binary measure.It looks at whether someone has a bank account,uses a mobile wallet to make transactions,has insurance or not and so on.This tells us whether financial services are accessible and used.It gives limited insight,however,into whether and how the access and usage of financi
159、al services improves peoples well-being.The concept of financial health provides more insights into this very question.It calls for a more nuanced measurement framework than financial inclusion.While most agree that its important to have a practical measure to better understand peoples financial hea
160、lth,there is no consensus yet on the measure itself.Exploring key measurement frameworks of financial healthFinancial health is a state in which an individual can meet current needs,absorb financial shocks and pursue financial goals.Financially healthy individuals also feel secure about their financ
161、es.The following captures the four dimensions of financial health:Financial security is the ability to meet short-term commitments.Financial resilience is the ability to cope with unexpected or adverse events.Financial control is being confident of ones finances,now and in the future.Financial freed
162、om is the ability to meet long-term financial goals and desires.24Delivering Financial Health GloballyThe ability to meet financial commitments in the short-term and have financial resilience can be observed,at least to an extent,while financial control and freedom also consider peoples perception a
163、nd personal goals.How can a measurement framework consider aspects that are more subjective in nature?And should the focus be on financial health outcomes,or also consider the drivers of financial health?Is a uniform measure of financial health desirable or must it be adapted to the customers contex
164、t?Below we discuss several measurement frameworks that have approached these questions in different ways.In 2015,the Financial Health Network pioneered an easy-to-implement financial health measure,initially developed to be conducted in the United States.Their framework categorizes financial health
165、into four categories-plan,save,borrow and spend-and draws from data collected through demand-side surveys and transaction data.The eight indicators measure a mix of self-reported financial behaviours(e.g.planning ahead,spending less than income,paying bills on time)and financial conditions(e.g.credi
166、t score,having manageable debt load,short and long-term savings).With that,the framework considers aspects of financial security and control.Financial aspirations and goals(i.e.financial freedom)are included in the analysis as contributors to financial health,but are not included in their financial
167、health measure.Also relevant to note is that the Financial Health Network does not directly measure financial health outcomes but measures the behaviours and financial conditions as pathways to those outcomes.For example,the measure assumes that spending less than ones income and having savings incr
168、eases financial resilience.The Consumer Financial Protection Bureau(CFPB)developed a 100-point financial well-being scale,also initially developed to be applied in the United States.27 Respondents score ten statements that cover self-reported financial status(“I am behind on my finances”),subjective
169、 assessments of financial security(“I could handle a major unexpected expense”)and feelings of financial well-being(“My finances control my life”).Contrary to the Financial Health Networks framework,CFPB considers respondents confidence in their financial conditions and their feelings of self-effica
170、cy.This is significant because,as CFPB notes,financial well-being can mean different things to different people.CFPB found wide disparities in how people feel about their financial situation for a given financial health score.These insights are particularly relevant for policymaking and the effectiv
171、e design and delivery of financial solutions.Building on previous empirical work done in the UK and seven low-and-middle income countries,Kempson et al(2017)offer a more objective version of the CFPB scale.CFPB did include objective measures in their empirical work such as income,borrowing patterns
172、and education levels,though these were identified as determinants of financial health.The scale proposed by Kempson et al includes objective(though self-reported)measures in the scale itself.Specifically,the scale captures the extent to which people are able to meet their commitments.This is determi
173、ned in a number of ways to capture varied responses-from a lack of resources for essential needs;the extent to which they have money left over after essentials to the extent to which they would be able to deal with economic shocks in the future.Kempsons research shows that financial behaviours and s
174、ocio-economic environmental factors influence financial health directly,and these in turn,are determined by psychological factors 27.CFPB is an agency of the United States government responsible for consumer protection in the financial sector.25Delivering Financial Health Globallysuch as self-contro
175、l and attitudes to spending,saving and borrowing.Knowledge and experience have a minimal effect through behaviours.Gallups global financial health study includes a subjective measure of financial control and an objective(though self-reported)measure of financial security.The financial control metric
176、 is a count of positive answers to ten binary questions.These questions assess the extent to which people perceive they are in control of and can influence their financial situation.Examples of statements include“Do you think that no matter what you do your financial future will stay the same?”and“H
177、ave you tried saving in the past and were not able to?”.The financial security measure is based on statements related to respondents ability to cover their basic needs with their liquid savings should they lose their income,and their ability to fulfil their debt repayment obligations.Gallup shows th
178、at people with low levels of perceived financial control are also likely to show low levels of financial security.And while financial security tends to be higher in high-income countries,there seems to be no relationship between perceived financial control and income level.With that,Gallup concludes
179、 that the measure of financial control could provide insights into financial security that are comparable across different contexts.Innovations for Poverty Action(IPA)developed a measure of financial health centred around financial resilience,a sub-component of financial security.Building on questio
180、ns on financial resilience in the World Bank Global Findex survey,respondents are asked how difficult it is for them to raise a certain sum of money(scaled to Gross National Income(GNI)per capita)in defined timeframes,and the main source(s)of funds they would rely on.The survey also includes questio
181、ns on access to finance and financial behaviours.These are considered as inputs and provide context to the findings but are not included in the actual financial health measure.As such,IPAs financial measure is simple to implement but may not provide a nuanced understanding of an individuals financia
182、l health.In Financial Sector Deepening(FSD)Kenyas financial health index respondents are considered financially healthy if they score positive on at least 6 out of 9 binary indicators related to their ability to manage day-to-day expenses,cope with shocks and invest in the future.FSDs analysis of th
183、e FinAccess household survey data shows that between 2016 and 2019,the percentage of financially included adults increased from 75%to 83%in Kenya.However,during the same period the percentage of adults classified as financially healthy dropped from 39%to 22%.These findings illustrate the limitations
184、 of the binary financial inclusion measure.Also,FSDs analysis,which builds on existing data and survey tools,highlights that financial health measures do not necessarily require entirely new tools and data.The measurement frameworks outlined so far all rely on demand-side data.In other words,they al
185、l entail conducting a survey among customers.There are also examples of measures that rely on supply side data to measure financial health.The Commonwealth Bank of Australia(CBA)and Melbourne Institute(MI)developed a financial health measure that determined the following data points to be the most e
186、ffective in accurately measuring a customers objective state of financial health:payment dishonours,payday loans,liquid balances and savings using transaction data.28 This observed measure is complemented by a subjective measure which builds on CFPBs scale,described above.The survey is conducted amo
187、ng the same clients.28.Payment dishonours refer to non-payments by due date.Payday loans refer to small,short-term,unsecured loans with high interest rates.The word payday specifically refers to post-dated cheques written out to lenders for payday salary in exchange for immediate cash from the lende
188、r.26Delivering Financial Health GloballyCBA-MIs findings show a strong positive correlation between observed and self-reported financial well-being,i.e.,70%of the respondents with high self-reported financial well-being scores also show high financial well-being based on transaction data.While the d
189、iscrepancies for 30%of the sample require further investigation,the findings do suggest that transaction data and self-reported data could serve as measures of financial health in conjunction or independently.29In conclusion,the outline above is not meant to be exhaustive,but shows how the measureme
190、nt of financial health can be approached in different ways.All frameworks discussed so far are helpful in their own right,whether focused on behaviours,perceptions or outcomes.However,the underlying logic of measuring financial health needs to be clear in order to draw the right conclusions.Consider
191、ations when measuring financial healthBased on the exploration of the various measurement frameworks discussed above,we identify four factors to consider when measuring peoples financial health.Outcomes versus DeterminantsIn Section 2,we distinguished the outcomes of financial health from its determ
192、inants.This distinction is equally relevant when measuring financial health.Most of the measurement approaches discussed above are outcomes-focused(CFPB,Gallup,CBA and IPA).Financial Health Networks measure of financial health also includes determinants.More specifically,Financial Health Network tes
193、ts for respondents spending,saving,borrowing and planning behaviour.This poses the question of whether financial behaviours or the outcomes of those behaviours provide a more relevant and reliable measure Figure 4:Four factors to consider when measuring financial healthOutcomes versus DeterminantsWh
194、ether financial behaviours or the outcomes of those behaviours provide a more relevant and reliable measure of financial health remains an open question.Financial Inclusion and Financial HealthFinancial health builds on and provides nuance to financial inclusion metrics.As such,the availability and
195、usage of financial products and services should be considered when measuring financial health.Financial health measures must be rooted in contextFinancial health measures need to consider the broader socio-economic and cultural context of the respondents.The extent to which certain factors influence
196、 peoples financial health may not be consistent across contexts.Demand versus Supply side dataCombining transaction data(supply side data)with self-reported,more subjective data(demand-side surveys)provides a nuanced and solid financial health measure.29.The discrepancy could be partially explained
197、by the fact that CBAs study included transaction data from CBA account holders only.27Delivering Financial Health Globallyof financial health.Or,as an example,should we ask people about their savings habits or consider their savings balances?Besides financial behaviour and habits,a broad range of va
198、riables play a role in determining an individuals financial health status.In Section 2,we made a distinction between personal characteristics(e.g.age,gender,income and assets)and environmental factors(e.g.household characteristics,social capital,socio-economic environment).CFPB conducted extensive a
199、nalysis in the United States on how some of these factors interact with financial health.Higher income,employment status,education level and older age all show a positive relationship with financial health.Within various subgroups of sample respondents there is a high degree of variation.For example
200、,while the average financial health of people with a university degree is much higher than the average financial health of people without a degree,some people with only a primary school degree show higher financial health scores than many people with a university degree.This confirms that many facto
201、rs are at play and that there is no single explanatory variable for financial health.While complex,considering the determinants of financial health is imperative.For measurement,it is important to make a distinction between outcomes and determinants.Measuring financial health outcomes allows to take
202、 stock and monitor how individuals financial health status evolves over time.Measuring the determinants is important to understand whether and how specific factors influence peoples financial health status.This is particularly relevant for policymaking and product design.More work is needed to bette
203、r understand the determinants of financial health and how these determinants interact.Also,if correlation with financial health is established,what is the direction of this correlation?And to what extent can the determinants be used as proxies for financial health?Financial health measures must be r
204、ooted in contextPursuant to the above,financial health measures need to consider the broader socio-economic and cultural context of the respondents.The extent to which certain factors influence peoples financial health may not be consistent across contexts.For example,in low-income countries social
205、capital is a key determinant of financial resilience.It is common to rely on family and friends to cope with and recover from financial shocks.In more developed countries,the welfare state offers a level of protection and basic economic security,such as Sweden and the Netherlands.Relying on social c
206、apital therefore,is less prevalent.For this reason,when CFPBs tool was applied in Brazil,some of the statements were tailored to suit the countrys financial conditions.Demand versus Supply side data(or client surveys versus transaction data)Most existing measurement frameworks discussed above rely o
207、n self-reported data(demand-side surveys);a few make use of transaction data(supply side).Both types of data have their pros and cons-not unlike measuring financial inclusion.The World Bank Global Findex database is a key reference for financial inclusion metrics.It provides longitudinal data and is
208、 comparable across countries.But demand-side data is costly and time-consuming to collect.Consequently,Global Findex data is available in 3-year intervals.28Delivering Financial Health GloballyOnce the systems are in place,supply-side data is less costly to collect and can provide real-time insights
209、.But supply-side data holds its own challenges.For one,there is limited evidence to suggest that account activity gleaned through transaction data could explain financial health.Second,private sector players are often reluctant to share data,for obvious reasons.When it is shared,for example,when man
210、dated by the regulator,data quality assurance warrants attention.It also requires strong systems and resources to manage,extract and analyse data.In addition,transaction or supply-side data used from a single institution to capture financial health does not capture the totality of an individuals fin
211、ancial condition.For example,it doesnt account for multi-account ownership.Additionally,cash-based transactions which could be substantial in low-and middle-income countries are not accounted for.Customer perceptions are at the centre of financial health measures and subjective assessments of financ
212、ial health status provide nuanced insights that cannot be extracted from transaction data.Also,the challenge of making a measure work across different contexts is(partially)addressed by including respondents self-reported qualifications of their financial status.At the same time,transaction data pro
213、vides very detailed and objective insights into financial behaviours.And contrary to customer surveys,supply side data is not impacted by response biases.Therefore,combining transaction data with self-reported,more subjective data provides a nuanced and solid financial health measure.This is in line
214、 with the frameworks of CBA and CFPB,outlined above.Financial Inclusion and Financial HealthFinancial health builds on and provides nuance to financial inclusion metrics.As such,the availability and usage of financial products and services should be considered when measuring financial health.IPA and
215、 CFPB consider the availability and usage of financial services as determinants.In an adaptation of Financial Health Networks model for developing countries,the use of financial tools is included in the actual measure of financial health(CFI&Financial Health Network,2017).For example,digital credit
216、offers significant opportunities for un(der)banked populations to access loans.However,due to ill-designed credit scoring systems and other features,it has also led to over-indebtedness and a bad credit score for many.A financial health measure should help us assess whether the means(financial inclu
217、sion)contribute to the ends(financial health).It is important to keep in mind that financial products or services do not,by default,have a positive impact on peoples financial health.They are tools to improve financial well-being,but can also carry a risk.If not designed or delivered appropriately a
218、nd for that matter used suitably financial services could in fact have a significant negative impact on peoples financial health.29Delivering Financial Health GloballyWho will measure,how and for what?We want to measure financial health to better understand what drives or inhibits peoples financial
219、health.In addition,financial health metrics are more comprehensive indications of an individuals financial life,which is key to understanding the client on many levels.Financial health measurement,therefore,is crucial for policymaking and the effective design and delivery of customer-centric financi
220、al solutions.Policymakers and the private sector have a key role to play in measuring financial health.The measurement frameworks discussed in this section allow policymakers,regulators and private sector players to assess how their(lack of)action impacts peoples lives in terms of financial security
221、 and resilience,control and/or freedom.Whichever approach is applied,the findings should inform appropriate public and private action that ensures and advances the financial health of people,particularly of marginalised groups,and incentivises the market to act in favour of their clients financial h
222、ealth.In their recent paper“Measuring Financial Health:What Policymakers Should Know,”insights2impact(i2i)lays out recommendations for policymakers to get started on the measurement of financial health.Drawing from these recommendations and the exploration described above,we outline below the propos
223、ed steps private sector players,policymakers and regulators could follow in measuring financial health.Figure 5:Three steps to follow in measuring financial healthFrame financial health characteristics and set objectivesSet a baseline and measure financial health periodically Extract insights to inf
224、orm financial solutions,policies and regulationsStep 1:Frame financial health characteristics and set objectivesA set of financial health characteristics would guide the public and private sectors actions to contribute to end clients financial health.Based on these characteristics,stakeholders can s
225、et their objectives and monitor progress.Below we list an initial set of characteristics that could be considered.Most are relevant to both public and private sector actors.30Delivering Financial Health GloballyFinancial Health CharacteristicsData collection:Is the financial health of end-clients me
226、asured and monitored over time?Product design:Is the design of financial solutions informed by financial health data?Is the clients financial security and resilience,control and/or freedom considered in the design and delivery of financial solutions?Attention to marginalised groups:Does the data mon
227、itor,measure and inform targeted actions to improve the financial health of vulnerable population segments,e.g.low-income,women,informal workers,elderly,and youth?Pricing:Are financial products and services priced fairly?Transparency:Are all product features transparent to ensure clients take inform
228、ed decisions and understand the impact on their financial health?Marketing and communications:Are marketing materials and other communications actively promoting financial health,for example through savings reminders or responsible financial education?Financial education:Is financial literacy and ed
229、ucation actively promoting messages related to financial health?Step 2:Set a baseline and measure financial health periodically Once the characteristics and objectives are set,the next step is to identify the measurement framework that will be applied to take stock,monitor and better understand how
230、individuals financial health status evolves over time.The considerations outlined earlier should be kept in mind.Of course,available financial and human resources are key drivers of the chosen methodology and frequency of data collection.For private sector actors,their own transaction data is a rich
231、 source of information to gauge the financial health of their customers.This can be supplemented by a short outcomes-focused survey conducted with a subsample of the institutions customer base.This requires dedicated human resources for analysing and extracting insights,but only limited efforts are
232、needed in terms of data collection.Annex 2 gives an overview of the indicators applied by the discussed frameworks.Larger surveys conducted with representative samples and repeated over time are needed for statistically significant data on changes in financial health status and deriving a more in-de
233、pth understanding of the drivers of financial health.Given the required financial and human resources,public sector actors are best placed to lead these efforts.For regulators and policymakers,it is equally relevant to understand whether and how the ecosystem as a whole is contributing to(or inhibit
234、ing)the populations financial well-being.In other words,how are market actors performing on the agreed characteristics?For example,how is the sector faring in 31Delivering Financial Health Globallyterms of pricing of financial solutions,data collection practices,and the availability of customer-cent
235、ric financial solutions.Step 3:Extract insights to inform financial solutions,policies and regulationsEqually important to measuring the status and progress in financial health of end clients is using the data and insights to inform the design of products,policies and processes,and communication mat
236、erials.This requires a strong commitment to the financial health characteristics by senior officials and the management.The relevance of a solid and nuanced framework to measure financial health cannot be overstated.The exploration of different approaches helped us identify the key considerations to
237、 keep in mind and provide initial guidance on measuring financial health as outlined above.Sections 4 and 5 will discuss how the private sector and policymakers could operationalize financial health.Section 4Financial Health and Financial Service ProvidersBuilding a case for the private sector,parti
238、cularly financial service providers to focus on financial health outcomes for their customers33Delivering Financial Health GloballyThis note explores the intersection between financial health and customer centricity and builds a case as to why financial providers should focus on the financial health
239、 of their low-income customers.Building on that,it provides a simple and practical roadmap for financial service providers to adopt and operationalise.This is the fourth section in a 5-part financial health series.It is meant for standalone reading but assumes basic understanding of the concept of f
240、inancial health,so a quick pre-read of sections 1 and 2 on the basics of financial health is recommended.Customer centricity efforts should be anchored to financial health outcomes for customersAt the core of every single financial service providers mission statement is the promise to improve custom
241、ers financial outcomes.“Ninety percent of the top banks and insurers have customer centricity at the top of their strategic agenda and their leaders say that they want to become more customer-centric,”said Henrik Naujoks,Partner,Bain&Company.Studies from Forrester and Deloitte demonstrate that custo
242、mer-centric companies bring in 5.7 times more revenue and 60%more profits than their counterparts.A recent article from Forbes lists 50 similar statistics that demonstrate the value of customer experience.30Customer centricity seems like common sense and the term is used by the private and developme
243、nt sector alike.Despite that,there is a near consensus that with few exceptions not a lot of progress is being made by financial services providers in achieving customer centricity.As it took hold as a goal to be pursued,the financial sector may have also been distracted by several technology,proces
244、s and product disruptions.The disruptors were not particularly holistic in their view of customer centricity.Financial“inclusion”drove many innovations to focus exclusively on making products more accessible.Adages such as“no 30.https:/ Financial Health Globallymore queuing at the bank”and“make depo
245、sits at the market”were and continue to be ubiquitous.User experience is another key focus,with providers aiming to make product use“seamless,”with emphasis on simpler interfaces and the use of agent banking among other things.But are we confusing customer service with the goals of financial inclusi
246、on?And,are pressures to“reach scale”adding to the industry seemingly losing sight of the bigger question:is my innovation or service transforming the financial lives of individuals,households and communities?We believe that our industry is more than a service provision.As development-oriented sustai
247、nable financial service providers,we all must put customer financial health at the centre of our business and orient our business toward achieving that goal.The rest of this article discusses a roadmap that financial service providers can follow to put customers at the centre and focus on their fina
248、ncial health.For financial providers,it involves looking at their organisation across four pillars:1)Strategic Imperative,2)Metrics&Measurement Model,3)Organisational Alignment,and 4)Marketing for Trust.Financial health as an explicit strategic imperativeThis step begins with a ground-truthing exerc
249、ise to arrive at a clear understanding of where the organisation currently stands in terms of customer centricity and financial health,followed by simply making a strategic choice as to whether customer financial health is an explicit executive priority or not.Wed like to caution here that a financi
250、al health focus needs to be a strategic decision which is core to how an organisation is led,designed and managed.It will not succeed if it is treated as a pilot program or merely as one of the many small departments or a function within the current organisational set-Figure 6:Four pillars to focus
251、on to put customers at the centre and focus on their financial healthCustomer financial healthFinancial health as an explicit strategic imperativeMarketing for TrustRe-prioritise your metrics and measurement modelOrganisational Alignment Technology,Products,Processes and Business Case35Delivering Fi
252、nancial Health Globallyup.If a focus on better customer financial health outcomes is not driven directly by the CEO,it will constantly be challenged by the legacy culture,and priorities of the organisation.Drawing from our work with numerous organisations over the last two decades that helped them b
253、ecome more customer-centric,we have developed this indicative framework to synthesise how customer centricity has evolved in the context of financial health.This framework reinforces the notion that a focus on financial health is the final frontier for financial providers who are truly and deeply co
254、mmitted to their customers.One can use this indicative framework to evaluate where an organisation stands in terms of customer focus.This will provide a quick reality check in terms of an organisations position along this spectrum that demonstrates an ideal journey from being transactional(organisat
255、ions who are on step 1 or step 2 focused on access and usage as depicted in the framework above)to transformational(organisations who are deliberately moving towards step four of being truly focused on building their customers financial health).Figure 7:A framework for customer centricity and financ
256、ial healthSTEP 1ResponsiveProactiveTacticalStrategicSTEP 2STEP 4STEP 3Customer ServiceCustomer JourneyTransactional(Access and Usage)Transformational(Financial Health)Customer SuccessCustomer ExperienceBasic:Good customer service is important for the organization.It must ensure it has courteous,help
257、ful and available staff who are responsive to customers needs.Intermediate:Making changes to customer touchpoints such as frontline staff,call centre,apps,etc.as well as peripheral changes to products,technology and services to improve customer experience at each step of their interaction with the o
258、rganization.Leading:The customers success mirrors the organizations purpose and success.Customer financial health is an executive priority and customer is the organizing principle around how an organization is structured.Deep customer insights is at the core of how an organization designs and update
259、s its products,processes,technology and delivery channels.Advanced:Move beyond customer touchpoints and focus on customer journeys(purchase decision,enrolment usage,problem resolution,etc.).Make significant improvements in tech,products,processes,and distribution to improve overall customer delight.
260、Financial health is the final frontier of an organisations customer centricity strategy36Delivering Financial Health GloballyOne can begin with three quick anonymous surveys:one with the top leadership team,one with associates and one modifiable version for customers,asking them to simply place the
261、organisation along this spectrum.The next step is to compare perceptions across these stakeholders.This quick exercise could provide major insights and represent a moment of truth,but more broadly this step amounts to the leaderships willingness and ability to simply make a strategic choice.This is
262、a critical step financial health is either an executive priority or not.If it is,then the next step is to resolve any gaps in alignment and have a shared vision of success across the organisation.For example,what does it exactly mean for an organisation to focus on customers financial health?In the
263、next section on metrics and a measurement model,we provide some insight into this question.Re-prioritise your metrics and measurement modelWith an agreed focus on customer financial health,the organisation must now identify their goals,and the measurement framework to understand if they are on the r
264、oad to the outcomes they seek.Under this section,we will cover three areas that are essential to developing a robust metrics and measurement model:1)developing a system to measure and understand customers financial health;2)using the resulting insights(from 1)to inform customer-focused metrics,refer
265、red to as primary metrics;and 3)reviewing and reprioritizing internal metrics related to institutional growth and efficiency,referred to as secondary metrics.Understanding your customers financial health Understanding customers financial health is difficult.The U.S.may be the market most focused on
266、trying to understand the financial health of Americans.Government and think tanks produce national surveys as well as qualitative and quantitative tools developed through various levels of academic rigor.For example,the Financial Health Network has identified a financial health framework that can be
267、 used to measure customers financial health across the four components of financial health:Spend,Save,Borrow,and Plan.31 The Consumer Financial Protection Bureau in the US has developed a set of questions and a scale to measure financial well-being.32 Another example is FSD in Kenya who have also de
268、veloped a measurement framework called the multidimensional financial health index and Commonwealth bank of Australia and Melbourne Institute who used both transaction data(leveraging bank account data)and a subjective customer survey to assess customer financial health.33 It is important to note th
269、at that there is no agreed upon framework to understand or measure financial health.(Read section 3 for more context).In addition,as some institutions only offer credit or savings,they will want to tailor what they can measure vis-a-vis what they currently offer or might want to offer.These framewor
270、ks can also be illuminating in terms of helping financial providers determine if their customers are financially healthy overall.31.https:/finhealthnetwork.org/score/32.https:/www.consumerfinance.gov/data-research/research-reports/financial-well-being-scale/33.https:/www.fsdkenya.org/research-and-pu
271、blications/inclusive-finance/and https:/fbe.unimelb.edu.au/research/streams/health-and-wellbeing/measuring-financial-wellbeing37Delivering Financial Health GloballyOrganisations can collect survey and transactional data to understand their customers financial lives and benchmark that data against na
272、tional or regional data.Transactional data such as on-time bill payment rates,savings balances or credit scores will provide financial providers with a narrow,yet a more nuanced view of their customers financial lives.Benchmarking transactional data against comprehensive internal surveys or the nati
273、onal or regional data is important as it is generally difficult to have a complete aggregated overview of a persons financial situation through transactional data alone.Drawing conclusions based on incomplete observed data will perhaps lead to wrong interventions.Collectively,this data will reveal g
274、aps,insights,and opportunities that will inspire and inform the design of new financial health strategies.In addition,continuous monitoring of customer financial health provides organisations with a way to measure the efficacy of their efforts and innovations to better guide the allocation of scarce
275、 resources to high ROI activities.Primary Metrics At the highest level,primary metrics should be:1)Focused on positive outcomes for customers;2)Clear and inspiring to everyone in the organisation;and;3)Measurable.We recommend having three primary metrics that cover three critical areas of the organi
276、sation:customer outcomes,customer perception,and organisational growth or efficiency.Customer outcomes:The first metric should be around real change or outcomes for the customer,Eg:increasing their short-term and/or long-term savings,increasing their business revenue,increasing their income,reducing
277、 their cost of credit/financing,reducing their defaults,improving their risk profile or credit score.It is important to note that these measures should be evaluated as sub-components of a holistic and rigorous financial health measure.A relentless focus on increasing savings can drive disproportiona
278、te rises in debt,and vice versa.The outcomes-based measure should be a holistic measure of financial health that ensures all aspects of a consumers finances(spending,income,savings,and debt behaviours)are balanced.Customer perception:The second metric is customer perception tracked regularly through
279、 a robust Net Promotor Score(NPS)system.34 Given our digital advancements,it is relatively straightforward to set up an NPS system.Depending on how customers interact with the organisation,one could begin by setting up a quick three-question NPS like survey over Whatsapp or any other messenger digit
280、al tool easily accessible to customers.Organisational growth or efficiency:The third one,which is more internal,could focus on either growth,efficiency or outputs,depending on the type of organisation and ones current priorities(for example,number of enrolments,usage,persistence etc.).In addition to
281、 focusing on frequency of engagement,these metrics should also include breadth of customer coverage and“necessary engagement”(e.g.x%of customers have automated savings and have stuck to their pre-defined settings).34.https:/ Financial Health GloballySecondary Metrics Once primary metrics are pinned
282、down,the next step is to identify a set of secondary metrics which are mostly internal or growth-focused like enrolments or usage as well as efficiency-focused metrics like revenue per client,cross-sell and upsell.One of the key differences between the primary and secondary metrics is that the prima
283、ry metric should be outcomes-focused i.e.in this case positive financial health outcomes for customers and the secondary metrics are mostly output-focused such as number of clients,usage of products,revenue per client etc.We leave a small window of exception open with one growth or efficiency-focuse
284、d metric to be included as a primary metric.We are also being simplistic as we recognize that most organisations do measure a mix of these or similar metrics but where they often fall short is at prioritising them in a way that enables organisations to focus on what matters the most for the organiza
285、tion as well as customers and a full alignment of interests between the organisation and customers.As a result,we see a trend where secondary metrics gradually take over the organisational strategy with the primary metrics being side-lined.This gradual decay or“mission drift”happens often and for st
286、raightforward reasons.It is significantly easier to manage and drive outputs(like enrolments)than outcomes for customers(like helping them increase their savings or improve their resilience)and of course,there are constant short-term performance pressures around profitability and increasing sharehol
287、der value.As a result,the secondary metrics which are meant to be a useful tool become the terrible master.Once the metrics are clear and prioritised,the next step is to ensure organisational alignment across all key functions,including technology,products and processes.Organisational Alignment Tech
288、nology,Products,Processes and Business CaseWhile restricting or realigning an organisation to be customer-centric is not simple or something that can be achieved by reading a 5-page brief,organisations that have a clear focus on customer outcomes and their financial health have the opportunity to ou
289、tperform those that do not.The good news is that once the first two steps are taken in the right direction i.e.a clear and shared vision of success that is focused on customers financial health and a metrics and measurement model that is in line with the organisations vision,one will have a better u
290、nderstanding of the changes that need to be made.These could be around improving technology to suit customer needs,adding or removing some products from the product portfolio,simplifying processes and adding or terminating partnerships.While some changes could seem overwhelming,the key here is to id
291、entify priorities and develop a step-by-step execution roadmap that is manageable,measurable and appropriate to the unique context and capabilities of the organisation.One of the major challenges that leaders within the organisations face as they evangelise such a fundamental and radical shift is es
292、tablishing a strong business case,which is specific to the organisation and clear in terms of its return on investment(ROI).39Delivering Financial Health GloballyWhile there is a lot of high-level data available that demonstrates that organisations which focus on maximizing customer value generate s
293、ignificantly better returns than organisations simply pushing products and services,the key dilemma here for most leaders is the time horizon.Focusing on financial health will require organisations to make investments that will pay off in the long run.It is important to ensure that the expectations
294、are well-aligned between the leadership and employees and that the organisation is willing and able to see the long-term value despite the pressures to look good and deliver within a short time frame.Financial Health Network,a partner of MetLife Foundation,has engaged with“Financial Health Leaders”,
295、leading financial providers in the US,and identified the key issues to consider when making the business case to their Boards and management.A table reproduced below from their note provides for a practical summary and overview of how improvement in financial health of customers affects the key busi
296、ness metrics which in turn,drive an organisations ROI at multiple levels.Improvements in customer financial healthSPENDSAVEPLANBORROWImpacts key business metrics Drives ROI at multiple levels Account Customer/Household Product Customer segment Channel Company Larger deposit balances Reduced delinque
297、ncies and charge-offs Increased cross-sales and customer lifetime value Higher customer satisfaction and retention Lower customer service costs Improved employee engagement and retention Enhanced reputational and brand value1.Spend less than income2.Pay bills on time and in full3.Have sufficient liq
298、uid savings4.Have sufficient long-term savings5.Have a sustainable debt load6.Have a prime credit score7.Have appropriate insurance8.Plan ahead for expensesFigure 8:Summarized business case for Financial Health(Source:Financial Health Network)Those in the process of developing a business case for th
299、eir organisations will benefit from reading the paper for a deeper dive into what each of the metrics mean and how to measure ROI at multiple levels.3535.https:/finhealthnetwork.org/research/making-the-business-case-for-financial-health/40Delivering Financial Health GloballyMarketing for TrustTrust
300、is the ultimate global currency.Simply put,any organisations success will depend on its ability to inspire and maintain trust between itself and its customers.It is even more true for financial providers as money and our relationship with money is one of the most ubiquitous expressions of trust.Trus
301、t has traditionally been considered a soft corporate issue;its value to a company is unclear,suggests Accenture in their strategy report titled The Bottom line on Trust.36 Accenture evaluated 7,000 companies across interdependent dimensions of competitiveness:growth,profitability,sustainability and
302、trust.The report found that more than 54%of companies in their sample experienced a drop in trust,with total revenues at stake equating to at least US$180B.As expected,the impact of a decline in trust was most material on the banking sector:A mere 2%drop in trust levels corresponded with a 22%drop i
303、n future revenue whereas a similar drop in trust levels in the manufacturing and media sectors led to a decline in future revenue by 1.3%and 2.2%respectively.Transparency and personalisation are more essential than ever in marketing.Personalisation can deliver 5-8 times the ROI on marketing spend an
304、d can lift sales by 10%or more(McKinsey&Company).Fortunately,for financial providers who are truly focused and committed to building the financial health of their customers,the foundational and key steps are already taken in the right direction.Instead of having to resort to generic financial litera
305、cy,education and marketing campaigns,financial providers should focus on building a connect with their clients and providing personalised financial solutions to help them improve their financial health.In conclusion,while focusing on customers financial health might seem like a radical and different
306、 way of doing business for most financial providers,there is sufficient evidence that there is a strong business case in doing so and is perhaps the most sustainable way to stay competitive and relevant to customers.36.https:/ 5Public Policy and Regulatory Considerations for Financial Health42Delive
307、ring Financial Health GloballyGovernments understand that the financial health of individuals impacts their capacity to be productive citizens.The pursuit of economic stability and growth requires that governments create the type of environment where people can effectively manage their day-to-day ec
308、onomic needs and invest in the future.Weathering financial shocks means fewer small businesses close,fewer children are pulled out of school,and fewer people suffer from preventable health concerns.Planning for the future means more businesses can invest in expansion,more children move from school t
309、o jobs,and more people live healthy,productive lives.These reasons,among many others,are why governments have an interest in public policy that promotes financial health.The concept of financial health can be defined in many ways.Most broadly,it encompasses four important aspects of an individuals f
310、inancial life:security,resilience,control and freedom.(Refer section 1).Despite the societal and public policy benefits of these dimensions,the practice of creating policies that align with financial health is still nascent.Most policymakers and regulators focus broadly on financial sector stability
311、 and consumer protection.Stability and protection are necessary,but insufficient,preconditions for financial health.Infrastructure,technology,business models,cultural norms,behavior,and many other factors also influence the financial health of individuals.The COVID-19 pandemic has provided a clear c
312、ase for the importance of financial health.The shock of lockdowns,collapse of entire industries,and prolonged nature of the pandemic have tested individual and societal resilience.With limited ability to generate income and significant uncertainty in future employment prospects,the pandemic has demo
313、nstrated that there are systemic barriers to financial health that extend beyond an individuals propensity to save or plan.Policymakers and regulators now face an imperative to adapt their mandate,experience,and tools to promote financial health as a critical public policy priority.43Delivering Fina
314、ncial Health GloballyFinancial health is a relatively modern public policy paradigm,with a growing awareness of its importance.Rightfully prudential risk management remains critical to manage systemic stability and market integrity.This inherent focus impacts institutional structures and resources a
315、llocated to research,policy,and regulation.Officials who are willing to champion financial health still face the challenge of adapting the organisational architecture that impedes the integration of financial health into policy and regulatory systems.Research,policy development,supervision,and indus
316、try engagement are examples of the systems that make up the architecture of financial system management.Within each is human resources,processes,budgets,and legacy systems that define how governments pursue financial sector public policy objectives.The rest of this chapter discusses how policymakers
317、 and regulators can adapt,augment,and repurpose these systems,so financial health policy complements the existing focus on managing prudential and conduct of business risks.There should not be a trade-off between these priorities.We strongly believe there is a synergy between a financially healthy s
318、ociety and financial sector stability.The highest order public policy objective should be to seek out this synergy.Starting point:Define the problem Role of measurementMeasurement becomes a central attribute of the enabling environment for financial health.Policymakers and regulators can manage the
319、nuances defining and monitoring financial health by investing in research and data collection systems.A baseline survey is a necessary and logical starting point.The Centre for Financial Regulation and Inclusion proposes a framework for measurement comprised of financial health indexes,resilience fo
320、cused inquiry,and diagnostic customer research using detailed surveys.37 Governments would do well to apply this framework as a starting point for their own financial health agenda.(See section 3 for other information on financial health measurement)Supply-side data through compliance reporting from
321、 financial institutions can be a foundational component of a baseline dataset.Compliance data is often focused on prudential risk and should be adapted to measure specific attributes of financial health.For example,more granular credit data can determine client exposures,particularly when cross-refe
322、renced with baseline data from local credit registries.38 Better data also includes disaggregating data by sex/age/location,reducing double counting of accounts and refining complaints data.However,supply-side data alone is insufficient.Measuring financial health for better policy and regulations re
323、quires the complete integration of demand-side data into existing systems.Many regulators currently focus extensively on supply indicators(particularly for measuring financial inclusion)and rely on external actors to provide relevant demand-side data.Fully embracing financial health as a priority re
324、quires policymakers and regulators to invest in collecting demand-side data while also improving the quality of supply-side data.Impact assessments are an essential component of the measurement systems for financial health.The Organisation for Economic Co-operation and Development(OECD)has extensive
325、 research on impact of policies and regulation and notes that an impact assessment“provides crucial information to decision-makers on whether and how to regulate to achieve public policy goals”.39 Thus impact 37.https:/cenfri.org/publications/measuring-financial-health-what-policymakers-need-to-know
326、/38.https:/www.bis.org/ifc/events/7ifcconf_damia_israel.pdf39.https:/www.oecd.org/gov/regulatory-policy/regulatory-impact-assessment-7a9638cb-en.htm44Delivering Financial Health Globallyassessment systems can help shape policy outcomes and determine if the regulations have been effective.They should
327、 be integrated into the oversight process,rather than seen as a separate exercise.The impact of policy on financial health may not always be direct.For example,the role of social capital should be accounted for as a determinant of financial resilience,particularly in markets where public welfare sys
328、tems are not prevalent.Systematic impact analysis,using supply and demand-side data,can give policymakers and regulators the confidence that their interventions are working.Or inform how to improve those that are not.It is expected that data derived from supply and demand-side measurement will influ
329、ence strategic planning and supervisory priority-setting.However,it can also define research priorities which feed into policymaking.For governments,data can also play an important role in facilitating financial health outcomes by empowering many critical non-policy or regulatory domains.Data made p
330、ublicly accessible can supply sorely needed data to consumer advocacy groups,educational institutions,civil society,and academia,all of whom can integrate the insights into their own respective programs or development of market segment-specific resources.Government sponsored financial health data ca
331、n also inform public campaigns on emergent financial behaviours,risks,or activities.Lastly,it can guide the approach used to foster more responsible innovation,helping service providers to develop better,higher-quality services.What policies will drive financial health?In addition to measurement,pol
332、icymakers and regulators require other tools to implement an enabling environment for financial health.Policy objectives must be clearly defined,evidence-based,and measurable.Regulations must enforce fair and accessible markets.Supervisors need to hold financial institutions accountable to standards
333、 that serve financial health outcomes.There are three broad areas of policy to consider:1.The measurement processes should track outcomes that can translate to industry level or national targets.Targets may,initially,be imperfect in an emerging practice like financial health.At a minimum,targets are necessary to guide regulatory implementation and measure policy impact.More transformative is the r