Building financial resilience in the context of deprivation: experimental evidence from a family financial literacy and parenting programme in South Africa

Background:
Living in poverty exposes individuals to multiple risks. These include food insecurity, restricted access to educational, financial, and medical institutions, vulnerability to income shocks, indebtedness, and poor mental health. In response, many development programmes seek to build financial resilience among the poor by helping them build security buffers against emergencies and secure their basic needs with volatile incomes. Popular intervention strategies have capitalised on promoting budgeting and saving skills. However, effectiveness of these programmes has often been limited, particularly when targeted at low-income participants. Therefore, it is essential both for policy and research to determine which programme designs can most effectively foster financial resilience whilst improving financial management and decision making.
This thesis begins by depicting the financial lives of the poor and illustrating the poverty-linked adversities they face. The concept of financial resilience is introduced to define the outcomes analysed in the thesis and motivate a theory of change. DPhil Paper 1 summarises experimental research of existing resilience-building programmes in Sub-Saharan Africa. Based on this comprehensive review, gaps in previous programmes and evidence are highlighted and potential new intervention strategies drawing on psychological and social aspects are discussed. The empirical part of the thesis reports on a cluster randomised controlled trial to evaluate the economic impact of a family-based financial literacy and parenting programme targeting poor households in the Eastern Cape province of South Africa (DPhil Paper 2). Mechanisms underlying changes in financial behaviour are elucidated in DPhil Paper 3.
Methodology & Results:
Paper 1 – The first paper synthesises and critically appraises existing randomised controlled trials on the effectiveness of saving and budgeting promotion programmes in Sub-Saharan Africa. An extensive search of 28 academic and policy-focused databases was conducted and 27 relevant programme evaluations were identified. Data extraction and quality ratings were carried out independently by the candidate and another review author. Standardised effect sizes were pooled across studies for each outcome category using robust variance estimation. Heterogeneity in effect sizes was examined in a series of meta-regressions, considering the impact of programme curriculum, target population, and study design characteristics. The meta-analysis provides evidence for a small (standardised mean differences between 0.01 and 0.07) but significant impact of saving and budgeting promotion programmes on poverty reduction, including increases in household expenditures and incomes, higher returns from family businesses, and improved food security. Results also show positive and significant effects (standardised mean differences between 0.04 and 0.12) on intermediate outcomes, including total savings, pro-saving attitudes, financial literacy, and investments in small-scale family businesses. Findings from meta-regressions suggest that providing access to formal banking schemes is more effective than delivering programmes with educational and/or motivational focus. Further to this, findings point to reduced programme effectiveness for female participants. This paper is published in World Development (5-year IF: 3.35).
Paper 2 – The second paper draws on primary data from a randomised field experiment with 552 families in the Eastern Cape, South Africa. 40 villages and townships were randomly assigned to either participate in a combined parenting and financial literacy programme (treatment arm, 270 families) or receive a one-day hygiene workshop (control arm, 282 families). Different specifications of regression analyses (adjusting for baseline variables or not) with clustered standard errors are used to estimate the intent-to-treat effect of the parenting and financial literacy intervention five to nine months after programme delivery. Experimental evidence points to significant improvements in financial behaviours, with higher saving and lower borrowing rates among treatment group participants at post-test. There is further evidence for substantial effects on household economic welfare, expressed in significantly reduced financial distress, better resilience to economic shocks, and a greater capacity to secure a range of basic needs (standardised mean differences ranging from 0.10 to 0.62). There is tentative evidence that programme effects are higher (with regards to some outcomes) for rural dwellers but diminished for women who are not the household heads. This paper is published in the Journal of Development Economics (5-year IF: 3.43).
Paper 3 – The final paper builds on findings from DPhil Paper 2 by applying a mixed-methods framework to elucidate the pathways underlying changes in financial behaviour. Thematic analysis was applied to data collected in focus group discussions and in-depth interviews with programme participants, aiming to identify distinct narratives on the mechanisms of change. Qualitative evidence elicits three driving factors for changes in financial behaviour, namely (a) a higher confidence in financial management skills, (b) a more optimistic future outlook, and (c) increased socio-emotional support provided by peers and family members. These mechanisms were then cross-validated using mediation analysis and a structural equation model. Quantitative results point to higher levels of financial self-efficacy and optimism as well as improved parent-child relationships and community social support in the intervention group. Together, these factors can be seen to translate into optimisations in financial behaviour.
Conclusion:
This thesis argues that financial behaviour and financial decision making in poor families is shaped by a complex interplay of psychological and social factors. It follows that programme curricula that leverage these influences – in addition to standard financial literacy training – have the potential to achieve greater impact. To test this argument, the thesis presents evidence on the beneficial economic impacts of a multi-faceted parenting and financial literacy programme for poor families in the Eastern Cape, South Africa. Despite the evidence presented, this thesis acknowledges that future, more complex research designs are needed to confirm the causal impact of psychological and social programme components. In addition, findings from this thesis, and particularly from the systematic review, highlight reduced effectiveness for female programme participants. Therefore, gender-sensitive programming that tackles prevailing gender norms and power dynamics within household bargaining processes is necessary and should be integrated into financial curricula. This thesis paves the way for more holistic programmatic innovations to alleviate financial hardship in highly vulnerable and deprived populations.

Advisor: Cluver, L
Meinck, F