Synthesizing Best Practice Frameworks for Enhancing Financial Literacy Support in Microenterprise Lending

Abstract

Average poor financial literacy among micro-entrepreneurs is a recurring challenge that affects the productive utilization of money in lending and payback activities resulting in increased rates of defaults and mistrust. Aim Our study aims to address this by bringing together best practice models for the delivery of financial literacy support, client education, business advisory support and participation in providing microfinance services. We build a conceptual framework informed by theory from adult education, service co-production and behavioral economics to inform an intervention pathway between targeted financial capability interventions, improved credit behaviors and enterprise resilience. Through an evidence-review methodology, the article maps and evaluates an assortment of support schemes, such as modular financial literacy training, peer-network schemes, and embedded business advisory provision, focusing on their theoretical strengths and practical integration issues. Policy and institutional implications related to scalability and sustainable monitoring for effective monitoring of the impact of the intervention are provided, specifically with respect to repayment performance and relationship building. The paper provides practical policy insights for microfinance institutions and policy makers looking to optimize the social and financial returns on microenterprise lending.