What does having “good financial health” mean?

Have you ever taken out a loan to meet your expenses? Did you take out insurance the last time you went on a foreign trip? Have you ever saved up in order to achieve a specific goal in your life?

It is very likely that knowing how to manage your personal finances is what led you to take those decisions. If this is the case, you are considered to enjoy ‘good financial health’.

According to BBVA Microfinance Foundation (BBVAMF)’s 2018 Social Performance Report  ‘Measuring what really matters’, being in good financial health means being capable of “managing money so that income covers expenses and investments, to meet unexpected eventualities and for use” at future life stages. This is why it is a key feature in supporting the development of the entrepreneurs we serve, especially those who live in vulnerable situations.

Having a good financial health is not an end in itself, but a means to reach other goals such as building a livelihood out of entrepreneurship.”

For the first time, BBVAMF, together with the Bill & Melinda Gates Foundation, the Center for Financial Services Innovation, (CFSI) and Innovations for Poverty Action (IPA), have analyzed financial health as one of the impacts that having access to financial services has on its entrepreneurs in Colombia and Dominican Republic. Through a survey on 1,100 clients, the study aimed to find out whether having a bank account or a loan improves the entrepreneurs’ capacity to take responsibility for their finances by: achieving a better balance between expenses and income, accumulating assets, saving and managing their debts sensibly, among other abilities.

The first research results indicate that the majority of clients manage their finances well.

This analysis allows the Foundation to observe how its Productive Finance model contributes to improve the lives of more than 2 million entrepreneurs served in Latin America. Given that the outcomes are a direct consequence of having had access to the formal financial system, they also provide information about the type of product that best suit their needs. A line of action that helps to meet BBVAMF’s purpose: the development of vulnerable people with productive activities.

However, having good financial health is not an end in itself, but a means to achieving other sorts of goals, such as running one’s own enterprise as a livelihood. Something we have already seen when Adelaida used a microcredit to upgrade a small business. And also when María wanted to safeguard her savings to build a bigger house, and when entrepreneurs from Peru took enough precaution by taking out a voluntary insurance policy.

The Foundation is fully aware of all the efforts that its entrepreneurs make to stay in good financial health. That is why, whether it is to plan for the future, mitigate the effects of a natural disaster or regulate their cash flow, BBVAMF stands by its commitment to support them so that they can optimize the resources they have within their reach, make their dreams come true and have a better life, together with their families.