Financial education is central in overcoming vulnerability. While vulnerability is an inevitable fact of life, it occurs in diverse ways. In high-income countries, unexpected shocks threaten wage incomes and households cannot sustain living expenses. Except during systemic shocks (covid-19), acute vulnerability is the exception. In low-income countries, vulnerability is an everyday occurrence. The poor earn their living through self-employment in informal markets or small subsistence farms. Daily incomes are too low, irregular, volatile, and unpredictable. Basic consumption depends on daily incomes, and when not enough is earned, hunger follows.

The poor suffer idiosyncratic shocks (illness, accidents) and systemic shocks (natural disasters, price fluctuations, civil war). Given multiple, frequent shocks, incomes fall below levels that sustain minimum consumption, assets are lost, delinquent loans are followed by foreclosure, and critical expenditures (health emergencies) rise unexpectedly. Escaping poverty might not be sustainable, households are kept in poverty traps, and poverty persists across generations.

Finance matters for the poor, precisely because they are poor. They deal with shocks and emergencies, transform irregular incomes into stable consumption, take advantage of productive opportunities, and make lumpy investments.  Without access to deposit facilities, they accumulate illiquid and risky assets (goats, jewelry) as precautionary and speculative reserves. Without access to institutional loans, they rely on a multitude of informal sources: relatives, friends, moneylenders, landlords, traders, input suppliers. Although indispensable for survival, informal finance has limitations. It is costly (moneylenders), risky (goats) or not a good match when households face systemic events. Inclusion in institutional financial markets is indispensable.

Financial inclusion results from the confluence of the supply of providers that match requirements of vulnerable populations and demands emerging from time preferences, attitudes toward risk, and ability and willingness to pay for various services. Diverse barriers (distance, imperfect information, incompatible incentives, absence of institutions,  and covariance) make the confluence of demand and supply hard to achieve. Missing markets result in financial exclusion. Inclusion requires products that match diverse potential demands, offer high quality at low costs, and are timely, reliable, permanent. Inclusion requires awareness of users about the existence and terms and conditions of services, understanding of their appropriateness, and the ability and willingness to engage in financial transactions.

Financial education transfers knowledge and fosters incentives that change attitudes and choices. Both appropriate products and the actions encouraged by financial education are required. Products without financial education are irrelevant! Without financial literacy, their supply is useless. At best, it is as if products were invisible. At worst, use without understanding might be harmful. Financial education without products is frustrating! If suitable products are missing, potential users do not find valuable services. Knowledge that cannot be applied is counterproductive. Product development and financial education must be parallel processes, joint learning-by-doing exercises involving both providers and clients. The key is consistency. If desired products are not available, unhappiness follows. If products are not appropriate, they are rejected. If they are not understood, opportunities are missed. If use is not voluntary, products are ignored.

Heterogeneity characterizes vulnerable populations. Each group demands different product features and requires different pace and direction in their financial education path. Segmentation is central. Product features and financial education must be tailored to the specific circumstances of each set of users. Institutions in the BBVA Microfinance Foundation Group understand segmentation and compatibility. Examples of bundling of products designed for each segment and tailored education are the strategy in support of women entrepreneurs and programs for small farmers, with a focus on environmental sustainability, accompanied with training on business skills.

Client success determines institutional success. Institutional success determines the number, variety, and quality of services. Success is grounded on long-term client relationships. The pandemic has challenged relationships based on meeting in person and accelerated digitalization. SMS, What´s App, social media and virtual classrooms are used to deliver lessons. These initiatives highlighted the persistence of digital gaps. To reduce them, education in digital skills is added to the bundle of financial and non-financial services. The BBVAMF Group offers financial services adapted to the circumstances of diverse clienteles, accompanied by financial education, business training, and digital skill acquisition. The new post-pandemic normal demands this  comprehensive approach.