Financial empowerment is a relatively new approach to poverty reduction that goes beyond financial literacy. It focuses on improving the financial security of low-income people through a set of five interventions. These interventions have proven successful at eliminating systemic barriers to the full financial inclusion of low-income people, by providing them with enabling supports for learning the financial skills and practicing the behaviors that tangibly improve their financial outcomes and build their financial security.
The five interventions include:
- financial information education and counselling (usually known as financial literacy)
- help accessing income boosting benefits and tax credits
- support in accessing safe and affordable financial products and housing
- access to savings and asset building opportunities
- consumer awareness and protection
Evidence from a wide range of scaled interventions in the United States and local community initiatives in Canada (community collaborative s), suggests that a financial empowerment approach can help to measurably advance the reduction of poverty, increase employment, encourage savings for home ownership, retirement or post‐secondary education, and reduce health care and social service costs.
Field interviews and site visits of several organizations in Western Canada delivering this kind of program suggests that it is financially viable and sustainable over the long-term, and it is demonstrated to be an effective strategy to reduce poverty.
A community collaborative model can deliver these programs in many cities not already involved in this type of work. These initiatives demonstrate how to establish sustainable programs at a relatively low cost by pooling community resources.