1. The Case For Social Investment in Microcredit: Four years ago, at the suggestion of Alex Counts, I started working on a review of operationally relevant academic research specifically for practitioners. I finally finished it this month [sad trombone]. One of the reasons for the long delay was that the world kept shifting. Over the last 18 months it became clear that the need was not just to document the opportunities for innovation in microfinance but to specifically address whether additional social investment in microcredit was justified given the published impact evaluations. So I ended up making the case for social investment in microcredit. I believe the case for additional social investment is strong—not despite, but because of, what we’ve learned from impact evaluations. Obviously there’s much more in the paper, but here’s the one sentence summary (there’s a one-page summary in the paper): Microcredit is a cheap intervention with modest but generally positive effects with a great deal of scope for evidence-based innovation that could materially improve impact. The kicker, though, is that the innovation required to boost microcredit’s impact is unlikely to happen without targeted social investment.
Please take a look and argue with me, publicly or privately, about it.
2. Digital Finance and Household Behavior: I lied, I admit it. A few weeks ago the faiV featured "the most interesting" papers from NEUDC. But the most interesting paper wasn't ready for circulation so I couldn't include it. It is now. Tomoko Harigaya studied what happened when savings groups in the Philippines were transitioned to digital finance tools--in other words, group leaders stopped taking cash deposits, instead directing members to make deposits themselves using mobile money. Members could now also make withdrawals without traveling to a bank branch. The result was a significant drop in savings deposits and savings balances and an increased reliance on informal loans. In other words, "convenience" went up and usage went down. The effects seem to be driven by those closest to bank branches ex ante, by the loss of positive peer effects and by increased salience of fees for transactions. Now there are some obvious ways to potentially counteract these effects but it is an important cautionary insight into how little we know about how digital stores of value and transactions affect household financial behaviors--and an especially important finding for the bank itself which would have seen it's funding costs rise from a program designed to reduce operational costs since it relied on deposits as a cheap source of capital.