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December 13, 2013

New & Noteworthy

By Alicia Brindisi

This week’s edition of New and Noteworthy includes a debate on the feasibility of cashless societies, a new credit scoring system in the Indian MFI space, and a report on the trend of major banks offering payday loans.

  • NPR reported on a growing trend in banking – many banks are now offering products called “deposit advances,” which are essentially payday loans with high fees. Regulators recently put new restrictions on the loans such as only allowing banks to lend money once per month and not in consecutive months.
  • One of the identifying characteristics associated with the “millennial” generation is they cannot be separated from their smart phones, a fact that has led to a growing interest in completely mobile banks among young consumers.
  • Due to income instability and risk inherent in conditions of poverty, poor people need flexible financial products to improve their day-to-day money management and cope with shocks. A new paper by Marc Labie, et al. discusses how microfinance institutions could design flexible products efficiently.
  • The New York Times reported this week on the impact of rising housing costs and gentrification on the poor. The article explores both the demand and supply issues affecting the affordable housing markets in major cities across the US.
  • The New Yorker takes a broader look at some of these issues in, “Who Belongs to the Lower Middle Class and Why Does it Matter?,” . Families who belong to the lower middle class have incomes between $15,000 and $60,000 annually and are more likely to be married, college educated, and working. However, they are still struggling to make ends meet. The article discusses the potential policy approaches to targeting this segment of the population and reducing income inequality in the US in general.
  • Also in The New York Times this week was an interactive online debate on the topic of whether or not the US should move to a completely cashless society. (This would certainly have made the Sorry, Cash Only project a lot harder!)
  • Equifax, one of the three major credit information companies in the US, announced it’s entering the microfinance market. It is launching a new product in India called Equifax MFI Risk Score, which will help MFIs understand the credit profile of potential borrowers.
  • Martin Cihak posted an introductory analysis of the World Bank’s Financial Inclusion Strategies Database, which documents more than 50 countries’ national approaches to promoting financial inclusion. While bike share programs continue to grow in cities across America, they are not without critics and are sometimes accused of not serving low-income individuals.
  • This NPR report notes that one issue in expanding access to the transportation alternative is one of financial exclusion since the current bike systems only take credit cards.

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