Virtual Conference Day One: Innovations, financial behaviors and methodology, part 3

*On June 8th and 9th, 2010, MicroSave and FAI sponsored a virtual conference – Reimagining Microfinance around the World: Implementing Lessons from Portfolios of the Poor – to share findings from yearlong financial diaries kept by villagers and slum dwellers in Bangladesh, India, and South Africa.

Session Three Summary (June 8, 2010)

Innovations and financial services for the poor
David Cracknell of MicroSave wondered if there have been significant changes in how people manage their money over time, and made specific references to the impact of the Mzansi accounts in South Africa. Daryl Collins noted that Portfolios researchers revisited the original South African diary households in 2009, five years after the first financial diaries on these households, to see how they might have changed their financial behavior in light of both Mzansi and the broader Financial Sector Charter that required financial services to become physically closer to poor households. Daryl provided some of their key findings, including:

•    A 22% increase in take up of new banking services – most were new accounts opened by people who already had accounts, but in rural areas, the number of unbanked adults was driven down from 42% of the sample to 21%.
•    Higher saving as a percent of monthly income (i.e., the amount put aside from monthly income): about 19% of income in 2004 compared with 27% of income in 2009 (perhaps reflecting a real median increase in income per capita of 8%).
•    Comparisons between 2004 and 2009 of the same sample of households showed: Much higher use of bank accounts, much higher accumulation of savings in bank accounts, and slightly higher balances held in bank accounts.

Daryl concluded that this data suggests that we must expect that often changes in financial behavior come in shifts in the financial portfolio and not a wholesale abandonment of a particular device or practice, and this is likely to happen fairly slowly over time, and directed readers to the www.finmark.org.za website for more information on the study.

Rakhi Mehra wondered about limited innovation in the MFI space and brought up some interesting points about the for- and non-profit aspects of the microfinance industry. Ursula Heimann from Savings Banks Foundation for International Cooperation asked about what the financial diaries revealed regarding marketing-mechanisms, messages, and communications channels for the poor, and if the moderators could speak to insights from the research related to savings products. Daryl noted that mental accounting was the "stop-order of the poor," and that practitioners can do more experimenting around labeling accounts in different ways. Currently, there are a large number of permutations of these labels making it difficult to find the "right" one, though a global round of simple focus groups would be a step in the right direction. Daryl cited research from Innovations for Poverty Action (IPA) in Ghana that is working off of this idea. The role of mobile banking is an exciting frontier. Daryl pointed our attention to IPA's work in Bolivia and M-Pesa's "Send Money Home" campaign.

Daryl picked up on the thread covering accumulators, which were introduced in a discussion of post office savings account. She noted that the process of accumulating in small lumps to make larger ones was observed in Portfolios households. She referred to Olga Morawczynski and posed a question to the group regarding their knowledge of other evidence of the impact of e-money as an accumulating mechanism

Understanding Financial Behaviors
Vinnie Gajjala wondered about the empowerment of women and how we measure this outcome. Daryl cited research from Naila Kabeer, based at the University of Sussex, and included her paper, “Conflicts Over Credit: Re-Evaluating the Empowerment Potential of Loans to Women in Rural Bangladesh,” in World Development from 2001. Daryl noted that the broader point here is not necessarily solving how we measure different outcomes, but rather to emphasize that we need to think harder about how and what we measure.

Amit Krgarg brought up some great points about life cycle events—planned and unplanned—and how they impact the finical behavior of the poor. Daryl commented that unplanned events are a critical component of drivers to borrowing. What the portfolios revealed, she reported, was a lack of untied, medium duration funds that one could tap into if "things went wrong."

Methodology
Sarah Myers from the Center for Social Development at Washington University in St. Louis raised two questions: 1) in light of Portfolios research using interviews rather than self-reporting methods, is there room for self-reporting using the diary methodology to reduce cost and allow for a larger sample? and 2) what types of information came from the qualitative portion of the survey where respondents were asked to share their thoughts or feelings about each transaction recorded, and what risks could be associated with collecting other types of household information (e.g., social or developmental impacts of MFI participation) in this way?

Citing the Portfolios research and Angus Deaton's discussion of LSMS surveys, Daryl reflected that she was skeptical about self-reporting and concerned about results leading practitioners to the wrong conclusions.