The Social Meaning of Money too shows how preferences develop and are reinforced by social contexts. Economists have not yet paid much attention to preference formation, but the work so far suggests that it is a promising path for empirical inquiry, especially as researchers look to next steps in understanding the economics of gender and the nature of decision-making under conditions of substantial scarcity.
By Jonathan Morduch
November 7, 2015
By Jonathan Morduch
Economics and the Social Meaning of Money
The Social Meaning of Money too shows how preferences develop and are reinforced by social contexts. Economists have not yet paid much attention to preference formation, but the work so far suggests that it is a promising path for empirical inquiry, especially as researchers look to next steps in understanding the economics of gender and the nature of decision-making under conditions of substantial scarcity.
The financial and business models for collecting savings by microfinance institutions have been relatively little explored in literature. This paper seeks to fill the gap by evaluating deposit-taking MFIs that rely on two primary types of savings: those that emphasize raising funding (through large deposit accounts) and those that emphasize service (through small deposit accounts). The findings suggest that geographic location, level of economic development, and regulatory environment all play an important role in dictating the types of models that are likely to be adopted. Different models also have substantially different funding and operating costs. Finally, net outreach levels in terms of number of savers served appear to be little affected by choice of model, though in many cases outreach may be skewed by widespread presence of empty accounts, which overstate the number of active depositors, and understate the average account balance.
By Daniel Rozas
For the world’s poor, living with unpredictable and inadequate income flows makes it difficult to cope with risk. Catastrophic events such as illness or crop failure can be devastating financially. Households use a variety of strategies to protect themselves from misfortune. Formal insurance may be the last resort after all other possible mechanisms for risk protection become unworkable.
But how exactly will insurance be delivered? What new innovations matter most in insuring the poor? What can be done to increase microinsurance take‐up rates? This briefing note seeks to explore these questions and provide additional resources on these and related topics.
August 2013
By FAI
Big Questions in Insurance
For the world’s poor, living with unpredictable and inadequate income flows makes it difficult to cope with risk. Catastrophic events such as illness or crop failure can be devastating financially. Households use a variety of strategies to protect themselves from misfortune. Formal insurance may be the last resort after all other possible mechanisms for risk protection become unworkable.
But how exactly will insurance be delivered? What new innovations matter most in insuring the poor? What can be done to increase microinsurance take‐up rates? This briefing note seeks to explore these questions and provide additional resources on these and related topics.
It would appear self-evident that poor families are unable to save. If these households are barely making ends meet, they must be so preoccupied with covering immediate needs that thinking about the future is a luxury. However, this proves not to be the case. Most poor households, even those earning less than $2 a day per person, have disposable income (Banerjee and Duflo, 2007).1 And yet, demand for and use of formal and informal savings products falls far below what theory would predict.
In this briefing note, we explore the benefits and risks for saving, the issue of profitability for making savings products available to the poor, how people are saving, and new innovations that can facilitate great access to savings tools.
August 2013
By FAI
Big Questions in Savings
It would appear self-evident that poor families are unable to save. If these households are barely making ends meet, they must be so preoccupied with covering immediate needs that thinking about the future is a luxury. However, this proves not to be the case. Most poor households, even those earning less than $2 a day per person, have disposable income (Banerjee and Duflo, 2007).1 And yet, demand for and use of formal and informal savings products falls far below what theory would predict.
In this briefing note, we explore the benefits and risks for saving, the issue of profitability for making savings products available to the poor, how people are saving, and new innovations that can facilitate great access to savings tools.
Digital payments may be an important part of closing gaps around financial access. But how will digital payment systems be deployed? What design elements would create value for poor users? How can payment systems be the first stepping stone to other financial products? What are the regulatory issues surrounding mobile payment systems? This briefing note seeks to explore these questions and provide additional resources on these and related topics.
August 2013
By FAI
Big Questions in Payments
Digital payments may be an important part of closing gaps around financial access. But how will digital payment systems be deployed? What design elements would create value for poor users? How can payment systems be the first stepping stone to other financial products? What are the regulatory issues surrounding mobile payment systems? This briefing note seeks to explore these questions and provide additional resources on these and related topics.
We combine two datasets to examine whether the scale of an economy’s banking system affects the profitability and outreach of microfinance institutions. We find evidence that competition matters. Greater bank penetration in the overall economy is associated with microbanks pushing toward poorer markets, as reflected in smaller average loans sizes and greater outreach to women. The evidence is particularly strong for microbanks that rely on commercial-funding, use traditional bilateral lending contracts (rather than group lending methods favored by microfinance NGOs), and take deposits. We consider plausible alternative explanations for the correlations, including relationships that run through the nature of the regulatory environment and the structure of the banking environment, but we fail to find strong support for these alternative hypotheses.
February 2013
By Robert Cull, World Bank; Asli Demirgüç-Kunt, World Bank; and Jonathan Morduch, NYU
We combine two datasets to examine whether the scale of an economy’s banking system affects the profitability and outreach of microfinance institutions. We find evidence that competition matters. Greater bank penetration in the overall economy is associated with microbanks pushing toward poorer markets, as reflected in smaller average loans sizes and greater outreach to women. The evidence is particularly strong for microbanks that rely on commercial-funding, use traditional bilateral lending contracts (rather than group lending methods favored by microfinance NGOs), and take deposits. We consider plausible alternative explanations for the correlations, including relationships that run through the nature of the regulatory environment and the structure of the banking environment, but we fail to find strong support for these alternative hypotheses.
What We Know So Far: from 15 randomized control trials (RCTs) on the impact of microsavings.
March 2015
By Financial Access Initiative
What We Know So Far: from 15 randomized control trials (RCTs) on the impact of microsavings.
What we know so far: 9 randomized control trials (RCTs) about the impact of microcredit.
August 2015
By Financial Access Initiative
What we know so far: 9 randomized control trials (RCTs) about the impact of microcredit.
The US Financial Diaries track the finances of a small sample of low and moderate-income households over a year. The households faced substantial swings in income from month to month. On average, they experienced 2.5 months when income fell more than 25 percent below average.
March 2015
By Anthony Hannagan and Jonathan Morduch
Income Gains and Month-to-Month Income Volatility: Household evidence from the US Financial Diaries
The US Financial Diaries track the finances of a small sample of low and moderate-income households over a year. The households faced substantial swings in income from month to month. On average, they experienced 2.5 months when income fell more than 25 percent below average, and 2.6 months when income was more than 25 percent above average. The volatility is summarized by an average coefficient of variation of monthly income (within year, averaged across households) of 39 percent. The CV is greatest (55 percent) for households below the poverty line, but the CV remained relatively high (34 percent) and steady for households with income from 100 percent of the poverty line up to 300 percent. Thus, in the non-poor sample, greater income did not imply notably greater income stability.
In this note we focus on the savings group as a model for delivering products to address this market failure. Reviewing recent research, we extract the mechanisms that make savings groups effective. We then explore the potential to apply these factors to formal products that make sense for both providers and consumers.
November 2014
By Alicia Brindisi, FAI & Julia Siwicki, FAI
The Wisdom of the Group: How Lessons from Savings Groups Can Guide Financial Product Innovation.
Budgeting can be a daunting task for the poor. Poor families must stretch low, often-volatile income to meet basic consumption needs, and handle unforeseen expenses. Despite these challenges, the poor are able to save. They often do so in small amounts for short periods of time, adding to and spending down savings frequently. But short-term saving seldom results in long-term assets—it is not a tool for building up larger sums.
Savings groups are a popular and effective way of helping poor households increase their savings. But is there a way to incorporate the mechanisms that make them effective outside of the group in savings products in general?
Savings groups are a popular and effective way of helping poor households increase their savings. But is there a way to incorporate the mechanisms that make them effective outside of the group in savings products in general?
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