Among the useful insights from behavioral economics (or behavioral science, if you prefer) is a greater understanding of the difficulties everyone faces following through on our good intentions to save for the future. People routinely say that they would like to save more—to build a cushion, for retirement, for a future vacation—but when the time comes to put money away, it gets spent instead.
Some of the most well-known and oft-cited policies and products influenced by behavioral economics address this issue Read More
About 2.5 billion adults, just over half the world’s adult population, lack bank accounts. If we are to realize the goal of extending banking and other financial services to this vast “unbanked” population, we need to consider not only such product innovations as microfinance and mobile banking but also issues of data accuracy, impact assessment, risk mitigation, technology adaptation, financial literacy, and local context. In Banking the World, a new collection of research papers edited by Robert Cull, Asli Demirgüç-Kunt, and Jonathan Morduch, experts take up these topics . . . Read More
A very interesting microfinance experiment is in the new issue of the American Economic Review, one of the premier journals in the field (Published, but gated, version here. Ungated version here). The paper is by FAI Affiliate Xavi Giné, Jessica Goldberg (see her recommended reading on savings here), and Dean Yang. It's not often that microfinance makes the pages of AER; it's a testament to the work that Xavi, Jessica and Dean did to set up this experiment and their careful analysis of the data.
In brief, the experiment tested the effects of fingerprinting borrowers from a microcredit program in rural Malawi. I had the opportunity to interview Xavi and Dean (separately) for my upcoming book on economic field experiments and we talked about this work. I’ll let them explain the project and its implications in their own words . . . Read More
A lot of progress has been made in understanding the savings behavior of poor households over the last few years. A raft of new studies are beginning to appear that promise to advance our understanding further.
But thus far, the new studies are providing as many new mysteries as answers. David Roodman does a good job of exploring the mysteries presented by one of the first of these studies—a trial of a commitment savings product in Malawi. In summary, the researchers found that access to a commitment savings product helped increase savings balances—but NOT in the commitment savings account. Sometime soon I’ll be blogging about a new paper from Pascaline Dupas and Jonathan Robinson that similarly suggests that a commitment device works even though it doesn’t require much commitment.
The mysteries aren’t limited to commitment devices though . . . Read More