Week of April 28, 2014

1. Poverty in the US: Despite improved living standards, the poor in the US have fallen further behind the middle class and the affluent in both income and consumption. In addition, the cost of many services crucial to escaping poverty —  including education, health care and child care — has soared. The New York Times 

2. Behavioral Economics: A new report illustrates how policy makers and human services administrators can draw on the principles of behavioral economics to design programs to better serve poor and vulnerable populations in the US.  OPRE

3. Financial Services: Large financial institutions continue to move away from brick-and-mortar branches in favor of online banking – banks closed a total of 281 branches in the US in the first three months of 2014, representing approximately 2% more total closures in branches than last year. Quartz

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New Remittance Data, Ripe for Analysis

A collaboration between the Gates Foundation and the Gallup World Poll has gathered new data on remittances for a broad set of countries in Sub-Saharan Africa and in South Asia, home to many growing markets for mobile banking and money transfers. 

Collected jointly with the Global Findex data, the new data include answers to questions such as: 

  • “Have you personally brought money in person or sent money to a family member or friend living in a different city or area in [your country of residence] in the last 30 days?”
  • “Have you personally brought money in person or sent money to a family member or friend living in a different country in the last 30 days?”
  • “Including any charges you may have incurred, was the largest amount of money you personally brought in person or sent to a family member or friend living in a different country in the last 30 days?”
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Bangladesh’s bKash Adoption Puzzle

On a recent trip to Bangladesh, one question kept pestering me:  if mobile bank accounts are so good for the poor, why haven’t they adopted them already? After all, financial products and services for the poor have the potential to improve lives, but only if they are actually adopted and used. 

I traveled to Bangladesh to set up a randomized controlled trial to test for the impacts of mobile banking on financial management, food security, health and self-reported well-being for poor households . . . 

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Week of April 21, 2014

1. Payments: Wal-Mart launched Walmart-2-Walmart this week – a new service that will allow customers to send and receive up to $900 at a time at more than 4,000 stores.  The Wall Street Journal

2. Financial Inclusion: Shawn Cole of Harvard Business School stresses the importance of design in serving poor customers, specifically how the process of creating products meant to “bank the unbanked” is unique. CFI Blog

3. Cash Transfers: Christopher Blattman and Paul Niehaus discuss the latest developments in the world of cash transfers, including how they can serve as index funds for international development. Foreign Affairs

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Unhappy Tax Day for Some

Last week the New York Times highlighted a trend among low-income communities: people seeking tax prep at unregulated, sometimes fraudulent, pop-up shops. The article explains, "for millions of low-income Americans tax season means the biggest one-time influx of money all year." When preparers hand these customers a lump sum much larger than they're used to seeing on a daily basis, many filers don't think to check the numbers. After all, they sought a professional to do the work so they wouldn't have to . . . 

Low-income tax filers are vulnerable. 

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Week of April 14, 2014

1. Digital Payments: Facebook is finalizing preparations to begin offering financial services to its users, allowing them to store and exchange money. CNBC

2. Remittances: A new report on the impact of remittance fees on Africa's development investment claims that reducing charges to 5% would increase transfers to the continent by $1.8 billion annually. Overseas Development Institute

3. Financial Inclusion: The next generation of ATM innovations (sending money to someone, paying bills, and loading a portion of a check) may not require a bank account and could potentially provide alternative financial services to the unbanked. American Banker

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The Life of the "Microentrepreneur"

There has been plenty written on the failure of microcredit-funded enterprises to grow or achieve more than minimal profitability. If you’re curious why microenterprises don’t grow, I recommend reading a new piece that provides some insight into the life of a microentrepreneur. It’s from an unexpected source: a Fast Company magazine article about the emerging world of task-based “entrepreneurship” in the United States. Companies like Uber, TaskRabbit, Postmates, AirBnB and Amazon (via its Mechanical Turk service) allow people to earn income by doing odd-jobs, renting out a room or running errands. The rosy view that all these companies present is that they are providing an opportunity for people to earn money on their own terms and in the hours that they are not otherwise occupied. And each prominently features stories of individuals who are doing quite well, even quitting regular jobs and substantially profiting from using these tools (not unlike, it should be noted, the stories that emanate from microcredit).

But that is not the experience of the average user . . . 

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Not For Free

Two weeks ago I attended a Payments Bootcamp put on by Glenbrook Partners (a 2-day class they hold several times a year) to learn more about how the payments industry works behind the scenes. There is a lot to learn. Two days allows more than just scratching the surface, but not much more. While the class is focused on the payments infrastructure in the United States particularly, the material illuminates the evolution of mobile money and digital payments in the developing world.

A better understanding of the economics of the payments industry provided the foundation for a new longer-term research project on the future of digital payments innovation in developing countries. But one thing that immediately grabbed my attention was a conversation from the first day about why the payments system in the United States is so complicated and opaque (for instance, it is now virtually impossible for a small merchant to know what fees they will pay for a credit card transaction). According to Carol Coye Benson, a Glenbrook partner teaching the course, the root cause is the stubborn refusal of consumers to be overtly charged for payments. The attitude seems to be that no one should be charged for using “their own money" . . . 

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Week of April 7, 2014

1. Savings: FAI affiliate Ignacio Mas challenges us to step back from usage data and rethink how we approach the development of savings products for the poor. Center for Financial Inclusion

2. Behavioral Economics: According to Helaine Olen, Americans' financial woes have "more to do with the outside economy than their inner psyche."  Bloomberg

3. Payments: New research presents findings on who is using prepaid debit cards and why.  One suprising finding? it's not necessarily the unbanked - 7 in 8 users have or previously had a checking account. The Pew Charitable Trusts

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Week of April 4, 2014

  • David Evans from the World Bank provides a nice round up of key publications at the 2014 Pacific Conference for Development Economics, including papers on cash transfers and wages in Mexico, commitment savings products in the Philippines, and flexible microcredit design in Bangladesh.
     
  • Researchers at the University of Colorado – Boulder analyzed findings from 188 studies  (and over 585,000 combined participants) on the connection between financial literacy and financial decisions.  From this meta-analysis, they found that education programs that are timed to be close to the financial decision have the biggest impact but that most interventions show weak links between education and financial decisions.
     
  • You may think of savings groups as typically found in developing countries but this NPR piece highlights the ways they are used among communities in the US to provide access to savings and credit.
     
  • A new study from the California Reinvestment Coalition reports on the impact of ATM fees for welfare recipients that use electronic debit cards. Over 96% of recipients use the cards and are often charged fees of $3-4 per transaction. Bank of America earned $3.6 million from welfare transactions in one year.
     
  • FAI affiliate Igancio Mas discusses how the very words that describe financial products can change their usage and perception.  For example, many think of “savings” as something you do when you have excess money instead of a useful tool for dealing with emergencies.
     
  • NPR’s Marketplace recently reported on workplace lending – when borrowers take out a loan through their employer, with repayments taken directly from paychecks.
     
  • The IRS ruled that virtual currencies are property and subject to tax, which some say severely limits the potential of Bitcoin as an alternative currency since it is no longer fungible.
     
  • Eva Vivalt of NYU’s Development Research Institute posted a blog on ways to improve impact evaluations that draws on data from over 400 studies in an AidGrade meta-analysis.

BRAC Innovation Fund Announces Idea Challenge

On my recent trip to Bangladesh, I had the good luck to cross paths with and chat over dinner with Maria May and Amanda Misiti, two members of the Social Innovation Lab at BRAC who are engaged in advancing the organization’s mobile money agenda.  Founded in 1972 in a rural village in Bangladesh, BRAC is one of the world’s largest and most influential nonprofits, serving by its estimates over 135 million people in need . . . 

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Should Your Post Office Be a Bank?

Last month brought a flurry of opinions on postal banking in response to a new proposal that the US Post Office offer financial services – including bill-pay, check cashing, even small loans – to the “financially underserved.” Reactions have ranged from enthusiastic to deeply skeptical. This post highlights two key questions that have been posed and synthesizes some of the answers offered up so far.

Would the underserved consumer actually benefit?

Some say yes. There’s evidence that the Postal Service’s financial products would be able to reach people who are “significantly poorer, older, less educated, and less likely to be employed” than those who bank at formal financial institutions according to CGAP, citing a 2013 Findex report which found that as much is true in other countries with postal banking . . . 

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How can financial services advance the rights of the poor?

I recently attended the launch event for Bill Easterly’s latest book, The Tyranny of Experts.  His thesis is that international development policies have been determined by a group of so-called experts, who both ignore the rights of the poor and systemically violate those rights.  After his presentation, Professor Easterly urged the audience to start more discussions that highlight a rights-based development agenda.

This call to action prompted me to think about how the provision of financial services can advance the rights of the poor, and reminded me of my first-hand experience with Slum Dwellers International (SDI) in Uganda.  SDI is a grassroots organization of the urban poor that started in India in 1996 but now works in 33 countries . . . 

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Week of March 25, 2014

  • The National Consumer Law Center (NCLC) published a new report analyzing claims that big data and predictive algorithms will create alternative credit scores and new options of accessing credit for the unbanked.  NCLC concludes that more customer data does not necessarily equal good customer data or accurate scores and those scores may be violating federal laws.
     
  • There were a few big announcements recently in the mobile money world  – Safaricom and Airtel jointly bought out yuMobile, the third-biggest telco in Kenya, T-Mobile announced it will offer financial services in Poland through a partnership with Alior Bank, and MTN partnered with Ecobank to allow customers to transfer money between accounts and withdraw cash from Ecobank ATMs in 12 African countries.
     
  • In a recent webinar, Bankable Frontier Associates discussed key findings from four recent CGAP and Better than Cash Alliance case studies that examine the e-payment experience of cash transfer programs in low-income settings in Kenya, Uganda, Haiti and the Philippines. 
     
  • When RCTs include treatments at the village or district level, what happens to individual consent?  Jed Friedman discusses the ethics of consent and trials in a post for the World Bank’s Development Impact Blog.
     
  • Both The New York Times and WNYC profiled the lives and financial hardships of individuals working low-wage jobs.  While the Times looks at Chattanooga, TNand WNYC at New York, the struggles of households to get by share commonalities with each other and with those of the US Financial Diaries project.
     
  • FAI affiliate Daniel Rozas partners with Gabriela Erice on a new paper for the European Microfinance Platform that shows at MFIs and banks in Bolivia, Nicaragua, and Pakistan 50-75% of savings accounts at MFIs and banks in Bolivia, Nicaragua, and Pakistan are empty and balances of accounts with funds are at least double the average reported size.
     
  • Tom Murphy covers the recent debate on why remittances have fallen in the US-Mexico corridor and includes excerpts from a recent Felix Salmon article on this topic, Tim Ogden’s blog response to Salmon, and Michael Clemens and Tim’s work on migration as a household investment strategy.

Deflating the Promise of Using Remittances to Cope with Financial Shocks

Over the past three years, I have been working on the Microinsurance Learning and Knowledge (MILK) Project, focusing on one specific question: Do clients obtain value from microinsurance? As the project comes to an end, I feel more and more that this is only one of the many questions that we should be asking as we think about how low-income people cope with risk and financial shocks.  Insurance is one of many coping strategies; it is not always the quickest, the easiest, or the most accessible. But it is an important complement, and in some cases, can take the “bite” out of some of more difficult strategies such as selling assets, borrowing at high interest rates or drying up savings . . . 

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Quiz: How Much Do You Really Know About Mobile Money?

Last month the Mobile Money for the Unbanked group at GSMA released their state of the industry report for 2013.  They’ve been collecting data on mobile money since 2010 so a more complete picture of changes in the industry is starting to emerge, and this year for the first time they’ve added other mobile money products like insurance, credit and savings, which make up a growing piece of the mobile money pie. Though we try to keep up on what’s new in mobile money, some of the findings surprised us.

We hear that people these days are into quizzes (admit it, you already know which Game of Thrones character you are). Now get out your pencil and paper to tally up your scores, and see how much you really know about the global mobile money industry . . .

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Women Pay More and Get Less: Experiences from Malawi

Here on the FAI blog we’ve written many posts  on the shortcomings of financial literacy training programs, both in the US and abroad. When I came across a study from the World Bank’s Development Research Group evaluating a vocational training and entrepreneurship program in Malawi, I was prepared to add this to the stack of mounting evidence of training programs that show little to no effect on business development and personal finance and move on. But in this case, the study focuses on the gendered differences of participation in the training course, not just whether or not it was effective at facilitating new business activity.

Like previous research, the Malawi study found no effects on self-employment*, but it did find significant differences in satisfaction and self-esteem between women and men after taking part in the program. The authors (Cho et al.) comment, “these differences are explained by both the conditions under which women participate in training, as well as gender differences in the training experience" . . . 

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Week of March 14, 2014

  • CFSI published its Prepaid Industry Scorecard, which analyzes 18 prepaid cards and assesses their level of quality based on criteria related to transparent communication and marketing, overall value for the customer, and ability to expand financial access.
     
  • While mobile phone penetration in Ghana is over 90%, up-take of mobile money services lags behind, particularly in rural areas.  IMTFI investigates why this is the case and also looks at the role of the private sector and government in promoting the use of these services. 
     
  • The ILO’s Microinsurance Facility issued its 2013 annual report with the theme “Protecting the Working Poor.”  The report not only summarizes the work of the organization over the last year but also looks at shifts and trends in the microinsurance industry since 2008, focusing on the commercial viability of products and their value to customers.
     
  • Elisabeth Rhyne, Managing Director for CFI, turns a critical eye to the current state of the microfinance infrastructure, focusing on key organizations that set standards and provide information globally. 
     
  • Kevin Starr and Laura Hattendorf from the Mulago Foundation write a compelling piece for SSIR that reminds readers to temper the hype surrounding GiveDirectly and to not mistake “an important experiment for a proven solution” to poverty.  Also see Chris Blattman’s response to the SSIR piece.
     
  • According to the IFC, “The total supply of formal finance to women-owned MSMEs [micro, small and medium enterprise] in 2012 is around Indian rupees 2.31 trillion ($42 billion). This resulted in a finance gap of Indian rupees 6.37 trillion ($116 billion), or 73 percent of total demand.”  The organization’s new report on the state of women-owned MSMEs in India looks at why this gap in demand exists and offers recommendations on improving female entrepreneurs’ access to finance.
     
  • We appear to be in another cycle of the “RCT debate”: see recent posts from Lant Pritchett, Chris Blattman, Rachel Strohm, and David Mckenzie. Here are couple of posts from FAI Managing Director Tim Ogden from the last cycle: on External Validity and  Transcendental Significance critiques.