1. Business Training: Previous evaluations show the effectiveness of business training programs is mixed at best. But a new paper finds (as with most things in life) it helps to have a friend. The World Bank - Development Impact
2. MFIs: Can financial service providers address domestic violence among microfinance clients? CFI
3. Savings: In India, MFIs that offer savings products have a chicken and egg problem – they struggle to attract savings because their clients don't perceive them as a savings provider. MicroSave
New USFD Household Profile
Each of the U.S. Financial Diaries' Household Profiles presents the financial life of one family in the USFD study. While these families are not necessarily representative of the total sample, they illustrate recurring themes: households struggling with income volatility, unplanned expenses, and finding ways to save and invest, but also using creative–and sometimes counter intuitive–budget and money management strategies to help make ends meet.
The latest profile focuses on Elena Navarro, 27-year-old woman living outside of San Jose, CA. She has a bachelor’s degree and ambitions to attend law school. While Elena’s degree and experience qualify her for jobs that pay well above the poverty line, she lives close to the margin . . .
Read MoreFinancial Access 101: Why Savings Groups Work
Our recent Financial Access 101 video provided an introduction to savings groups - a common tool used around the world to help poor families build savings and better manage their financial lives. In our latest installment in this series, we explore why savings groups work. The underlying mechanisms of these groups (public commitment, social norming, salience, limited access, and mental accounting) work together to create an effective way of helping poor households increase their savings . . .
Read MoreWeek of October 27, 2014
1. Financial Inclusion: Lisa Servon asks: Are banks too expensive to use? The New York Times
2. Savings: A newly launched micro-pension platform in India links employers and domestic workers to a streamlined enrollment process for a National Pension Scheme product. CFI
3. Human-Centered Design: Seven human-centered design projects in eight countries testing 30 prototypes for 175 concepts for financial products or services. All in one report. CGAP
Week of October 20, 2014
1. Financial Inclusion: Dean Karlan asks: If microcredit has reached maturity, what's next for the financial inclusion movement? SSIR
2. Impact Evaluations: It may take a long time, a really long time, to see the impact of development interventions. The World Bank - African Can End Poverty
3. Housing: As much as 70 percent of the world’s population uses “incremental building,” a process of slowly improving shelter by adding components of a house. A new report looks at how to better serve these customers with housing-related financial products. SEEP Network
Week of October 13, 2014
1. SMEs: SMEs in the developing world are sometimes too big to access a microloan but too small to attract major investors or capital. Could crowdfunding offer a solution? InfoDev
2. Microfinance: From Bangladesh to the Hawkeye state - the American Midwest may be microfinance's newest frontier. The Guardian
3. U.S. Economy: Five facts on income inequality in the US. Pew Research
NYT: In Lending Circles, a Roundabout Way to a Higher Credit Score
Earlier this week, The New York Times published a feature on new initiatives aimed at bringing informal savings groups into the formal financial sector:
Read MoreWhile informal lending circles among families, acquaintances, co-workers and neighbors are familiar to hundreds of millions of people all over the globe, they are rarely recognized by mainstream financial institutions . . .
Week of October 6, 2014
1. Financial Inclusion: India’s vision of boosting financial inclusion by building thousands of bank branches may be inadequate if those branches actively prevent customers from purchasing low-cost products. IFMR
2. Insurance: How can small firms protect themselves against risks and continue with expansion plans even in an environment of uncertainty? The World Bank - Development Impact
3. Housing: A new study finds that relative to homeowners, renters in the U.S. comprise a financially fragile population that is burdened by debt and lacks emergency savings. FINRA
Financial Access 101: Intro to Savings Groups
Budgeting can be a daunting task for poor famlies - they must stretch low, often-volatile income to meet basic consumption needs, handle unforeseen expenses, and try to build savings. But banks and formal institutions often do not offer savings products to the poor because their small deposits and frequent transactions do not cover the cost of servicing accounts. For rural populations, not having a nearby bank branch is another obstacle to formal savings.
Despite these obstacles, poor families DO save. Savings groups are one tool that poor access as a dependable mechanism for saving. In the latest video from our Financial Access 101 series, we provide an introduction to savings groups, the basic models, and why they help poor families better manage their financial lives . . .
Read MoreNew USFD Household Profile Highlights Yearly Budgeting with Seasonal Income
Many of the households included in the U.S. Financial Diaries project operated on a weekly or monthly budget, balancing income and expenses in relatively short-term periods. However, the subject of the latest household profile, provides an example of long-term, annual budgeting.
Sandra Young lives in Brooklyn with her grown children Tyler and Kayla. She manages several branches of a tax preparation agency, which means that she earns most of her income during the six months between November and April. Sandra has chosen an unusual structure for her financial life, and the seasonal nature of her income means that she has to budget over a longer time period than many households . . .
Read MoreNew From USFD: Profile of A Single Mom's Financial Balancing Act
The U.S. Financial Diaries project, a joint initiative of NYU Wagner’s Financial Access Initiative (FAI) and The Center for Financial Services Innovation (CFSI), reveals hard-to-see aspects of the financial lives of working Americans, providing new insight for the design of financial services policies, programs and products for a broad range of Americans.
Each of the project's Household Profiles presents the financial life of one family in the USFD study. While these families are not necessarily representative of the total sample, they illustrate recurring themes: households struggling with income volatility, unplanned expenses, and finding ways to save and invest, but also using creative–and sometimes counter intuitive–budget and money management strategies to help make ends meet. . . .
Read MoreUSFD Project Releases New Report on Informal Finance
People run their financial lives with a variety of tools. The first tools that come to mind are likely to be formal, like checking accounts and credit cards. But households often use informal tools that are harder to see from outside, like short-term loans from friends or relatives. Some people use informal financial services because they lack access—or believe they lack access—to quality products or because they do not trust formal options. It’s tempting to think that these informal tools are last resorts, or second-best solutions, but informal financial mechanisms are often combined with formal tools, and sometimes are preferred . . .
Read MoreWeek of September 29, 2014
1. Savings: How do you build credit without a bank account? One strategy is linking savings group activity to credit bureaus and formalizing invisible financial activitythat already occurs in many households, including those in the U.S. Financial Diaries project. Vox
2. Financial Inclusion: What explains Latin America's financial inclusion gap? Poor-quality institutions, income inequality, and low educational achievements. Center for Global Development
3. Microcredit: Smart Campaign responds to the recent debate on responsible pricing and self-regulation from the 17th Microcredit Summit in Mexico. NextBillion
FAI's Jonathan Morduch on "The Hidden Tragedy of the Poor"
Recently Upsides sat down with FAI’s Jonathan Morduch to discuss his views on the current state of microfinance and his current project – US Financial Diaries. Morduch highlights that whether in the developing world or the US, the poor face many of the same financial struggles, which is why understanding money management strategies at the household level a crucial step to providing more effective financial services to the poor . . .
Read MoreVideo: What's Behind Door #3? Investment in Migration for the World's Poor
This week’s UN General Assembly meetings brought renewed attention to the set of global goals that will replace the Millennium Development Goals (MDGs) when they expire in 2015.
The latest draft of the new “Sustainable Development Goals” (SDGs) is a kitchen-sink-like receptacle for the interests of every possible development constituency. There are some obvious and glaring problems with this. To focus on the plus side, though, this enormous brain dump allows space for some intriguing new thinking about what the global community can and should agree upon . . .
Read MoreWeek of September 22, 2014
1. Impact Evaluations: Most impact evaluations look at interventions to improve the lives of the poor, but are they actually making poor people’s lives better? The World Bank - Development Impact
2. Financial Inclusion: Elisabeth Rhyne reminds us the recipe for digital financial inclusion (technology + efficient delivery models + effective regulation) is easier said then done, even when a country has all of the "ingredients" in place. Center for Financial Inclusion
3. Retail Banking: Walmart announced it now offers customers a low-cost checking account product through a partnership with GoGreen. The new "GoBank" accounts have no overdraft fees or minimum balance requirements. TechCrunch
Studying Cash Flow Patterns to Design Better Loans in Myanmar
“If you build it, he will come.” Unfortunately, this line that worked so well in Field of Dreams is less effective in the world of social enterprise. Simply producing and having the networks to distribute a product does not guarantee its success—to be successful, a product must address a customer need.
What better way to understand customers’ needs, wants, and limitations than to involve them in the design process? This customer-centric philosophy is also known as human-centered design (HCD). I work with Proximity Designs, a social enterprise that sells locally manufactured solar lanterns and low-cost irrigation products to smallholder farmers in rural Myanmar. Before we launched these products at scale, our team presented prototypes to farmers in the field. Farmers could see, hold, and operate the products and give us immediate feedback on size, color, weight, price, and wattage.
But when Proximity launched its microfinance services in 2010, we had to come up with a different approach . . .
Read MoreWeek of September 15, 2014
1. Credit: In 2013, 4 million workers, or about 3% of all employees, had wages garnished for a consumer debt in 2013 - sometimes at rates of up to 25% per paycheck. ProPublica
2. Poverty in the US: The poverty rate in the US dropped for the first time since 2006, but the number of Americans living in poverty remains the same. US Census Bureau
3. Microfinance: MFIs in West Africa respond to Ebola outbreak. While some are suspending operations, others are granting loan forgiveness, or spreading preventive information to their communities. CFI
Every Dollar In, Every Dollar Out
Think back on the past year in your financial life: the money you received from work, loans or gifts, the purchases large and small, the bank deposits and withdrawals. Now imagine keeping track of every one of those transactions - regardless of your income level, it would be a mind-boggling endeavor.
Yet that's exactly what the U.S. Financial Diaries project has done . . .
Read MoreA Tale of Two Studies: Measuring Women’s Empowerment Then and Now
In what seems to me an unfortunate conflation, the literature on women’s empowerment frequently relies on the same characterization as pornography: “you have trouble defining it but you know it when you see it.” If “empowerment” is hard to define, it is even harder to measure. This is a problem for researchers trying to establish a clear causal relationship between microfinance interventions and better outcomes for women.
In theory, microcredit could empower women through a number of different channels. For example, giving loans to women could increase their bargaining power within the family, and afford them greater control over household resources and decisions. The peer monitoring component of group-lending could provide protection against abuse, and deter domestic violence. Empirically, however, the picture is quite mixed . . .
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If you were hoping that the faiV would be a pleasant distraction from the overwhelming flow of AI-related content, sorry. For the record, the faiV had “ai” built in before Anthropic existed. And a housekeeping note: we’ve finally jumped ship from Mailchimp to NYU’s mailing platform—I guess if you’re reading this it’s been a seamless transition and if you’re not, well, you’re not. Feedback on the faiV’s content and format and delivery methods is always welcome, just drop me an email.
- Tim Ogden