Today, The New York Times featured research from the U.S. Financial Diaries as well as other sources to explore the issue of income volatility and how it is affecting the financial lives of Americans. The complete article is available here.
For millions of Americans, including USFD households, income fluctuates monthly, weekly, and seasonally. In fact, 61% of the time (for those in the study), there is a mismatch between spending needs and income flows. According to principal investigator Jonathan Morduch, “This is a hidden inequality that often gets lost.”
Read MoreToday researchers and national experts will share early findings from the U.S. Financial Diaries (USFD) project, which tracked every dollar earned, spent, borrowed, saved, and shared by 235 low- and moderate-income households in five states over the course of a year—thus providing a powerful picture of how millions of Americans work to make ends meet. At the event, you will have first access to USFD findings. . .
Read More1. Mobile Technology: Privacy and other regulatory concerns have limited access to mobile communications metadata useful for public health. Is there a path forward? Brookings
2. Savings: "After years of relative neglect from proponents of 'financial inclusion,' why are [ROSCAs] now getting the attention they deserve?" CFI
3. Cash Transfers*: Are cash transfer evaluations doing enough to measure community-level tensions? IRIN News
Read More1. E-Payments: Electronic vouchers and mobile money may be a fast, cheap way to transfer funds in some parts of the developing world but when digital infrastructure is weak (like in the DRC), old fashioned cash may be the best option. Mercy Corps
2. Financial Inclusion: Bangladesh's central bank is dropping the requirement of a guardian's signature and lowering bank account fees in hopes of bringing 7.4 million working children into the formal financial system. The Guardian
3. SMEs: Shifting the focus from regulations to actual transaction costs (gathered from local firm owners) could provide a richer, more accurate picture for The World Bank's annual Doing Business report. Policy Innovations
Read MoreBudgeting 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.
The poor have an acute need for savings tools to amass lump sums of money, yet the supply of useful products often falls short, in part because formal providers face barriers to entry in this market. Savings groups are (and have been) a traditional method used by households around the world to save. But what makes these groups effective? What value do they provide for members? Can lessons from savings groups inform the design of products that reduce cost, reduce risk, and help consumers save?
Read More1. Mobile Money: Ignacio Mas thinks allowing independent cash in/cash out agents would be a huge boost to mobile money. Would loosening regulations spur mobile money take-up and innovation? NextBillion
2. SDGs: Is full financial inclusion a means or an end? The Guardian
3. Financial Inclusion: Peru, Colombia, and the Philippines top The Global Microscope 2014's list of the most conducive environments for financial inclusion. The Economist Intelligence Unit
Read MoreThe latest household profile from the U.S. Financial Diaries project presents the story of Mateo Valencia, 31, and Lucia Benitez, 30. Mateo and Lucia are an unmarried couple currently living in Queens, New York after moving to the U.S. from Ecuador in 2005. They live with their four-year-old son Pablo in a three-bedroom, one-bathroom townhouse, and they rent out rooms to friends and relatives who are between homes or jobs. Mateo and Lucia are in many ways emblematic of the American immigrant experience. They came to the U.S. with hopes of building a better life and while they are not truly secure yet, they are finding opportunities. They each work multiple jobs and actively seek additional income earning opportunities. But Mateo and Lucia live much of their financial life outside the formal financial system. They deal primarily in cash, so there is little information to support a credit score and they do not have long-term savings or health insurance. Their undocumented status also undermines their ability to invest in the long-term . . .
Read More1. 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
Read MoreEach 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 MoreOur 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 More1. 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
Read More1. 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
Read More1. 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
Read MoreEarlier this week, The New York Times published a feature on new initiatives aimed at bringing informal savings groups into the formal financial sector:
While 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 . . .
Read More1. 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
Read MoreBudgeting 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 MoreMany 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 MoreThe 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 MorePeople 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 More1. 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
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Editor's Note:
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