Thanks to the COVID-19 crisis, many microfinance borrowers can’t repay their loans. That in turn means that microfinance institutions (MFIs) won’t be able to fulfill obligations to their investors. And that means that microfinance investment vehicles (MIVs) will have trouble maintaining obligations to the ultimate funders, who are often large, well-financed Development Finance Institutions (DFIs). So, there’s a value chain that often looks like this: Customers < MFIs < MIVs < DFIs. And if the chain breaks down, customers end up alone and without support.
Read MoreWeek of May 29th, 2020
Editor's Note: Let's kick-off with a couple of public service announcements: The Household Finance Research Initiative at Dvara Research has a call for research proposals on household finance in India that is due on the 31st. The "tracks" are applied data science and primary research and there are 10 total grants available. Apply!
In the US, the Mastercard Center for Inclusive Growth, the Gates Foundation and the Walmart Foundation also have a new RFP for research projects focused on "stabilizing workers during the Covid-19 crisis and offer pathways for longer-term economic security and mobility." For the first time ever, the BREAD conference on Development Economics will be live streamed. It's today and tomorrow at 11am Eastern. Here's the link for today, and the one for tomorrow. This morning Emma Riley will be presenting her work on providing microcredit to women business owners via mobile money accounts; others are on "Rationing the Commons" and "Manipulation Proof Machine Learning." Tomorrow, Morgan Hardy will present her paper with Gisella Kagy and Lena Song on bargaining behavior among microentrepreneurs, followed by papers on state capacity and taxation; and inequality and place-based policy.
—Tim Ogden
Read MoreHow resilient are we? A dive into the global data on how people deal with unexpected shocks
By Michelle Kempis and Jonathan Morduch
As the current pandemic pushes the global economy to the brink, we decided to take a look at what surveys say about how well households plan to deal with big emergencies.
The only truly global data we know are from the World Bank’s Global Findex survey. The Findex reports on household surveys from 140 countries, and it greatly enriches what we know about financial inclusion. One section is devoted to asking how respondents would cover a large emergency equivalent to 1/20th GNI of per capita. It’s an under-exploited resource—but see this and this —and a bit tricky to interpret.
Read MoreHrishipara Diaries: How One Community in Bangladesh Has (So Far) Weathered the COVID-19 Storm
One member of the Hrishipara community, realizing the demand for fresh vegetables and faced with the collapse of his usual work, sets up an improvised vegetable market in late April, 2020. Photo credit: Kalimullah
At FAI we have begun convening conversations with a small group of researchers collecting high-frequency data on the financial lives of households and small businesses. All members of the group are managing, through modified survey techniques, to continue (or start) data collection during the COVID-19 pandemic and lockdowns. Data collection is frequent, in some cases daily, but at least once a month. Our goal is to get a sense of the reach and scope of these somewhat similar studies, while facilitating collaboration among researchers to learn from one another, for example on streamlining and improving survey questions, and analyzing and interpreting high frequency data gathered in these circumstances. We also aim to support the use of the very granular data that emerges from these projects, contextualizing or aggregating it, to contribute to more informed, pro-poor policies and services.
Read MoreWeek of May 11th, 2020
Editor's Note: I recently learned that my paper with Michael Clemens (that one I referred to last week that took 5 years from submission to publication) on rethinking migration from the perspective of household finance is among the top 10% of downloads at Development Policy Review so if you're eager to read something non-pandemic check it out. Apparently at least a few other people have done so. And the paper on what is happening with microcredit in Pakistan is now officially published.
–Tim Ogden
Read MoreBanking on Human Capital: What Financial Institutions Need to Do – Now – to Enable a COVID-19 Recovery
Every crisis carries its own signature, unfolding with distinctive timing, impact and, ultimately, recovery. Floods have a short, sharp impact, and recovery begins as soon as the waters recede. Other crises, like the 2009 global financial meltdown, linger for years.
For the novel coronavirus, many epidemiologists predict a series of waves for the next year or so, with lockdowns beating back the virus only to have it flare up again when those measures are eased. As policymakers with limited information struggle to find the right balance between the health of people and the health of the economy (while also working to keep themselves in power), we can expect a juddering mix of policy-induced economic slowdowns that could go on for months – if not longer.
Read MoreWeek of April 27, 2020
Editor's Note: In the last faiV I noted that the question "How are you?" didn't seem like it could survive the pandemic. Here's an article from The Atlantic on some alternatives. But my favorite alternative so far is a different answer rather than question. Hans Dieter Seibel passed on that his colleague Marion Levy Jr. has a standard response to "How are you?" that seems especially apposite now: "Terrible. But I'm glad you asked."
Read MoreWelcome Elisabeth Rhyne as FAI Visiting Fellow
We’re pleased to announce that Elisabeth Rhyne will be joining FAI as a visiting fellow. Former managing director of the Center for Financial Inclusion and a co-founder of the Smart Campaign, Elisabeth will focus on the issue of consumer protection, especially during the COVID-19 pandemic and its aftermath.
Read MoreFinancial Consumer Protections in Unprecedented Times
by Dave Grace and Elisabeth Rhyne
During the economic slowdown in response to the novel coronavirus, the position of financial institutions is in some ways analogous to that of medical workers fighting the virus—without the health risk. Financial institutions have a duty to help their clients, even though doing so exposes them to increased risk. This is especially true for microfinance institutions, financial cooperatives and other bankers who serve lower income and vulnerable people. For these providers, taking steps to help customers like forgiving loans or offering payment holidays potentially threatens their own survival. Financial institutions are asked to support their small business and household customers through this unprecedented situation, even while their own solvency is challenged.
Can Migration Patterns Help Predict COVID Outbreaks in South Asia?
Authors: Jean Lee (World Bank), Mahreen Mahmud (Oxford), Jonathan Morduch (NYU), Saravana Ravindran (UCLA), and Abu Shonchoy (Florida International U.). Click here for a PDF of this blog post.
Within one week in March, the lockdowns ordered by South Asian governments to combat the COVID-19 pandemic dramatically reversed rural-to-urban migrant flows. Our team’s early analysis shows that migration patterns may help predict the location of COVID outbreaks.
Read MoreMicrofinance and COVID-19
This edition of faiVLive brought together expert practitioners and researchers to discuss how we should be thinking about the impact of COVID-19 and pandemic control policies on poor households in developing countries, what policy interventions are plausible and possible, what role does microfinance have to play, and what needs to happen to enable the global microfinance industry to be useful now and six months from now.
Read MoreResources from our faiVLive Webinar on COVID-19 and Microfinance
Thanks to everyone who joined our April 10 faivLive webinar on Global Pandemic Meets Microfinance: Impact on Poor Households and What the Industry Needs to Do Now, on Friday April 10. Below you’ll find a list of resources shared by panelists and attendees during the call.
Read MoreWeek of April 10th, 2020 (faiVLive)
This week’s edition of the faiV was a faiVLive — a webinar featuring a panel of experts discussing the impact of Covid-19 on MFI clients and other poor households.
About the Webinar
This edition of faiVLive brings together expert practitioners and researchers to discuss how we should be thinking about the impact of COVID-19 and pandemic control policies on poor households in developing countries, what policy interventions are plausible and possible, what role does microfinance have to play, and what needs to happen to enable the global microfinance industry to be useful now and six months from now.
Featuring
Shameran Abed, Senior Director of BRAC’s microfinance and ultrapoor graduation schemes
Greta Bull, CEO of CGAP and a director at the World Bank Group
Deborah Burand, Professor of Clinical Law at NYU and the Co-Director of the Grunin Center for Law and Social Entrepreneurship
Neville Crawley, CEO at Kiva
Jonathan Morduch, Professor of Public Policy and Economics at NYU-Wagner, and a founder and Executive Director of the Financial Access Initiative
Stuart Rutherford, Leader of the Hrishipara Financial Diaries; founder and Chairman of Bangladeshi financial services co-operative SafeSave
Moderator
Timothy Ogden, Managing Director of the NYU Financial Access Initiative
Support
This faiVLive is part of the Household Financial Security Insight Community, supported by the Mastercard Impact fund, and in collaboration with the Mastercard Center for Inclusive Growth.
The Truth about Training: What We Know about Training Programs for Small Businesses
Tim and David’s conversation focuses on the “big mystery” at the heart of the debate about training programs for micro, small, and medium enterprises (MSMEs). On one hand, we know that keeping a small business afloat in a constrained environment is extremely difficult and complex. We’ve also found that the types of skills taught in training programs—basic budgeting, marketing, record keeping, financial and inventory management—do matter for small firm profitability and growth. These facts should in theory create scope for huge business improvements as a result of training programs. So what’s the conundrum? These improvements are generally not detected in the research: David’s meta-analysis of 15 rigorous studies found no statistically significant impact of training on profitability or sales.
Read MoreRegister for Our Upcoming faiVLive on COVID-19 and Microfinance
This edition of faiVLive brings together expert practitioners and researchers to discuss how we should be thinking about the impact of COVID-19 and pandemic control policies on poor households in developing countries, what policy interventions are plausible and possible, what role does microfinance have to play, and what needs to happen to enable the global microfinance industry to be useful now and six months from now.
Read MoreWeek of April 3, 2020
Editor's Note: The only two predictions I feel I confident in making right now are that a) we will find some new phrase for opening a conversation other than "How are you?" or at least some new way to answer the question, and b) that the trend of putting webcams on the bottom of a laptop screen is over. Thanks to all of you who reached out in reaction to the abbreviated version of the faiV last week focused on my concerns about the future of microfinance in the US and globally. Please keep sending information and thoughts my way.
Read MoreFAI In the News: Those Who Most Need The $1,200 Stimulus Checks May Wait the Longest (Time)
“This particular element is going to hit lower income people much more than higher income people,” says Jonathan Morduch, the executive director of NYU’s Financial Access Initiative. “They really have a double whammy—their incomes are being hit, and also the mechanism to help them is going to take longer.”
Source: Abby Vesoulis, Time Magazine, Published April 1, 2020.
Read MoreCOVID-19: How Does Microfinance Weather the Current Storm
By Tim Ogden and Greta Bull
This blog post was originally published on CGAP.org.
COVID-19 has unequivocally arrived in the developing world. Hundreds of cases have been reported across Latin America and South Asia, and now there are at least 30 countries in Sub-Saharan Africa reporting infections. South Africa and India both announced yesterday that they would go into lockdown for three weeks, and others may soon follow. With health-care systems ill-equipped to cope with a pandemic, there are many reasons to believe that the effects of the virus in these countries will be even more damaging than in the developed world, with higher mortality rates.
Read MoreThe Most Vulnerable Small Businesses and Communities Will Be Left Behind Without Targeted Action: The Fed and Treasury Can Make Sure They Are Not
By Bill Bynum, Joyce Klein, and Tim Ogden.
This blog post was originally published on the Aspen Institute.org.
You’ve heard about how important small businesses are to the economy and the nation. You’ve heard various figures being proposed to help those small businesses: $300 Billion, $350 Billion, $500 Billion.
What you likely haven’t heard is who typically receives small business stimulus funds. Even with the vast figures being proposed those funds won’t reach the most vulnerable businesses or the most vulnerable communities. We know because we’ve seen it in the past.
Read MoreResources for MFIs and Investors: What We’ve Learned from Past Shocks and Crises
This morning we spoke with Deborah Burand, Professor of Clinical Law and Co-Director of the Grunin Center for Law and Social Entrepreneurship at the NYU Law School. She has a wealth of knowledge on how to support MFIs and investors after an economic crisis.
She shared with us summaries of two papers that look back on 2009-10 when MFIs ran into trouble following the 2008 global financial crisis.
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Editor’s Note: I’m going to assume that you are seeing plenty of AI content (news and papers, not AI slop, though I’m sure you’re getting plenty of that too) from other sources, so I’m trying to think hard about the marginal value that the faiV can provide. As far as I’ve gotten so far: a) make sure that directly AI-related content does not take up more than 2 of the 5 items, and b) try to focus specifically on the cybersecurity issue for financial inclusion. Beyond that, I’m open to feedback on the value you get from the faiV in relation to AI to help guide us in the future. On a different note, I’ll be making a brief cameo appearance at the e-MFP Inclusive Finance Conference to moderate the opening plenary. If you haven’t registered, do so and I hope to see you there! - Tim Ogden