Week of September 12, 2016

Editor’s Note: I’ve been 'away' for a while finishing up two books: Experimental Conversations, a collection of interviews about RCTs in development economics and evidence-based policy (pub date January 2017) and The Financial Diaries, based on the US Financial Diaries project (pub date March 2017). I briefly entertained the idea of a “catch-up” faiV, but that might have become the faiVhundred so herewith we’re back to (sort of) five items from (mostly) this week.

1. Income, Poverty and Volatility: The big news of the week in the US was the release of the US Census Bureau’s report on income, showing strong gains across the board (but best for lower income groups) and the largest drop in the poverty rate since 1999. As always, the story is more complicated than the headline statistics. Annual income measures hide year-to-year and month-to-month volatility. And volatility seems to be rising. That means that even though the poverty rate is falling based on annual income, the number of households that spend part of a year in poverty or bounce in and out of poverty from year to year may be increasing.

Aspen EPIC has a wealth of new materials on the topic of volatility including videos, interviews and blog posts.

2. Measurement: Also prominent in US news was the announcement that Wells Fargo, one of the country’s largest banks, had fired 5300 employees and paid a $185 million fine for creating millions of accounts without customer consent (to hit management metrics). Matt Levine has the most useful reporting on the issues and the problem of measurement, calling it an “evil genie...it grants your wishes, but it takes them just a bit too literally." Case in point, Indian banks have apparently been doing essentially the same thing as Wells Fargo, depositing 1 rupee into dormant accounts, so they don't appear dormant. I won’t miss the opportunity to plug Dan Rozas’ work on the large gap between savings accounts and savings account usage in microfinance banks around the world, not just in India.

3. Digital Finance: Visa announced the roll-out of mVisa in Kenya with near-term expansion into Uganda, Tanzania and Rwanda and possibly Nigeria. I must admit I’m a bit confused as mVisa ran a pilot in Rwanda beginning back in 2013. Did that shut down? In any case, mVisa is a significant challenge to m-Pesa, perhaps the first significant challenge, because it works differently—it’s cross-bank and makes customer-to-merchant payment (as opposed to p2p transfers) easier, though it does require smart phones. In other digital finance news, while mVisa is attempting to expand in east Africa, mobile money has now disappeared from South Africa as MTN followed mPesa by shutting down the service in the country because of lack of use. I’ve also seen reports that mobile money use is falling in Nigeria but not sure about how reputable the source is. Anyone know more?   

4. Behavioral Finance (and more): The Urban Institute released a report on a test of a behavioral intervention to help consumers reduce credit card debt. Working with a credit union they tested "rules of thumb" messages to discourage use of credit cards and found the message “Don’t Swipe the Small Stuff”, encouraging people to use cash for small transactions rather than a card, reduced their balances by $104 in six months. To put the result in context, the gains to households (reduced debt/increased savings) were equivalent to 60% of the matched savings incentive in the SaveUSA program, for less than 1% of the cost. On the other hand, the finding that encouraging people to use cash reduces their spending in helpful ways presents something of a problem for boosting the use of mobile money.

In related news, here’s the White House’s Behavioral Sciences Team’s 2016 report.

5. Poverty Measurement: Sort of tying all our topics for the week together, the Grameen Foundation and Innovations for Poverty Action just announced that the Progress Out of Poverty Index will be moving to IPA with funding from several institutions, so that this particular measure of poverty, designed to be operationally useful for MFIs, will continue to be developed and, hopefully, improved.      

Since we're on the topic of poverty measures and volatility and net savings, here's an infographic from the US Financial Diaries, on exactly those issues. (Click on image to see entire infographic on US Financial Diaries website.)

Since we're on the topic of poverty measures and volatility and net savings, here's an infographic from the US Financial Diaries, on exactly those issues. (Click on image to see entire infographic on US Financial Diaries website.)

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