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Viewing all FaiV posts with topic: Payments  

Week of December 3, 2018

1. faiVLive Background: The motivation for the faiVLive experiment is discussing what to think about microcredit impact given all the research in recent years. If you can't make it, or if you can, here's your quick cheat sheet to the recent research.
Of course it's starts with the average impact of microcredit being very modest. A Bayesian Hierarchical model look at the data confirms those findings. But there is important heterogeneity hidden within those average effects--"gung-ho" microborrowers do see substantial gains from increased access to credit. It's also true that these are mostly studies of expanding access to formal credit, not introducing it. That's hard to measure, but we can get a cleaner view of the value of credit when it gets taken away from most everyone--and that shows significant benefits, though through a somewhat unexpected channel: casual labor wages. Changes in labor wages can matter a lot for understanding the impact of a program, even entirely masking any benefits of an intervention with evidence that it makes a substantial difference in many contexts. And it's clear that changes in labor supply are quickly passed through into labor rates--in this case, the markets seem to be working fairly well. But it's not just labor markets. When microcredit affects local markets--by increasing or decreasing the supply of tradeable goods--the benefits may be substantial but mostly captured by the people who aren't using microcredit (what economists call general equilibrium effects). Which makes it all the more important to understand local market dynamics, especially when in many cases microenterprises are operating in sectors where supply exceeds demand. That being said, microcredit is a cheap intervention relative to other options. And it's possible we could increase the returns to microcredit for more reluctant microenterprise operators by boosting their aspirations. Or perhaps by doing better targeting of lending. But is it worth targeting? Households do seem to do a pretty good job of allocating access to capital to its most productive use within the household, and the gung-ho entrepreneurs are benefiting even without the expense of targeting.

2. MicroDigitalFinance and Household Finance: I suppose all of the above would qualify here as well, but here's a bunch of different new stuff, starting with the digital side of things. There are two new papers about the effects of SMEs adopting digital payments. In Kenya, an encouragement intervention led to 78% of treated restaurants and 28% of pharmacies adopting Lipa Na m-Pesa, and consequent increases in access to credit. In Mexico, a different kind of encouragement--the government distributed massive numbers of debit cards as part of the Progresa program--led small retailers to adopt POS terminals. That led to wealthier customers shifting some of their purchasing to these smaller retailers, and increased sales and profits for the retailers, but not an increase in employees or wages paid. On a side note, it's curious that the smaller shock of debit card distribution (pushing debit card ownership to 54% of households) had a large effect on retailers but the larger shock of m-Pesa being adopted by practically everyone has not led to more Lipa Na m-Pesa adoption.
A few weeks ago I featured a puzzle in savings from two savings encouragement experiments--the encouragement worked but savings plateau at a level well below what would seem optimal. Isabelle Guerin sent me a couple of papers that I'm still reviewing that might help explain why, but this week I stumbled across another example. The US CFPB, back in the days when it was allowed to do stuff and wasn't a hollow shell of existential dread, ran an experiment using American Express Serve cards and the "Reserve" functionality. They find that encouraging savings works--people boost their savings--but that the savings plateau after the 12 week encouragement and stay at roughly the same level for 16 months. That's consistent with the results from India and Chile but not with a model of accumulating lump sums or precautionary savings. You would expect among this population that they would experience a shock in that 16 month period and draw down the savings. Participants say they reduce payday loan use, but frankly I don't believe any claims about payday behavior that isn't based on administrative data (and it doesn't make sense if balances were stable).   
And finally because I want to encourage this behavior, Maria May sent me an interesting new paper on offering microcredit borrowers flexibility in repayment--customers get two "skip payment" coupons to use during the term of their 12 month loan cycle. Consistent with the much earlier work from Field et al, it yields more investment from borrowers, better outcomes and lower defaults.

3. Evidence-Based Policy: I noted last week that GiveWell, where I have served on the board since it's founding, released it's Top Charity recommendations. One of those is GiveDirectly. GiveWell, as is it's wont, wrote up some details of it's analysis of GiveDirectly, particularly about spillovers from cash transfers. That analysis was significantly informed by a forthcoming paper on general equilibrium effects and spillovers from one of GiveDirectly's programs that GiveWell was given access to even though it is not yet public. Berk Ozler took issue with that. And GiveWell responded. I have nothing whatsoever to do with GiveWell's research process or conclusions, but I was heavily involved advising GiveWell on its response to Berk's questions.
All of that is interesting, but I wanted to quickly draw attention to the Evidence-Based Policy subtext: internal and external validity. As Berk noted there are a number of papers that show negative spillovers from cash transfers in other contexts, and he makes the implicit argument that those papers are more internally valid because of public scrutiny and peer review. But are they externally valid--do their findings apply in other contexts? And more specifically, how should one weight research that has not had it's internal validity "boosted" by public scrutiny but is presumably more internally valid for being a study of the actual program being considered? GiveWell is putting a lot of weight on the non-public study because it has a large sample, is randomized and is pre-registered. Of course, one of the co-authors is a co-founder of GiveDirectly, which obviously presents some conflict-of-interest concerns. But one of the other co-authors might be called a godfather of the research transparency movement (OK, I'm doing it; I'm calling Ted Miguel a godfather of the research transparency movement).
Evidence-based policy is hard.
And that's before we factor in any of the complications of working with government and trying to incorporate community voice and self-determination. Susannah Hares reviews some lessons on "how, why and when to evaluate government-led reforms" through the lens of three impact evaluations of education policy reforms, from Delhi, Madhya Pradesh and Liberia. And since I'm speaking with Karthik Muralidharan later today, here's a throwback to a discussion he kicked off with comments at a recent RISE conference on evaluating policy reforms.  

4. Methods: I suppose that last link might belong more in a methods category, let's go right there. Well, let's go back to those internal validity questions. There's no shortage of discussion on the internet of whether peer review makes a difference or not. But it's much more rare to be told that "robustness checks are a joke." Double faiV points if you guess who wrote that before clicking. Quadruple points if you can guess who it links to. 
On the other hand, sometimes the rigors of peer review, robustness checks and working to have your research finding integrated into policy are just too much. It would all be much easier if your findings were suitably dramatic, surprising and large, even if that's not consistent with the data you've gathered. Here are ten simple rules for faking your research and getting it published (and not retracted).

5. Global Development : Please don't interpret that last link as having anything to do with what is in this item. Esther Duflo famously has noted that an advantage of RCTs is they have the ability to surprise. For my part, I'm frequently surprised by what expermenters manage to convince people to randomize. For instance, how about randomizing the religious content of a poverty intervention delivered by a Christian charity? That happened, in the Philippines, and here's a Freakonomics podcast about it. The results indicate that the evangelical Protestant content does increase effort and earnings. That's consistent with historical work in Germany, and by the way with the wave of work on the role of aspirations and hope. 
Speaking of aspirations and hope, those two characteristics would seem to be disproportionately held by migrants. Here's Michael Clemens and Katelyn Gough on the "best ideas for making migration work.
Finally, I've had a few links on updated work on the impact of the Green Revolution, which remains surprisingly controversial, hanging around waiting for the right faiV to include them, and well, I'm going to include them today. Here's a paper exploiting time variation in the development of high yielding crop varieties and their diffusion that finds that a 10% increase in use of HYVs increases GDP per capita by 15% (within a sample of 84 countries). Alternatively, here's work that finds that HYVs delayed industrialization and urbanization in India, and thereby limited GDP growth. But here's another new paper that finds that while HYV may have kept people in rural areas, it did decrease infant mortality. So if you weren't feeling bad enough about the difficulty of evidence-based policy and evaluating policy reforms as they happen, keep in mind that 30 years later people will still be arguing over whether the reform was good or bad.

Whether you survey husbands or wives about household assets matters, and can have a substantial effect on poverty measures. Via  Development Impact Blog , Source:  Adnan Silverio-Murillo .    

Whether you survey husbands or wives about household assets matters, and can have a substantial effect on poverty measures. Via Development Impact Blog, Source: Adnan Silverio-Murillo.    

First Week of May, 2018

For the First Time in Forever

Editor's Note: I apologize if the phrasing on the first item triggers PTSD symptoms in parents of children under 10. In other news, the paywall revolution seems to be gaining steam. I may need to start a Patreon for the faiV to afford subscriptions, but for now I'm just mourning my two favorite columnists, Justin Fox and Matt Levine, disappearing behind Bloomberg's odd paywall. --Tim Ogden

1. Microfinance, Part I (Uses of Credit): For the first time in forever, it seems there's enough new and interesting stuff on microfinance to support not only one, but a couple multiple-link items. Let's start with a useful piece that summarizes findings from several studies that have loomed large in our understanding (or questions about) of how microenterprises use credit, and apparent differences between male-owned and female-owned enterprises. I do find the framing a bit odd, as I don't know anyone who interpreted the results as "women aren't as good at running microenterprises as men" rather than, "women tend to be constrained to operating microenterprises in less profitable industries." When the newer results from Bernhardt, Field, Pande and Rigol emerged, I think the standard take was, "Households optimally allocate credit to their highest-return enterprise." So I think the intriguing thing here is not "women vs men entrepreneurs" but "maybe the industries women are concentrated in aren't less profitable after all." And that makes me think back to a paper from AEA (there's no version online that I can find, but this seems to be a significantly revised version using the same data) finding that female tailors in Ghana earn less than male tailors because they are constrained to making womens' clothes, a sector where there is more competition and lower prices.
Another use of credit for poor households is not to invest in a microenterprise but to smooth consumption when income is seasonal (or volatile for other reasons). Here's a new paper from Fink, Jack, and Masiye examining that dynamic in rural Zambia. Providing credit during the lean season affects the labor market, allowing liquidity-constrained farmers to avoid wage labor for their comparatively less-constrained neighbors, and pushes up wages. The intriguing thing here is another piece of evidence on the general equilibrium effects of microcredit via commodity (in this case, labor) markets.


2. Microfinance, Part II (Everything Else): Well, not everything else, see item 4. Access to credit and other financial services is a tricky thing--and it's not just the financial system that affects it, the justice system, criminal and civil, matters a lot too. Here's a new paper on alternative credit scoring using digital footprints--I haven't read it yet but am generally very skeptical of things like this. Grassroots Capital and CGAP are hosting a webinar on May 15th under the heading "Microfinance: Revolution or Footnote?" based on a conference last year (full disclosure, I was a participant). Of course, now I would want it to be called "Revolution, Footnote, or General Equilibrium Effects Eat Us All in the Long Run?" And applications are open for the 2018 European Microfinance Awards (until May 23) with the theme "Inclusive Finance through Technology." Whoever said the faiV didn't have news you could use? 

3. Methods/Statistics/Etc: Here's even more service journalism: A tool that will convert charts into data points automatically. I actually expect this to be the most clicked link in the history of the faiV. RAs, the robots are coming for your jobs sooner than you think.
Does everyone who cares about statistics read Andrew Gelman's blog regularly? Just in case, there were several posts recently that drew my attention. One is a fairly-standard-but-always-useful post about a specific example of dubious practices, on early childhood education (which morphs into some commentary on how the field of economics deals with these issues with a bonus appearance from Guido Imbens in the comments); another is a pointer to a new paper that tries to avoid some of the more dubious practices on a topic of a lot of interest and a lot of noise--the relationship of macro-growth and child development. But the most interesting is a post about how economists tend to see the world, specifically explaining why apparent bad behavior is good, and apparent good behavior is bad. Behavior in the economics profession is the best segue I can find into this short (audio) interview with Claudia Goldin.
But back to the use and misuse of metrics and statistics. If you don't click on anything else under this item, I do think you should look at these last two links. First, a thread about how most of the world thinks about statistics--as a tool for arriving at the answer you're looking for. And a column from Justin Fox on how pro- and anti-metrics authors end up in basically the same place--measurement is hard, and is only useful if you put the effort into doing it right.

4. Household Finance: Maybe the grab-bag is the right frame for this week's edition of the faiV. I'm including this item just so I could add this link to a look at how terribly non-poor people manage their money. One of the themes I've been increasingly talking about since the US Financial Diaries is how much even small amounts of slack obscure the sub-optimal decisions of the upper 60% of the income distribution. The analogy I make is to lean manufacturing: for the poorest people, we have drained all the slack out of the system so that when any mistake is made the consequences are large and obvious--that's the point of lean! But of course, unlike Toyota which spends massively to train workers on how to deal with mistakes, we give no useful training to these people to cope with their lack of slack, instead just blathering on to them with useless financial literacy training. Meanwhile, those with some slack are the American car companies of the 1970s, oblivious to their poor management of money. This week is when people who filed their US taxes right before the deadline will receive any refunds they were due; my strong prior is that there will be much more money wasted--even as a percentage--in the next 30 days than when the comparatively lower income families received their refunds back in February.
While we're at it, would you consider $200,000 of debt and a payment plan with the IRS for back taxes an example of "bad" financial decisions? What if the person in question was running for governor?

5. Cash Transfers: To round things out, Finland is giving up on it's "not-universal basic income" experiment since voters don't like it and they sort of already have an actual "universal basic welfare" system. There's another "not-universal basic income/cash transfer" experiment starting in the US. And here's Martin Ravallion on the pros and cons of guaranteed employment versus guaranteed income. (Channeling my inner Lant Pritchett: It's about state capacity!).   

Part of the US inequality story that doesn't get quite as much attention, via the  NY Times Upshot .

Part of the US inequality story that doesn't get quite as much attention, via the NY Times Upshot.

Week of August 1, 2017

1. More Ranting (Low-Quality Equilibria and Digital Currency): Following up on my rant last week about the prevalence of low-quality or sub-optimal equilibria because people have such a hard time figuring out what matters, here's another paper that caught my attention because it so thoroughly confirms my priors. The basics: a field experiment provided repair technicians with varying amounts and frequency of feedback. Performance suffered when feedback was weekly versus monthly because the technicians overreacted to each report. In other words, they had a hard time figuring out which details mattered to their own performance. The study could inspire another about "isomorphic mimicry" and the technology of management but I'll save that for another time.

Instead, I'll move on to a different rant about digital finance. In my world, there's only a tenuous connection between the digital finance groups and the cryptocurrency (e.g. BitCoin) groups, but the former certainly should be paying attention to the latter. As Matt Levine put it this week (again, he says this a lot): "The job of the cryptocurrency revolutionaries is to re-learn all of the old lessons of modern finance, one at a time, in public, in embarrassing ways." Right now those old lessons being re-learned seem particularly focused on how hard it is to manage and secure a money supply. I really hope that the digital finance advocates are paying attention to how often various "unhackable" and "secure" cryptocurrencies are being hacked. The spirit of Willie Sutton lives on, and as more "money" is stored in digital form, there will inevitably be more theft. And there's very little reason to believe that average users will employ security practices better than the supposed sophisticated users currently adopting cryptocurrencies. I fear though that the fate of much of digital finance is to "re-learn all of the old lessons of financial services, one at a time, in public, in especially embarrassing ways because they ignored the cryptocurrency movement's repeated mistakes."


2. Global Development (rants): On to more traditional faiV-ing. Kevin Starr has a new rant on the many outside groups making hay over government-funded private schools in Liberia (We need a hashtag to go along with #lantrant, I'm proposing #starrant). Someone once told me there were a lot less education experiments in the US than in other countries because more people were paying close attention and fighting any policy experiments where the outcomes were not already known. That may have been true, but it's certainly not true anymore in Liberia at least. Kevin's plea is to let the Education Minister do his job.

And here's a rant (with a link to another) against the "getting better" narrative that points out how much the world has improved, to the point where it is certainly the best time in history to be alive. I find the argument here pretty annoying, but not annoying enough to rant about myself. Pointing out that fewer children are dying of malnutrition and more people can read (for instance) in no way implies "this is fine."

In fact it's far more common for the "getting better" crowd to argue for more and for taking risks to make more progress, rather than settling for the status quo as Kottke says they are. In that vein, philosopher Peter Singer is probably the best known advocate for doing more, particularly associated with the "drowning child" thought experiment. Except it's not always an experiment. Last week, French philosopher Anne Dufourmantelle died while trying to rescue some actual drowning children. She was particularly known for her work on taking risks.


3. US Inequality: Much of the work on household finance either presumes that households desire to smooth consumption or tries to test how much smoothing they are able to do. Here's a new paper matching up food stamp receipt dates and standardized math test scores (and dates). There's already good data that shows that food stamp recipients aren't fully smoothing food consumption over a month--households often eat less in the last week of a monthly cycle. Here the authors look at how students from these households perform when test dates are toward the end of a benefit cycle and finds there is a material negative impact on performance. There are some other interesting patterns as well. At some point, I'll have a sort-of rant about a related issue: how we should think about whether the EITC lifts people out of poverty or not, given that it does so by delivering a lump sum on one day, but nothing the rest of the year.

Evidence like the food stamp study is used by safety net advocates to argue for more generous benefits, but just as often to say that the reasons people become and/or stay poor is their own choices. One of the frameworks for the latter is known as "the success sequence," originally proposed by Haskins and Sawhill. It lays out a set of choices that make escape from, or protection from poverty much more likely. Matt Bruenig has a new post about the "success sequence" which has been getting more attention of late. While the sequence has lots of advice, Bruenig points out that the only piece that seems to make a material difference is having a full-time job.

Finally, here's a profile of the current life of Rob Cordray, the embattled head of the CFPB

4. Theories, Methods and Models: It's getting late in the day already, so I'm going to pick up the pace a little here. Don't mistake that for disinterest or lack of endorsement. This is all good stuff. You should click on the links.
Michael Kremer and Gautam Rao presented on Behavioral Economics and Development at the NBER Summer Institute. Here are their very useful slides.

Are small studies ever worth it? Some people argue they do much more harm than good. I'm guessing they didn't factor in the damage avoiding small studies would do to the careers of academics-in-training. I'm particularly interested in how this applies in the business context, where unless you are one of the truly massive companies in your space, all the "data analytics" being done are small studies.

On the opposite end of the scale, Karthik Muralidharan and Paul Niehaus have a new version of their paper, "Experimentation at Scale", which points out that development RCTs have typically been "small" (though not in the same sense as the authors above use it), and offers lots of advice for dealing with the challenges of doing very large experiments.


5. Digital Finance: Most of the time when I discuss digital finance in the faiV it's about things like mobile money or digital credit. But there's a much bigger part of digital finance that is about what's happening on the back-end of digital commerce. Here's a profile of Patrick Collison, the founder of Stripe, an increasingly important player in that back-end globally. Stripe handles a lot of digital payments and is increasingly moving to add services to make all the other parts of digital commerce much easier. If you want to extrapolate wildly from Tavneet Suri's and Billy Jack's paper on the effect of M-Pesa on poverty, just imagine the impact of quickly and cheaply enabling developing world entrepreneurs to incorporate, set-up digital storefronts, manage inventory and get access to working capital. You may also recall that Patrick Collison recently interviewed Tyler Cowen and mentioned my book (even if he forgot the name) and so I have a strong positive bias toward anything he does. 

Finally, while Stripe is a big deal in digital finance even though you hardly ever hear about them, if you follow the finance space, you hear about robo-advisors all the time. For example, last week's faiV. But Josh Brown points out that "robo-advisor" already is a meaningless term. If everyone is a robo-advisor then no one is a robo-advisor.

Not particularly new, but new to me: a proportional chart of the use of languages in the world. Source: Search Reddit because I'm worried about filters catching the name of the Reddit forum where this is from.

Not particularly new, but new to me: a proportional chart of the use of languages in the world. Source: Search Reddit because I'm worried about filters catching the name of the Reddit forum where this is from.

Week of January 2, 2017

Pre-AEA/ASSA Edition

1. In Memoriam: The new year began with news of the deaths of two important thinkers on development, economist Tony Atkinson and philosopher Derek Parfit. Here's Tony Atkinson's view of his most important work. Here's a celebratory post from the World Bank's Let's Talk Development blog, here's Beatrice Cherrier's overview of his work as the "founder of modern public economics," and here's a Foreign Affairs piece of Tony's from late 2015, as always focused on inequality and what can practically be done about it. I'll save links for Parfit until next week.

2. Microcredit: I have a new post at Next Billion on what I consider to be one of the most important new research papers on microcredit, an examination of the size and prevalence of subsidy by Cull, Demirguc-Kunt and Morduch. It documents that subsidy is widespread but small--in other words, that delivering pro-poor financial services isn't free, but that it is cheap. Over at CGAP, Greta Bull offers her thoughts on the four drivers of change for financial inclusion in 2017. And here are the most influential posts of 2016 at Next Billion.

3. Cash Aid and Basic IncomeI'm trying not to turn the faiV into a cash and basic income newsletter, but it is a topic that is drawing a lot of attention lately. In the UK, one of the tabloids attacked aid for giving cash to poor people (as opposed to giving cash to rich people?). The Atlantic ran a piece about the history of cash aid in philanthropy and how it is changing current practice. Here's a short history of the idea of basic cash income and here's a round up of both history and current things going on. If you're at #ASSA2017, there's a reception Saturday night to learn more about the Y Combinator basic income experiment in Oakland.  

4. Kahneman and Tversky and Lewis: You've probably seen that Michael Lewis has a new book about Kahneman and Tversky. In case you haven't, here's Sunstein and Thaler's review of the book. Here's a piece by Walter Isaacson about Michael Lewis. And here's a piece from Slate about the irony of Kahneman, our teacher about how easy it is to be wrong, and his faith in results that depended on small samples and have ultimately not held up to replication.


5. Savings: On a more prosaic level, how and why people save remains an important question. Here's Guerin, Kumar and Venkatasubramanian on the use of ceremonial expenditures as a means of informal saving at the IMTFI blog. In related news, Bill Maurer of IMTFI has a book coming out this year on the artifacts of money and transactions (via Diane Coyle's round up of the spring catalogs from econ publishers)

Bonus Ad: Today is the official release date of my book Experimental Conversations: Perspectives on Randomized Trials in Development Economics. Check it out at the MIT Press booth at #ASSA2017 or order one from Amazon (though it now says temporarily out of stock. Is that good news or bad news?)

The  second post in David Roodman's epic review  of the evidence for deworming is now up at GiveWell. The first post looked specifically at some of the worms papers; this post looks at whether results from those papers can be reasonably applied to other contexts. It's a long read but thoroughly worth it. Source:  David Roodman/GiveWell

The second post in David Roodman's epic review of the evidence for deworming is now up at GiveWell. The first post looked specifically at some of the worms papers; this post looks at whether results from those papers can be reasonably applied to other contexts. It's a long read but thoroughly worth it. Source: David Roodman/GiveWell

Week of December 12, 2016

1. Effective Altruism: It's the right time of year to be talking about charitable giving--most US-based charities take in about 50 percent of their annual revenue during the month of December. Here is GiveWell's list of recommended charities this year (NB: I'm on the board of GiveWell). Jennifer Rubinstein has a new essay about the "hidden curriculum" of effective altruism, as seen in Peter Singer's and Will MacAskill's books. There's always a hidden curriculum isn't there?

2. Evidence-Based Policy: Effective Altruism shares a curriculum, hidden or not, with evidence-based policy. At Stanford Social Innovation Review, Jennifer Brooks of the Gates Foundation has a post making the case for evidence-based decision-making. I suspect that prior to November 8th most readers of this newsletter wouldn't have thought the case needed to be made. One of Brooks' key points is the need for better data from rigorous evaluations so that there is evidence not just on effectiveness of a particular program, but information on how to improve other programs' performance. That just so happens to be one of the points in the conclusion to my shortly to be available book on the use of RCTs in development economics. You're running out of time to buy a copy for a holiday gift. It won't arrive until January regardless, but it's the thought that counts right? Oh wait--the whole point of effective altruism and evidence-based policy is that it's not the thought that counts. 

3. African Bank FailuresIt doesn't make the global news, but there have been a number of bank failures in sub-Saharan Africa in the last few months: Kenya, Mozambique, Zambia, and Uganda have all closed banks since the beginning of October. At FSDAfrica, Mark Napier looks at whether there's a trend to be concerned about. He forecasts a "rocky ride" for African banks, and lots of work for bank regulators, in 2017.  

4. Cash, Cash, Cash (and Targeting): I've been trying to keep away from basic income and cash transfers for a few weeks. But some things are starting to build up. There's this new thing called the Economic Security Project (I'm not quite sure what it is) that seems to be organizing support for testing basic income in the US (but also making grants?). Here's their "Statement of Belief" with some notable signatories. Here's Rachel Schneider and Jennifer Tescher explaining their support, in part drawing on the US Financial Diaries research (yes, I'm biased to any argument from USFD research). And completely independently, here's Brown, Ravallion and de Walle looking at proxy-means testing approaches to target assistance to poor households. They find there are some methodological tweaks to standard approaches that would improve targeting, but that basic income performs as well at reducing poverty as any of the improved targeting approaches (but note that even still the best outcome is reducing poverty by 25%). And here's an Evansian review of Health CCTs if you haven't seen it yet--lots of good takeaways on program and study design.


5. Machine Learning: Back to evidence-based policy making. Well, perhaps I should say data-based policy implementation. Kleinberg, Ludwig, and the elusive Sendhil Mullainathan have a piece in Harvard Business Review--essentially a guide for policy makers on the possibilities and pitfalls of using machine learning for things like targeting. They discuss examples like setting bail and hiring police officers, but also how easy it is to be misguided by an algorithm if you don't understand it. I'm reminded of Matt Levine's phrase about algorithms being like genies, always taking instructions just a bit too literally. I've seen Sendhil present some of this work on how machine learning can be useful in improving targeting, but also dangerous by directing attention away from existing, undetected errors in the targeting process. Hopefully there will be papers available soon.

--------------------
Bonus Follow-Up: Last week I included some links to pieces that were widely circulating and getting a lot of attention with the idea that you didn't need such links from the faiV. I thought some of you might be interested in some data on that topic: David Roodman's blog on Worm Wars was 4th, Raj Chetty's data on mobility was 6th, and Gabriel Zucman's data on wages was 11th out of 20 links. 

There's a crisis of opioid addiction in the US, mostly concentrated in rural areas, serious enough that it's showing up in life expectancy statistics. But it's also affecting newborns, with cases of addicted newborns increasing rapidly enough to strain hospital budgets. Of note,  in the coverage of this issue  there is no mention of "super predators." I'm not sure whether to be encouraged or discouraged by that. Source:  J  AMA Pediatrics

There's a crisis of opioid addiction in the US, mostly concentrated in rural areas, serious enough that it's showing up in life expectancy statistics. But it's also affecting newborns, with cases of addicted newborns increasing rapidly enough to strain hospital budgets. Of note, in the coverage of this issue there is no mention of "super predators." I'm not sure whether to be encouraged or discouraged by that. Source: JAMA Pediatrics

Week of November 11, 2016

1. Demonetization in India: It doesn't seem like I'm the only one who's a bit confused by exactly what's happening in India and why this particular set of steps will yield the stated outcomes. Here's my current understanding: Last week, the government declared that 500 and 1000 Rupee notes would no longer be legal tender, effective immediately. Except that those notes could be exchanged for new notes until December 31 at banks and post offices. But only by people with official government ID. The purpose is to drive more of the economy into the formal sector and to clamp down on black market activity and corruption. Usually advocates of this sort of step talk about high denomination bills (which they say facilitates corruption by making it relatively easy--in terms of size and weight--to transport large sums) like $100 bills. But 1000 Rupees is roughly $15 and a new 500 Rupee note will be in use and other large denominations like 2000 Rupees will also continue to exist.

As you can imagine, when 86% of the currency in circulation by value has to be immediately exchanged, there are some problems. Of particular interest to faiV readers might be the effect on microfinance banks, which are not allowed (as of now) to accept or exchange the old notes. That apparently has caused repayment to plummet since people can't get their hands on legal notes to make their payments. There's also a surge in use of ATMs and people signing up digital finance systems. Of course, then there's the problem that roughly 30 percent of the population (a mere 300 million people) doesn't have official ID (not counting the additional millions who are short-term migrants and don't have their ID with them where they currently are). Lot's more to come on this story I'm sure.


2. Digital Payments and State Capacity: Dan Radcliffe of the Gates Foundation has a new paper (published by CGD) on the knock-on benefits of government-to-citizen digital payments infrastructure. Direct transfers have already shown significant benefits in terms of efficiency and effectiveness of social welfare programs. Radcliffe argues that other benefits also deserve attention, specifically "strengthening energy policy, food security, government transparency" and overall state capacity.    

3. Financial Inclusion for RefugeesCFI has been running a series on financial inclusion for refugees. The fourth and final installment is here, looking at the future of financial inclusion for refugees with specific advice for how donors, practitioners and governments can do better.

4. Goldman Sachs and Consumer Debt: I'm old enough to remember when Goldman Sachs was a "vampire squid" sucking the life out of the global economy. As of this week, GS is also your friendly (digital) neighborhood lender, here to help you manage life's demands and escape from credit card debt with low-interest loans. Beginning this week, GS is running ads for it's consumer lending business on Facebook and YouTube that "depict debt as an unavoidable nuisance of modern life." Given the amount of income and expense volatility documented in the US Financial Diaries, that sounds about right actually. The Goldman tagline is "Debt happens. It's how you get out that counts." I wonder if the Goldman loans will come with a "Don't Swipe the Small Stuff" sticker for credit cards?

In other consumer debt news, the former CEO of Lending Club, fired for potentially misleading investors, is already opening a new lending storefront. And here's an Urban report on how the overhang of bad credit scores from the Great Recession is continuing to hold back consumers and the US economy.


5. Obey the Evidence!: This week I happened across a review of the Milgram obedience experiments, which were conducted about 50 years ago. That led me to some more reading and research--there's a lot of recent material. Much of it is about what has been discovered by a close review of the Milgram archives and the difference between what actually happened in the experiments and what was reported--and what that means about how we should think about the results and the conclusions. It's interesting and thought-provoking reading, not only because it's about one of the foundational findings of behavioral science, but also because it should lead us to reflection on the conclusions we draw about the current generation of studies.

David Evans and Birte Snilstveit review what your paper should include so that it can be included in systematic reviews, including enough methodological details so that risks of bias can be assessed. Many papers don't. Source:  Development Impact Blog

David Evans and Birte Snilstveit review what your paper should include so that it can be included in systematic reviews, including enough methodological details so that risks of bias can be assessed. Many papers don't. Source: Development Impact Blog

Week of July 18, 2016

Editor's Note: I barely resisted the temptation to title every item here "Why not What"

1. Why not What: Chris Blattman posts notes from a recent talk he gave at DfID arguing that focusing too much on "what works?" is a mistake. Via Ryan Briggs on Twitter, here's Angus Deaton's 2010 paper making much the same argument.     

2. Why not What, Part II: 
A new paper from Buera, Kaboski and Shin looks at a host of "well-identified evaluations of the impacts of micro-financial interventions" including the microcredit evaluations, the targeting the ultrapoor programs, and cash grants to try to understand why the results are what they are.

3. American Financial Security (or lack thereof): Americans confidence is their ability to afford retirement is creeping up again, but it's not clear why. A new HSBC study finds that 64% of respondents over age 70 are financially supporting others. Andrew Yarrow writes about "the 45%" who are paid less than $15/hour, are "asset poor" and do not have access to employer-sponsored retirement-savings (note that these are not all the same people).

4. Digital Finance "Expansion": Pablo Garcia Arabehety has a perspective on why digital finance a la M-Pesa has not expanded rapidly in Latin America: proximity and simplicity of bill payment and person-to-person transfers (which account for 96% of usage) was already sufficient. Meanwhile, the Kenyan government is proposing to expand its regulation of M-Pesa to enable tax collection.     

5. Measuring Outcomes: Bobbi Gray writes about the balance between "hard" and "soft" outcome measurement, particularly in terms of measuring domestic violence and fear. Those softer measures can play an important role in understanding "why" as well as "what."

Week of September 7, 2015

1. Migration and Finance: We wanted to include a story on how refugees are financing their migration *and managing payments* but we couldn't find any. Do you know of one?  Tweet it to us - @financialaccess.

2. Cash Transfers: Data from The Cash Atlas, an online platform that tracks cash transfers, suggests transfers are a growing (but still small) component of humanitarian interventions but are mostly conditional and/or mixed with in-kind transfers. Center for Global Development

3. US Financial Diaries: "Six months a year the [USFD] households we tracked had income that was either 20 percent above or below their average. So even the concept of average [income] is meaningless.” Next City

4. Investing in SMEs:
David McKenzie shares the results from an evaluation of a Nigerian business plan competition that awarded $50,000 in cash grants--more than half of winners were randomly chosen from semi-finalists. Winners not only had higher profits but were more likely to hire several works and stay in business.  The World Bank

5. Asset Building: A new report reviews the counterproductive nature of many US financial assistance programs - essentially, households have to remain poor to avoid becoming even poorer. American Progress

Week of August 24, 2015

1. Digital Financial Inclusion: The 2015 Financial and Digital Inclusion Project (FDIP) evaluates 21 countries on various dimensions of financial inclusion. Four out of the top five of the top scorers are in sub-Saharan Africa and Kenya ranked number one. Brookings

2. Mobile Money: Speaking of Kenya, Uber began accepting cash in Nairobi and its fleet of 30 registered vehicles tripled since the policy change in January. Is cash still king in the country known for unprecedented mobile money success? Daily Nation

3. Product Design: Evelyn Stark brings us Part 2 of her examination of customer-centric product development, focusing on organizational strategy and demand-side factors of improving take up. CFI

4. Labor Policy: The Obama administration proposed new rules to overtime pay that could potentially increase incomes for more than 5 million workers. Pew Research

5. Payments: India's move to approve payment banks garnered a lot of media attention, but the central bank has a long list of "to do's" before it can make an impact for the poor and unbanked. NextBillion

Week of August 10, 2015

1. Cash: The artisanal movement may have reached its peak. Hipsters everywhere can now pay for their hand-sharpened pencils and small-batch mayonnaise with homemade, locally crafted currencies. The New York Times

2. Household Finance: Despite recent economic growth and falling unemployment, many American workers are still struggling to save for emergencies or make ends meet.  Financial capability programs, offered through employers, may help participants alleviate some of their financial struggles through knowledge and access to products and services. CFED

3. G2P Infrastructure: The Indian Supreme Court ruled that biometric identification cannot be mandatory to receive government subsidies. Bad news for banks and financial inclusion advocates, good news for officials siphoning funds from "ghost" beneficiary accounts (see Muralidharan, Niehaus, and Sukhtankar's massive RCT). NDTV
 
4. Poverty in the US: A new study claims that while deepening income inequality is a problem in the US, increased economic and racial segregation coupled with concentrated poverty is a much bigger deal. City Lab

5. Research: IPA is hiring a Program Director to oversee all of their financial inclusion work, both US and international, including existing research and dissemination efforts and several large research funding pools. Innovations for Poverty Action

Dr. Abu S. Shonchoy is auditing implementation work during Mobile Banking Research field visit.

Week of July 27, 2015

1. Mobile Money: Vodafone and MTN announced plans to allow money transfers between East and Central African customers of either provider, marking a big step toward interoperability on the continent. The Wall Street Journal

2. Financial Management: FAI affiliate Ignacio Mas analyzes common behaviors and decision-making practices that underpin the financial management strategies of poor households. Upsides

3. Digital Payments: A new blog series explores mobile merchant payments in developing markets, with a focus on the factors it will take to build out the extensive networks necessary to provide value for both merchants and customers. CGAP

4. Financial Inclusion: When we talk about financial inclusion, we generally talk about national statistics. Researchers funded by BBVA have made an impressive attempt to better understand financial inclusion in the United States by measuring it, and some possible determinants of inclusion or exclusion, for individual metropolitan areas. BBVA

5. Microinsurance: This week marked the launch of the first edition of The State of Microinsurance, a magazine-style publication aimed at taking stock of the microinsurance sector from the point of view of various stakeholders. The Microinsurance Network 

Week of July 13, 2015

1. Savings:  A new report from the US Financial Diaries project provides evidence that lower income households are saving up for frequent, short-term emergencies that prevent the growth of long-term savings. Could 401k style auto-enrollment programs help to manage both long- and short-term savings goals? AARP

2. M-Pesa:  Is M-Pesa merely a fintech service or [cue foreboding music] "a stealth political coup by a private operator which profits only from enforcing discipline, control and transparency (via massive data capture) over a wayward system?"... Financial Times

3. ...Regardless of its characterization, new regulations could cause Safaricom to separate its mobile money service from its voice, data, and infrastructure businesses. The changes could weaken Safaricom's market position, but may be a win for competitors like Airtel. Quartz

4. Anti-poverty Policy: What is an effective way for service providers to assist low income households? For starters, cut the bandwidth tax - the time, money, and mental costs of making ends meet. Ideas42

5. Cash Transfers: The Dutch city of Utrecht is the latest to test out a basic income benefits program. But they are tweaking the experiment, offering either conditional or unconditional transfers to treatment groups. Quartz

Week of July 6, 2015

1. Transfers: Cash transfers are a more common form of benefits for the world's poor than you might think. In fact, Sub-Saharan Africa is the only region where food and other in-kind transfers are more prevalent than cash transfer programs. The World Bank

2. Global Poverty: Between 2001 and 2011, the global middle-income population (those living on $10-$20 per day) almost doubled while those living on less than $2 per day halved from 29% to 15%. However, the poor just became slightly less poor as the portion of people living on $2-$10 increased 6 percentage points during this time while high income categories barely changed. Pew Research Center

3. Digital Literacy: A new report finds many women rely heavily on their social circles for instruction and trouble-shooting when it comes to accessing mobile internet, an important finding for mobile money and digital content providers. GSMA

4. Microcredit: Interest rate ceilings are in place to protect poor customers from excessively costly loans. But how much do they push riskier customers out of credit markets in the first place? Macrothink Institute

5. SME Financing: Since 2008, the outstanding portfolio of online lenders in the US has grown about 175% a year (compared to a 3% decline in the traditional banking sector). But more does not always equal better - what does this explosive growth mean for borrowers, particularly small businesses? The Huffington Post
 

Week of May 11, 2015

1. Ultra-Poor: A RCT involving more than 10,000 households in six countries reports improvements in livelihoods for participants in a "graduation model" poverty intervention. While the programs didn't show effects in all contexts, cost-benefit analysis suggests promising returns on investmentNature and Science

2. Savings:  When participants in a study in India received compensation directly to a personal account, they reported higher rates of savings and consumption (regardless of gender) than peers receiving cash. However, when account holders were switched to cash payments, savings and consumption activity reverted to their original patterns. VoxEU

3. Social Networks:  A new working paper from Angelucci et al. uses data from the Progresa evaluations to assess the degree to which family and social networks insure each other and provide funding for investment. They find that for every dollar received from Progresa, by a member of the network, food expenditures rise by .60 to .70 cents and investments in children also rise. J-PAL

4. Financial Inclusion: FAI affiliates David Roodman and Daniel Rozas question whether the newest Global Findex data is overstating growth in the rate of financial inclusion and what this means for policy-makers. NextBillion

5. Household Money Management: "The central conflict of domestic life right now isn't men versus women or mothers versus fathers; it's the family against money." The Atlantic

Week of April 6, 2015

1. Digital Payments:  A body of research contains evidence that people spend more with credit cards than cash because the former reduces the "pain of paying."  Do mobile wallets like Apple Pay increase or relieve this pain?  The Atlantic

2. G2P Transfers:  The US doesn't drug test farmers receiving crop subsidies or requirePell Grant recipients to limit their field of study - so why do the poor have to prove they are worthy of aid?  The Washington Post

3.  Mobile Money Agents:  Agents in Uganda use creative ways to "bend the rules" in order to meet the needs of a diverse customer base.  Helix

4. Economics of Gender:  A new report (and interactive digital tools) examines the current state of women’s economic, social, and political progress in the US.   Despite gains over the past few decades in educational attainment, women have higher rates of poverty, earn less, and have lower rates of business ownership than male peers.  IWPR

5. Financial Inclusion:  Tilman Ehrbeck, who recently moved from CGAP to Omidyar Network, discusses the value that finance apps that go beyond enabling payments may bring.  Huffington Post

Week of March 16, 2015

1. Savings Groups: In an evaluation of savings group outreach programs in Kenya, NGO-led groups had better attendance rates, saved more, had larger payouts, and lower rates of reported loss than groups formed spontaneously.  FSD Kenya

2. Mobile Money:  Kenya may be the current media darling when it comes to mobile money, but Tanzania's success story is due for its share of the spotlight.  CGAP

3. Poverty in the US:  "Our economy increasingly requires that people be flexible in the workplace, understand more complex processes, and communicate and work well with others. As consumers, many people living in poverty aren’t prepared to manage all the choice and temptations in the marketplace, such as mortgages, auto loans, and cell-phone plans."  Stanford Social Innovation Review

4. Sharing Economy:  Will low-income consumers benefit most from new peer-to-peer rental marketplaces or will they face barriers to growth and prosperity as microentrepreneurs?  The Washington Post

5. Payments:  Facebook announced it is adding a payments feature to its messenger app that allows American users to link their debit cards to the service and send money as easily as sending text.   The New York Times

Week of December 8, 2014

N.B.  This will be the last issue of 2014 for The FAIV, which will return on January 9th.  FAI wishes all of our readers a happy and safe holiday season and a prosperous New Year! 

1. Poverty in the U.S.:  “It’s assumed that we’re not unstable because we’re poor, we’re poor because we’re unstable. So let’s just talk about how impossible it is to keep your life from spiraling out of control when you have no financial cushion whatsoever.”  Slate

2. Agricultural Loans:  Forgiveness of agricultural loans has been a common occurrence in India. it's about to happen again. But who gets the benefits and what happens after?  Bloomberg 

3. Cash Transfers: Evidence is building for positive impact of both unconditional cash transfers and graduation models for the ultra-poor. How do you decide between the two?  NextBillion

4. Microinsurance:  New research examines the profitability and client value of banking and retail correspondents in four countries as alternative insurance distribution channels.  ILO

5. The Unbanked:  Argentina is experiencing an uptick in armed robberies due to its citizens' distrust of banks and tendency to operate mainly in cash.  NPR

Week of November 17, 2014

1. 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

4. Mobile Money: Interoperability (in its many forms) is a necessary but insufficient step for digital financial inclusion.  NextBillion

5. Wages:  In the U.S., "near minimum-wage workers" (those that make more than $7.25 per hour by less than $10.10), are young, earn close to $10 an hour, and are most likely employed by the restaurant and food industry.  Pew Research Center

Data Source:  Global Findex database, 2012
House by John Caserta for the Noun Project
Hammer by Edward Boatman for the Noun Project

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

4. Payments: Is Ripple the next Bitcoin or just more crypto-currency hype? Entrepreneur

5. Economics:  Game theory meets the politics of the potluck. McSweeney's

Source: BBC

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

4. Payments: Plastc wants to replace your entire wallet with a single card. The Verge

5. Impact Investing:  Mobile phones have positive effects for billions - but do socially-conscious investors see Nokia as an "impact company"? Interest in impact investing may be growing, but the field needs more concrete definitions and metrics. Stanford Social Innovation Review

Despite conventional wisdom, poor families DO save. However, they do not always have access to safe, reliable systems to build savings. Savings groups are one tool that help poor households better manage their financial lives.