Week of November 22, 2013

This week’s edition of New and Noteworthy highlights some innovative approaches to financial inclusion: a banking van, a new iPad app, and a new approach to delivering subsidies.

• The World Bank released its most comprehensive report on financial inclusion to date.
   
• “Gamification” was the hot buzzword a few years ago but has faded more recently. Nonetheless  this Wall Street Journal article illustrates that it’s still happening:   gaming behaviors and strategies are being used to promote financial literacy and management.
   
• A new study on the 2009 Credit Card Accountability Responsibility and Disclosure Act shows the legislation, which requires more regularity and transparency around credit card fees, has cut the cost of credit cards, particularly for borrowers with poor credit. The estimated overall savings for American consumers is $20.8 billion a year.
   
• NPR explores “banking deserts.”  As banks close branches in economically depressed areas, residents experience a void of formal financial services not dissimilar to historical patterns of redlining and exclusion.
   
• The Economist explores the trend of branchless, digital banking and its growing customer base – tech savvy 18-29 year olds.
   
• For a different take on “mobile banking,” new programs in Uganda, Rwanda, and the Phillipines are bringing financial services like microinsurance, bank accounts, and financial literacy directly to their customers through banking vans.
   
• According to a new report from The Pew Charitable Trusts on economic mobility,  43 percent of Americans raised at the bottom of the income ladder remain stuck there as adults, and 70 percent never make it to the middle.
   
• Enno Schmidt’s work to promote a “basic income” policy in Switzerland was recently featured in The New York Times. The basic income approach would provide a lump sum of money to all citizens to cover living expenses, replacing separate housing, food, and other subsidies.
   
• Researchers at IMTFI review the link between social capital and the use of mobile banking services like M-Pesa. These women often act as “brokers” – connecting groups who would not otherwise be connected. 

Week of November 8, 2013

This week’s New and Noteworthy highlights new research and findings on ways to encourage savings, measures of poverty in America, and a discussion of financial capability.

• Some of the mobile apps promoting saving behaviors profiled in this American Banker article could possibly address savings challenges highlighted by FAI’s Julie Siwicki earlier this week.

• In more savings-related news, FAI co-founder Dean Karlan together with colleagues at CGDEV released a working paper reviewing researching on savings groups and constraints that may hinder the adoption and effective usage of savings products and services by the poor. The SEEP network also released a research review of savings groups, focusing on seven specific RCTs from various countries.

• In separate but equally compelling reports, Lisa Servon, a professor at The New School and NPR’s Pam Fessler take an investigative, first-hand look “under the hood” of the payday loan industry.

• Perhaps the most common application of insights from behavioral economics is using defaults – for instance, automatically enrolling people in savings programs unless they opt out. While such defaults may help nudge many people toward savings, those who are motivated enough to opt-out are most likely the people who need help the most. CFED discusses the use of behavioral economic approaches in asset building and points to the need for more nuanced understanding of participants’ motivation and psychology when designing nudges.

• Microfinance Opportunities posted their working definition of financial capability and why it matters for promoting financial inclusion worldwide.

• Nearly 40 percent of Americans between the ages of 25 and 60 will experience at least one year below the official poverty line and 54 percent will spend a year in poverty or near poverty, making poverty a mainstream occurrence, according to Mark Rank of the University of Washington.

• At FAI, we’ve written a lot about initiatives focused on the ultra-poor like BRAC’s graduation program. Trickle Up outlined why focusing on this subgroup of the BoP is important for development practitioners.

• While NPR added to the call for new ways to measure poverty in America, The Washington Post featured a report from the United Way of Northern New Jersey that warns of a hidden new economic class – Asset Limited, Income Constrained and Employed (ALICE).  ALICE individuals live tenuously at the lower end of the middle class and while they are characterized by financial insecurity, they are often not poor enough to qualify for social safety nets.

Week of November 1, 2013

This week is one of big announcements - the latest research on unconditional cash transfers made a splash in the media, the World Bank released its annual Doing Business report, and I am launching my month-long Sorry, Cash Only project. I encourage our readers to follow my adventures of a peek into a cash-only economy on Tumblr, Twitter, Instagram, and Facebook.

• IPA released a policy brief showing initial (encouraging) results of its evaluation of Give Directly’s cash transfer program in Kenya. While many bloggers and news outlets covered the announcement, this piece from The Economist offers a succinct look at the CCT/UCT debate. and
• FAI affiliate Ignacio Mas offers a borderline sci-fi blog post as he speculates whether cash will disappear or we will move to a world of “smart notes.”
• Recently, the book Scarcity provided a deep dive into the impact of poverty on the way we think and act. New research is building on those ideas and shows that poverty can cause long-lasting changes in the structure of our brains.
• Ukraine is the most improved economy and Singapore is the easiest place to conduct business according to the World Bank, which released its annual Doing Business report on entrepreneurship and regulations.
• Over at the Why Nations Fail blog, Daron Acemoglu and James Robinson take a different view on Karlan, et al.’s paper on the economic returns of cows in rural India, looking at the phenomenon through a social and institutional (rather than purely economic) lens.
• CGAP reveals the practicalities of implementing mobile payments through the story of Mushtaque, a rickshaw driver in Bangladesh, and his challenges in using mobile wallet products.
• The New York City Housing Authority announced it will provide bank kiosks that look like ATMs to allow unbanked residents more convenient locations to make rent and bill payments.

Week of October 25, 2013

This week’s New and Noteworthy takes a big picture approach to microfinance regulation, behavioral economics the social enterprise sector, and academic research – asking what are the big challenges and how might we go about addressing them.

• FAI co-founder Sendhil Mullainathan and co-authors have a new short paper sub-titled “What Behavioral Economics is Not” , which is a good a description of this very useful attempt to clarify an often mis-used or misunderstood term. Highly recommended.

• On a related note, illustrating the need for Sendhil’s piece are these two posts (first, second) from Alex Tabarrok on Marginal Revolution about the layaway system. Be sure to read the comments as they illustrate the ongoing arguments over the policy implications of behavioral economics and it’s interaction with traditional economic analysis.

• Hannah Schiff of Value for Women writes a compelling post on why there is no such thing as gender-neutral financial services. She makes the point that banks should not bias services toward women but start removing the current bias toward men.

• Are we all on the same page when it comes to defining financial inclusion and microfinance? Grzegorz Galusek of the Microfinance Centre reviews some of the prominent definitions of these terms and the trend to conflate the two.

• The world of social entrepreneurs and social investing are full of small scale “development darlings” that get a lot of media attention but are they able to ever be profitable? Is that even a realistic expectation? Devex takes a deep dive on profitability in the social enterprise space.

• The Kenya Commercial Bank announced a new product that allows users to open a KCB account directly from their mobile phones.

• Like every major movement, Ignacio Mas contends that the mobile banking push has foundation myths. He takes a look back at these (agent banking in Brazil and Smart Communications’ mobile money service in the Philippines) to separate fact from fiction.
   
• Eleven microfinance experts recently weighed in on whether smarter regulation can restore faith in microfinance for a Guardian live chat session.

• From problems with the peer-review process, to the impacts of “publish or perish” on research,  this Economist piece exposes flaws in the academic research system and suggests ways to bring science back to its core principles.

• A recent Chicago Tribune article explores various models and approaches to bringing needed services to underserved communities, including financial services. In addition to Kiva, the piece highlights the Magic Johnson prepaid debit card. (n.b. To avoid logging into or creating a Chicago Tribune account to read the article, click here and select the first time in the Google search results titled "Serving the Underserved: Marketing to Make a Difference.")

Week of October 18, 2013

This week we explore whether technology is really a development silver bullet, if banks are too costly to absorb the unbanked, and two very different innovations in financial services in San Francisco.

• As the movement to bank the unbanked grows, Lisa Servon reminds us that the costs of “formal” banking services are often even higher than the costs of checkcashers and other non-traditional services.

• Charles Kenny and Justin Sandefur of the Center for Global Development have a “long read” in Foreign Policy, asking, “Can Silicon Valley Save the World?”

• The move to a cashless economy has been much slower than many advocates have predicted. Case-in-point, that a sandwich store in San Francisco, tech hub that it is, has gone cashless is actually news.

• University of Chicago social scientist Harold Pollack takes “rules of thumb” to a whole new level, claiming that all the financial advice you’ll ever need can fit on a 4x6 index card.

• Recently the New York Times ran two related opinion pieces on poverty – one focusing on how government anti-poverty programs ignore childless singles and the other by Joseph Stiglitz on the growing challenge of addressing inequality.

• San Francisco-based Mission Asset Fund brings documentation and guarantee services to the traditional lending circle model to help Latino residents build credit. A recent profile on NPR’s Marketplace highlights the hybrid formal-informal approach to financial services.

• After you pay for your sandwich with your phone, you might be able to walk next door to the drug store and do all of your banking – Walgreens announced it will begin providing financial services at 8,541 locations.

Week of October 11, 2013

This week’s New and Noteworthy includes continued discussion on some of the issues we’ve been blogging about like how to best deliver financial literacy, the benefits of cash transfers, and reasons why digital payments sometimes have low take-up rates.

• It seems we weren’t the only ones mulling over financial literacy last week. Richard H. Thaler, an economics professor at the Booth School, weighs in on the topic and the idea of “just in time” financial education for The New York Times.

• Earlier this week, FAI’s Tim Odgen asked why people aren’t paying with mobile money. It’s a question that is also on the minds of mobile payment operators in India as take-up of digital payment systems has been slow. Even in the US, some feel that the existing comfort with banking systems poses a challenge for a larger digital monetary system as highlighted in The New Yorker.
   
• In the debate on who should be on the front lines of digital payments – mobile operators or banks, GSMA argues that both are necessary for “cooperative competition,” which best serves customers.

• In the absence of government investment and formal banking, one area in China has developed a complex network of informal “shadow banks” to support SMEs.
   
• As cash transfers for the poor continues to gain traction as a development intervention,  GiveDirectly’s founder Paul Niehaus highlights their efficiency for NGOs and Aid Thoughts reminds us that while valuable, they cannot replace public goods.
   
• IPA reviews conversations around financial inclusion at the recent “Toward the Better Banked” event in New York.  One fundamental question explored by participants was - Should our goal be "banking the underbanked" into our current system, or should we be focused on transforming the system itself?

• And now for something completely different…David Roodman has a compelling blog post this week on why making the process in developing working papers (specifically those in the social sciences) more transparent is better for researchers everywhere.

Week of October 4, 2013

This week’s New and Noteworthy includes thoughts on both the transformative potential of digital banking as well as a defense of preventing a cashless economy. Also in our highlights are innovative uses for prepaid debit cards and research using mobile phone minutes as a proxy for income inequality.

• Earlier this week the Affordable Care Act officially went into effect. However, millions of uninsured Americans will still be left out of expanded coverage.
• As mobile banking becomes more ubiquitous and some predict cash’s demise, Oliver Burkeman reminds us that the “frictionless” cashless economy is not necessarily in our best interests. 
• As Myanmar emerges from decades-long conflict, it’s reopening its borders to foreign banks. The Economist explores how the nascent mobile and financial sectors have the “leap-frogging” potential to transform the financial services sector.
• FAI affiliate Ignacio Mas provides a deep dive into retail payments in the developing world and the challenges in bringing services to scale.
• The Atlantic highlighted a new study from Gutierrez, et al. that uses mobile phone communications and airtime credit purchases to map income inequality in Côte d'Ivoire.
• The talking points around prepaid debit cards usually involve mention of their high fees or alternatives to formal bank accounts. But Money Talk News takes a more positive spin offering seven innovative and practical uses for the products.
• Nancy Lee, General Manager of the Multilateral Investment Fund (MIF) at the Inter-American Development Bank Group, wrote the first in CGAP’s new blog series on gender and the role of finance. Lee’s insights focus on women entrepreneurs and their financial needs, which extend well beyond credit.

Week of September 27, 2013

This week’s New and Noteworthy focuses on policy and evaluation – in understanding youth savings in the developing world, looking deeper at the potential of conditional cash transfers in the US, and outlining the road to full financial inclusion.

• As part of its Financial Inclusion 2020 initiative, the Center for Financial Inclusion this week released its Five Roadmaps to Full Financial Inclusion, which offer recommendations and action points on topics including client protection, credit reporting, and addressing customer needs. CFI’s Managing Director, Elisabeth Rhyne, shared her thoughts on the project on the CGAP blog.
   

• Much has been written about the pros and cons of bitcoins (and their legal and regulatory repercussions), but Gene Frieda shares his thoughts on the WEF blogon the role of bitcoins as an alternative currency and a speculative commodity.
   
• Thailand has made progress in the area of financial inclusion (73% of the population has a bank account and only 3% have no access to formal finance whatsoever) but still has a problem when it comes to prevalence of loan sharks. The Economist highlights some interesting tactics that the government is undertaking to try to curb their activity.
   
• The concept of conditional cash transfers is nothing new and programs like Bolsa Familia in Brazil have shown some success. In the United States, New York City has pioneered the policy strategy domestically. Recent evaluation results of a program administered by MDRC show potential educational benefits, specifically for high school students.
   
• Many microfinance programs focus on access to financial services for adult populations. But if given the opportunity, would youth in developing countries save via formal services? This is one of the questions addressed by the YouthSave Initiative, which recently released a report of findings from its program targeting 12-18 year olds in Colombia, Ghana, Nepal and Kenya.

Week of September 23, 2013

After a short break, New and Noteworthy returns with a discussion on financial literacy, the true cost of cash, and the status of payment systems around the world.
 

• A new report from the Gates Foundation compares payment systems in more than 30 countries incorporating insights from more than 100 interviews with regulators and payments providers from around the world, including banks and telecommunications companies. It includes in-depth investigations in six countries – China, India, Kenya, Nigeria, the Netherlands and the United States.
   
• A blog post from the Harvard Business Review reports on the current status of the world’s women entrepreneurs, who now represent owners of 37% of SMEs globally.
   
• A US-based company called RoboCoin announced it will launch kiosks throughout Canada that allow customers to convert Bitcoins into cash.
   
• The New America Foundation released a report arguing that America has moved from a High Wages-Low Prices-Welfare system to a Low Wages-Low Prices-Tax Break system. The report highlights the drawbacks of this new system and offers some alternative structures.
   
• The New Yorker reviews a recent study by The Fletcher School at Tufts that shows low-income Americans spend an average of more than three times as much as their high-income counterparts to access cash.
   
• Can soap operas be a force for social change? According to The World Bank, there is evidence to suggest they can. A study in South Africa shows viewers of a popular television show Scandal! improved their financial literacy and behavior after watching episodes that incorporated financial education messages. On a related note, The World Bank blog explores the difference between financial literacy and financial capacity.
   
• This past week, the US Census Bureau released its annual report on poverty rates in the US. While the figures provide a snapshot of the economic situation in America, NPR reminds its listeners that the poverty rate does not include income from benefit programs such as food stamps and also does not take into consideration differences in cost of living for various localities.
   
• A new mobile payment service focused on Latin America called Regalii allows individuals to transfer funds by purchasing “mobile gift cards” at specific retailers—so that remittance senders can control where funds are spent. 

Week of September 9, 2013

In this week’s New and Noteworthy, mobile money is inspiring innovations in Kenya and new research points to the link between poverty and how the brain works.

• Last week Anandi Mani et al. released a study showing a link between poverty and decision-making ability based on changes in cognitive functions of Indian sugarcne farmers over a growing cycle. Two of the lead authors (Sendhil Mullainathan and Eldar Shafir) also released a book, Scarcity, which further explores the impact of poverty on mind-set and psychology.

• In The World Bank’s Development Impact Blog, David McKenzie recently explored the role of clinical equipoise in RCT development trials, that is – whether researchers have the obligation to prove the uncertainty of the expected impact of an intervention and to what degree.

• Recently a company called Kipochi launched an e-wallet service in Kenya, allowing international transfers via Bitcoins. The move has the potential to integrate M-Pesa with international services but some have concerns regarding security and regulatory issues.

• In a different part of Kenya, innovations in mobile money are expanding energy access in slums. The start-up access:energy uses wind turbines and solar panels to create “microgrids” in informal settlements, starting with one on Remba, an island in Lake Victoria. Users can pay for energy use using their mobile phones.

• Should we be looking to the pump when thinking about loan pricing? Recent blog posts from CFI and Microfinance Transparency use a gasoline analogy in discussing different (but related) issues. CFI explores a new Chilean system of reducing terms and conditions of loans into a two-digit number while Azish Filabi of the FRBNY looks at the issue of pricing transparency and consumer protection in Africa’s mircrofinance industry.

• In the wake of recent national debates around food stamps in the US, Al Jazeera published an in-depth profile of the complexities around the system, including for those who are fraudulent.

• A new study from the Center for American Progress shows that children growing up in regions in the US with higher rates of an economic middle class are more likely to move out of poverty than in regions where income inequality is high.