Week of December 20, 2013

Our last New and Noteworthy of the year includes new research on poverty rates in the US, racial disparities in retirement savings, and commitment savings devices in the Philippines.

  • The African Development Bank released a new report on the state of financial inclusion on the continent, highlighting opportunities and challenges for expanding access to financial services for the poor.
  • According to a new study from researchers at Columbia University, government safety net programs like food stamps and unemployment insurance helped reduce the percentage of Americans in poverty from 26 percent in 1967 to 16 percent in 2012. However, the economy by itself has failed to improve the lives of the very poor in that time period.
  • The National Institute on Retirement Security released a study on the racial disparities in retirement savings - fewer than half of black and Latino workers have retirement plans on the job or benefit from tax breaks and policy incentives designed to increase savings, putting them at greater risk for downward mobility in retirement.
  • In the latest installment of its Debt Inc. series, ProPublica explores the effect on payday loan recipients when their lenders decide to sue for money owed.
  • In case you didn’t make it to London in October for the Financial Inclusion 2020 Forum, CFI published a magazine with a roundup of key sessions and forum highlights.

Week of November 26, 2013

In this special Holiday (at least in the US) edition of New and Noteworthy, we take a look at the global status of bitcoin, analyze the gender gap in financial inclusion, and observe the intersection of the American military and the payday loan industry.

  • NextBillion has a two-part interview with Ideas42’s Alex Fiorillo. In part I,  “The Power of Choices,” she gives an overview of the principles of behavioral economics. In part II, “People-Centered Finance,” she describes how behavioral economics can be used to design better financial products and promote healthier decisions.
     
  • Coin, a new startup, has begun taking orders for its battery-powered electronic credit card. In essence it can alter its magnetic strip to mimic any of your credit or debit cards so that you only have to carry one card. While slick, it is an innovation for people who are already very well-served by formal financial services. At first glance it appears that the most value would be for people who are juggling lots of credit accounts and carrying 7 or 8 credit cards. What those people need most is likely credit counseling, not an easier way to carry multiple cards.
     
  • New York City’s Center for Economic Opportunity officially launched the enrollment phase for a new pilot project called Paycheck Plus, which adds to the annual amount that low-income workers without dependent children receive through the federal Earned Income Tax Credit (EITC).
     
  • Washington state can add “barrier to access for the unbanked” to the list of issues surrounding the launch of Obamacare.  While plan payment methods include money orders, the first payment must be made by credit card, debit card or electronic funds transfer from a bank account.
     
  • A website called fiatleak has a map drawing information from all the major online bitcoin exchanges, like Mt. Gox and BTC-e, and shows what country’s residents are buying bitcoins in real time. Much of the activity is concentrated in China, a point also noted in a recent New Yorker article on regulation of the digital currency.
  • This Economist article delves deeper into the global gender gap in financial inclusion and what can be done about it. One strategy could be the recent women-only bank launched in India – the first public-sector bank of its kind in the country’s history.
     
  • Nearly seven years since the Military Lending Act came into effect, government authorities say the law has gaps that allow the payday loan industry to target service men and women with potentially negative financial effects.

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.
  • 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.
  • 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.
  • 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.