The US Financial Diaries track the finances of a small sample of low and moderate-income households over a year. The households faced substantial swings in income from month to month. On average, they experienced 2.5 months when income fell more than 25 percent below average.
March 2015
By Anthony Hannagan and Jonathan Morduch
Income Gains and Month-to-Month Income Volatility: Household evidence from the US Financial Diaries
The US Financial Diaries track the finances of a small sample of low and moderate-income households over a year. The households faced substantial swings in income from month to month. On average, they experienced 2.5 months when income fell more than 25 percent below average, and 2.6 months when income was more than 25 percent above average. The volatility is summarized by an average coefficient of variation of monthly income (within year, averaged across households) of 39 percent. The CV is greatest (55 percent) for households below the poverty line, but the CV remained relatively high (34 percent) and steady for households with income from 100 percent of the poverty line up to 300 percent. Thus, in the non-poor sample, greater income did not imply notably greater income stability.
Based on the working paper, "Migration as a Strategy for Household Finance," by Michael Clemens and Timothy Ogden.
Based on the working paper "Migration as a Strategy for Household Finance" by Michael Clemens and Timothy Ogden. See paper.
"Best practice" in microfinance holds that interest rates should be set at profit-making levels, based on the belief that even poor customers favor access to finance over low fees. Despite this core belief, little direct evidence exists on the price elasticity of credit demand in poor communities. We examine increases in the interest rate on microfinance loans in the slums of Dhaka, Bangladesh. Using unanticipated between-branch variation in prices, we estimate interest elasticities from -0.73 to -1.04, with our preferred estimate being at the upper end of this range. Interest income earned from most borrowers fell, but interest income earned from the largest customers increased, generating overall profitability at the branch level.
May 2011
By Rajeev Dehejia, Heather Montgomery, and Jonathan Morduch
Do Interest Rates Matter? Credit Demand in the Dhaka Slums
"Best practice" in microfinance holds that interest rates should be set at profit-making levels, based on the belief that even poor customers favor access to finance over low fees. Despite this core belief, little direct evidence exists on the price elasticity of credit demand in poor communities. We examine increases in the interest rate on microfinance loans in the slums of Dhaka, Bangladesh. Using unanticipated between-branch variation in prices, we estimate interest elasticities from -0.73 to -1.04, with our preferred estimate being at the upper end of this range. Interest income earned from most borrowers fell, but interest income earned from the largest customers increased, generating overall profitability at the branch level.
Two observations are essential to understanding the market structure of most low-income economies. First, many markets do not exist and, of those that do, many work imperfectly. Second and more optimistically, a wealth of behavioral and institutional responses often emerge to fill in the holes left by market failures. . .
Summer 1995
By Jonathan Morduch
Income Smoothing and Consumption Smoothing
Two observations are essential to understanding the market structure of most low-income economies. First, many markets do not exist and, of those that do, many work imperfectly. Second and more optimistically, a wealth of behavioral and institutional responses often emerge to fill in the holes left by market failures. . .
