Girls' Scholarships in Kenya

Spotlight on FINCA-Peru

These entrepreneurial skills, such as how to manage profits, how to budget, where to sell, and how to manage and offer receivables, can potentially lead to more sales, more workers, and perhaps eventually provide the skills and knowledge needed to join the formal sector.In the study, village banks were randomly assigned to "treatment" and "control" groups. There were two types of "treatment" groups: mandatory and voluntary. Clients in village banks assigned to the mandatory treatment group were required to attend the business skills training in order to remain in the group and receive a loan. Members of village banks assigned to the voluntary treatment group were allowed to leave the meetings after the loan payment was made and before the training began. For banks that were assigned to control group, meetings remained the same as before, without any formal business training.In order to measure the impact on these outcomes and on overall client welfare, Innovations for Poverty Action administered baseline and follow-up surveys on clients in both treatment and control groups to measure any changes in their businesses or general well-being. 

KEY FINDINGS

• Sales last month and sales in a typical bad month were higher (16% and 28%, respectively) among those trained. Clients who received training demonstrated greater business savvy both in increasing sales in a "typical" month, and in improving their business strategies to avoid months of bad sales.

• Impacts on repayment and retention were larger for clients expressing the least initial interest in the training. This has strong implications for the appropriate method for introducing business training to a program or market. Since the impact is highest on those who indicate the lowest demand for the service, charging a fee for the business training may attract the exact wrong set of clients needed in order to maximize impact.

"This study was particularly important to us because it demonstrates that microfinance institutions can maintain both a social and financial bottom line," writes Iris Lanao, Executive Director of FINCA-Peru.  "The business skills training improved the welfare of our clients, and increased retention and repayment rates improved our sustainability."  As a result of this study, FINCA-Peru has now implemented credit with business education for all of its clients. 

                                          Our Latest Burning Question      

        How Can Banks Costlessly Mobilize Savings Among the Poor?

There are various methods that banks use in order to encourage their customers to save, such as offering higher interest rates,  rewards or bonuses, or even deposit collection services. But these methods often require big bucks for the banks, and while it might be worth it for some, are there other (and cheaper) ways to facilitate savings among the poor?

IPA is currently experimenting with alternative methods that include deposit reminders sent cheaply and effectively - via text messaging, for example, or reminder letters sent to the client from him/herself (written at the time a savings account is opened). These methods offer the additional benefit of being able to explore the sort of message or encouragement that has the power to motivate customers to save. Such psychological "devices" (e.g. reminders reading: 'With your next deposit you will gain a preferential interest rate!' or 'Without your next deposit you will lose your preferential interest rate!') help understand the individual decision-making process, which is critical for improving current product design. Many of these are ideas that come from laboratory work in psychology, but lack the careful testing in the field, over both short and long-run, that are required to make solid policy and business prescriptions. Other such devices include a picture of the client's goal in the form of a jigsaw puzzle: for every deposit the client makes, he or she receives another piece of the puzzle that culminates in the big picture - and the reality - of their savings goal when they have made all their deposits.

Do you have an idea like this?  Or would you like to test out ideas like this?  Please email your thoughts to us at saquila@poverty-action.org.

Meet the IPA Country Directors

Tania Alfonso received her M.A. from the Johns Hopkins University School of Advanced International Studies (SAIS) in 2006. Before joining the IPA Peru team, she worked at the Inter-American Development Bank and as an independent evaluator in Guatemala.  Since starting as Country Director in June she has been overseeing microfinance and health projects in the Andes, coastal and jungle regions of Peru.  "The great thing about working in Peru is that our group setup allows us to contribute knowledge, energy and ideas to each other's projects.  Our PAs are always talking with one another, whether it is just bouncing an idea off of a friend or trying to drill down to some minute aspect of survey design. Each indivudal develops an expertise - data management, poverty measurement, or surveyor training, to name a few - that everyone can depend on."

Alissa Fishbane is the Mexico Country Director and Regional Director of Latin America. She received her Master in Public Policy from the John F. Kennedy School of Government at Harvard University in 2005. Alissa began working with IPA in Peru, and shortly after moved to Mexico where she currently oversees projects relating to interest rate sensitivity among microcredit clients, savings encouragement for remittance beneficiaries, and inclusion of husbands in female lending groups. Alissa knew she wanted to work with IPA since studying with Sendhil Mullainathan in graduate school, where she designed experiments to test innovative solutions to poverty issues during her coursework. After discovering she could do this for a living, Alissa joined IPA with the goal of finding proven strategies, based on sound research, that improve people's well-being.  

Tomoko Harigaya is the Country Director of operations in the Philippines. She received her BA in Economics from Williams College in 2004. Since then, she has worked on microfinance evaluation projects in the Philippines, including a series of commitment savings projects and group vs. individual liability project. Of her work as Country Director, Tomoko says: "The challenge of the field operation is to balance the academic rigor and the operational feasibility at the same time in the evaluation. We constantly try to orient the partners about randomized controlled trials and discuss why we take the steps we do in order to minimize tension in the field. One of the most enjoyable moments in the field is when we are able to convince partners and practitioners of the benefits of RCTs and get them excited about it!"

Karen Levy is the Country Director for Kenya. She received her BA from Brown University in 1994, and her MSc in Social Policy and Planning from the London School of Economics in 2000. In her (not so) spare time, she is working on finishing her PhD in Development Planning at University College London. Karen has lived, studied and worked in Kenya for 12 of the last 15 years. She co-founded Tawasal Institute, a community-based development organization located on Kenya's coast in 1995, and has worked as a consultant for several local and international NGOs. Of her work with IPA, Karen writes: "Having lived in East Africa for many years, it has been particularly gratifying for me to participate in projects which are helping to answer some of the most fundamental questions in the field of development."

Justin Oliver is the Country Director in Ghana. He grew up on a small farm in Kansas and received his Master in Public Policy from the Kennedy School at Harvard in 2005. He moved to Ghana a year ago to start IPA's operations there, and has been working on projects examining loan interest rate sensitivities, commitment savings products, and indemnified loans for smallholder farmers, amongst others. Justin dreams of a world in which development policy is based on sound evidence, but what he really wants now is electricity and a hot shower.

Doug Parkerson is the Country Director of operations in Bolivia. He received a master's in Sustainable International Development from the Heller School of Social Policy and Management at Brandeis University in 2005. Since joining IPA, he has worked on projects such as evaluating the role that group liability plays in microcredit, how best to market health credit to the poor, and a study of the psychological drivers of charitable giving. Of his work with IPA in Bolivia, Doug writes: "When you encounter poverty, it is natural to want to do something about it, but it is not always obvious what to do. To get to contribute to an understanding of what works and what doesn't so that resources are used more effectively is very fulfilling."

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