With the support of the Citi Foundation, the Financial Capability Initiative at IPA incubates, develops, and rigorously evaluates products and programs that improve the ability of the poor to make informed financial decisions and adopt healthy financial behaviors. The Initiative conducts tests and evaluations of innovative, product linked financial education interventions and financial products that aim to improve financial capability.
IPA’s Messaging Replication Project builds on prior evidence that low-cost messages can improve financial behavior through increased savings deposits or on-time loan payments. The project works with banks and communication providers in multiple sites to rigorously evaluate the impact of client messaging that uses behavioral insights as content cues. This brief highlights the project's mission and goals.
In 2013 IPA celebrated ten years of producing high-quality evidence about what works, and what does not work, to improve the lives of the poor. It was a year of celebration for our accomplishments. More so, it was a time to prepare our organization for the next phase as we continue to pursue our vision of a world with More Evidence and Less Poverty.
View an online version of the report at annualreport.poverty-action.org/2013annualreport/
In 2009, the results from two microcredit impact studies in Hyderabad, India, and Manila, the Philippines were released to mixed responses (Banerjee, Duflo, Glennerster, and Kinnan 2010; Karlan and Zinman 2011). Some media declared microfinance a failure (Bennett 2009). Many in the microfinance community dismissed these randomized studies as too limited to be a true reflection of the entire sector. These first randomized studies caused a sensation because they challenged the dominant impact narrative for microcredit—a narrative that rests on loans to capital-constrained microentrepreneurs who earn a steep return on marginal capital and thus can repay a relatively high interest rate and reinvest to grow out of poverty—and the way in which that narrative had been universalized in the popular imagination. In fact, the results were more nuanced. What the microcredit studies really showed is that this model of microcredit works for some populations—those who successfully grow businesses—but not for others. Many now agree that the expectations for microcredit in the popular discourse were overblown. For some, the pendulum had swung: far from a panacea against poverty, some argued that microcredit was actually doing harm. The evidence supports neither extreme view. In fact, the results of the studies aligned with and confirmed some of the evidence from nonrandomized methods already in the microfinance research literature that found modest but neither revolutionary nor deleterious impacts from credit. While the concept of capital that will allow poor people to unleash small business opportunities remains valid for some poor clients, not every borrower is a microentrepreneur—take-up rates for credit products are often surprisingly low, and not all economic activities that poor people engage in yield high returns. Microcredit is not transforming informal markets and generating significantly higher incomes on average for enterprises. And yet the industry has focused almost exclusively on the rhetoric of entrepreneurship and has overlooked the many important benefits to households that are using loans to accelerate consumption, absorb shocks, or make household investments, such as investments in durable goods, home improvements, or education for their children.
This paper uses a public economics framework to review evidence from randomized trials on domestic water access and quality in developing countries and to assess the case for subsidies. Water treatment can cost-effectively reduce reported diarrhea. However, many consumers have low willingness to pay for cleaner water; few households purchase household water treatment under retail models. Free point-of-collection water treatment systems designed to make water treatment convenient and salient can generate take-up of approximately 60%at a projected cost as low as $20 per year of life saved, comparable to vaccine costs. In contrast, the limited existing evidence suggests that many consumers value better access to water, but it does not yet demonstrate that better access improves health. The randomized impact evaluations reviewed have also generated methodological insights on a range of topics, including (a) the role of survey effects in health data collection, (b) methods to test for sunk-cost effects, (c) divergence in revealed preference and stated preference valuation measures, and (d) parameter estimation for structural policy simulations.