Promotional political posters in the Philippines

Vote-buying and vote-selling obstruct the democratic process, yet they remain pervasive in many developing democracies. Researchers asked voters in the Philippines to make a simple, unenforceable promise not to accept money from politicians or to promise to vote according to their conscience, even if they do accept money, to test the impact of promises on voters’ behavior. A majority of respondents made promises not to sell their votes.

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Intuition suggests that certain personality types are predisposed to loan default. Accurately identifying these personality types could have profound implications for consumer banking policy, and also important lessons for our understanding of why credit markets may fail. In partnership with the Rural Bank of Mabitac in the Philippines, researchers implemented two experiments and a survey to predict if prospective clients with various personality traits would pay back their loans.

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Understanding why some micro entrepreneurs frequently use high interest rate debt for working capital without a corresponding increase in the scale of business operations.

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A Filipino micro entrepreneur works at his fruit stand

This is one of a handful of new studies which provide a rigorous estimate of the impact of microfinance. Accepted applicants used credit to change the structures of their business investments, resulting in smaller, lower-cost, more profitable businesses. So while business investments did not actually increase, profitability did increase because the capital allowed businesses to be reorganized. This happened most often by shedding unproductive employees.

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Poor microentrepreneurs have surprised skeptics with their ability to repay loans, but microfinance institutions and commercial banks lending to the poor still struggle with relatively high transaction costs and low rates of return. In “the text message capital of the world,” the Philippines, researchers tested the effect of text message reminders on client repayment rates. In contrast with previous research, they found that text message reminders did not increase repayment on average.

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Can financial incentives work to help people quit smoking?  The CARES (Committed Action to Reduce and End Smoking) Program, creates a commitment contract that provides financial incentives for smokers who wish to quit smoking. Smokers offered the product were more likely to be smoke-free 6 and 12 months afterwards.

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Some research suggests that individuals with higher levels of altruism are more attracted to public sector work, and recent studies indicate that public service motivation can serve as an indicator for strong job performance. Researchers conducted a randomized evaluation to test the impact of an all-expense-paid three-day leadership training workshop on incentivizing honest and competent youth to run for a village youth council.

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Ownership and use of bank accounts is low in many developing countries. Researchers partnered with banks in three countries to see if removing the costs to opening basic bank accounts would lead to more households opening and using bank accounts. Overall, use of the accounts was low across all three countries, and being offered a free, basic bank account had no impact on savings, expenditures, health, or education.

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If financial education can lead to increased usage of savings products, then why don’t financial institutions deliver financial education messages as part of their advertising? One explanation for this relative lack of informational advertising is that it may make customers more likely to use savings products in general from any firm, thus yielding no direct benefits to the advertising bank.

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Farmers across the developing world face risk from hazards such as weather, pests, and crop disease, but largely lack insurance to manage these risks. One reason for this lack of viable insurance products may be that farmers know their plots and risks better than insurers, and react accordingly. In the Philippines, researchers offered insurance on randomly assigned plots to farmers, and found that farmers preferred to insure the plots that faced more risk.

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Researchers asked if sending regular text messages to clients reminding them to save encouraged Filipino account holders to increase their balances.

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Commitment devices – in which people restrict their own choices in the near future to reach a farther off goal – have been shown to help people reach their goals, including savings goals. But are people good at choosing the right commitment contract? This evaluation in the Philippines tested the demand for and impact of a new commitment savings account with fixed regular installments. Clients could choose the stakes of the contract (in form of a default penalty) themselves.

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In 2009 well over a million Filipino citizens worked overseas, collectively sending home billions of dollars in remittances. The majority of overseas workers come from urban areas. This project explores some of the barriers to migration for rural inhabitants, such as lack of information, credit constraints, and the complex Philippines passport process.

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We evaluate a unique "commitment" savings account, in which individuals restrict their right to withdraw funds until they have reached a self-specified goal. Clients are also given the option to automate transfers from a primary account into the commitment savings account, and given the option of buying a lockbox to store their money, with only the bank possessing a key. The account helped people save more after one year, and increased decision making power for women in the household.

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