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Limited financial knowledge, skills, and confidence are associated with suboptimal financial behavior such as low rates of saving, limited usage of deposit and transactional accounts, and overindebtedness. The Government of Rwanda, the World Bank Group, and Innovations for Poverty Action (IPA) partnered to conduct a large-scale randomized evaluation that measured the impact of Phase One of the Financial Education through SACCOs program. The evaluation measured and compared the impacts of two program delivery models—autonomous vs. fixed trainer selection—on SACCO members’ financial knowledge, skills, attitudes, and behaviors.

Key Findings*

  • SACCO members attended more sessions of the Financial Education through SACCOs when SACCOs had autonomy to choose trainers from the local community (“autonomous selection”).
  • SACCO members in this autonomous selection group showed improvements in financial knowledge, attitudes, and behaviors, including with respect to knowledge of key rules of thumb, attitudes that emphasize saving and responsible borrowing, and having—and strictly adhering to—a written budget and financial plan.
  • They were also more likely to report saving regularly towards financial goals, and to deposit savings in the SACCO.
  • However, when trainer profiles were predetermined and limited to individuals with formal roles at the SACCO (“fixed trainer selection”) these improvements were not observed. No improvements in either group were found on account usage, borrowing behavior, or financial security.

* These results are considered preliminary and may change following academic peer review.

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Brief
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July 13, 2018

We present findings from a pilot study exploring whether and how existing ties between urban migrants and rural farmers may be used to provide the latter improved access to formal insurance. Urban migrants in Ouagadougou (the capital of Burkina Faso) originating from nearby villages were offered, at the prevailing market price, a rainfall index insurance product that can potentially protect their rural relatives from adverse weather shocks. The product had an uptake of 22% during the two-week subscription window. Uptake rates were higher by 17-22 ppts among urban migrants who were randomly offered an insurance policy that would make pay-outs directly to the intended beneficiary rather than the subscriber. We argue that rainfall index insurance can complement informal risk-sharing networks by mitigating problems of informational asymmetry and self-control issues.

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Working Paper
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March 20, 2018
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Innovations for Poverty Action (IPA) is a research and policy non-profit that discovers and promotes effective solutions to global poverty problems. IPA brings together researchers and decision-makers to design, rigorously evaluate, and refine these solutions and their applications, ensuring that the evidence created is used to improve the lives of the world’s poor. Since our founding in 2002, IPA has worked with over 575 leading academics to conduct over 650 evaluations in 51 countries. Future growth will be concentrated in focus countries, such as Myanmar, where we have local and international staff, established relationships with government, NGOs, and the private sector, and deep knowledge of local issues.

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Brief
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February 20, 2018

We report results of a randomized control trial in which parents of primary school leavers were encouraged to open a convenient bank account operated over a mobile money platform. A lock savings account (LSA) was randomly promoted to half the treatment group. Treatment boosted account take-up by 25 percentage points. Intent-to-treat estimates show that being offered either account increased savings on the mobile phone. Total financial savings increased by 3-4 times, suggesting access to the mobile bank account crowded in other forms of savings. High school enrollment was 5-6 percentage points higher – representing a one third increase for compliers.

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Working Paper
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January 23, 2018
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IPA Zambia is pleased to share its final bulletin from 2017. This bulletin features updates from our Saving for Safe Delivery study and the scale-ups of the food constraints and Catch Up projects. This bulletin also highlights IPA Zambia's dissemination events for the "Making Ghanaian Girls Great!" and "Interpersonal Communication to Encourage Use of Female Condoms in Zambia" studies.

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January 16, 2018

Bank accounts can provide a secure way for low-income households to build their assets to make large investments or protect themselves against unforeseen expenses. Yet many poor households don’t use formal financial services. In the Dominican Republic, Banco Unión delivers remittances to approximately 400,000 clients who do not have a formal bank account. The bank also created two savings products tailored to the needs of these clients. In partnership with the Inter-American Development Bank (IDB) and Innovations for Poverty Action (IPA), Banco Unión developed SMS message campaigns to try to boost account uptake and usage among its remittance-receiving clientele. Two randomized evaluations found that the messaging campaigns did not increase clients’ use of formal bank accounts, and may have in fact discouraged account holders’ engagement with Banco Unión, as observed through decreased deposit and withdrawal activity and slightly lower balances by the end of the campaigns. There are several possible explanations for this behavior, including a desire for privacy, savings goals that were overly ambitious, or the use of other, unmonitored deposit products.

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Report
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November 01, 2017
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In Rwanda, we have continued our global tradition of rigorous, applicable research by building foundational research capacity and conducting evaluations in areas of pressing national concern. Examples of our work below offer promising insights into everyday issues that affect the lives of the Rwandan poor. 

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Brief
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October 01, 2017
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In Burkina Faso, Côte d'Ivoire, and Mali, we have continued our global tradition of rigorous, applicable research by building foundational research capacity and conducting evaluations in areas of pressing national concern. Examples of our work below offer promising insights into everyday issues that affect the lives of the Francophone West African poor.

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Brief
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April 24, 2017
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An audit study was conducted in Colombia following the protocols in Giné and Mazer (2017). Trained auditors visited multiple financial institutions, seeking credit and savings products. Consistent with Gabaix and Laibson (2006) and similar to Giné and Mazer (2017), the staff only provided information about the cost when asked, disclosing less than a third of the total cost voluntarily. In addition, clients were rarely offered the cheapest product, most likely because staff was incentivized to offer more expensive and thus more profitable products to the institution.

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Working Paper
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March 20, 2017
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Climate change-induced natural disasters affect an estimated 230 million people worldwide. Droughts, flooding, pollution, and other weather events are especially threatening in developing countries, which have limited capacity to cope. Within those countries, the poor and marginalized are the most vulnerable, since climate change makes food more expensive, poses health risks through waterborne disease and extreme weather (particularly in areas with poor infrastructure and sanitation), and limits farmers’ ability to create and maintain sustainable livelihoods.

The poor are inadequately equipped to cope with income shocks that accompany extreme weather conditions. A study in India found that while farmers adjusted to weather fluctuations (in this case monsoons) by changing irrigation and crop choices, they only recovered 15% of profits lost. Substantial financial barriers may prevent farmers from adapting effectively to harmful impacts of climate change. For example, farmers may not have capital or credit available to invest in more resilient seeds or technology like irrigation. Additionally, they might not have access to affordable insurance products that can mitigate losses caused by extreme weather patterns.

As the effects of climate change intensify, it is critical to help the poor adapt to climate-induced challenges and empower them to reduce their impact on the environment. At IPA’s Financial Inclusion Program (FIP), we are discovering new ways that financial services and products can address the risks that climate change poses for the poor.

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Brief
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March 14, 2017
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Research shows that when people participate in the financial system, they are better able to manage risk, start or invest in a business, and fund large expenditures like education or a home improvement. Increasing women’s financial inclusion is especially important as women disproportionately experience poverty, stemming from unequal divisions of labor and a lack of control over economic resources. While demand and supply side barriers to women’s financial inclusion remain, this review shows that appropriate financial product design can help overcome some of these barriers. This review is organized by product and presents the existing evidence on the impact of savings, credit, payments, and insurance products on women’s economic empowerment outcomes, as well as the remaining open research questions in each area. The studies included in this review are limited to those designed as randomized control trials (RCTs), widely considered to be the gold standard in impact evaluation methodology.

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Brief
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March 06, 2017
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Reminders can increase savings deposits at almost no cost to providers

Despite good intentions, people often make less-than-optimal financial choices. In this series, we match insights from our global research in behavioral economics with specific financial product and service opportunities for U.S. providers. Providers can use these evidence-based insights to expand financial inclusion, improve client offerings, and continue to promote financial health.

Providing access to savings accounts is an important step in bringing financial services to the poor, but access alone does not guarantee people will save. Many people struggle to develop good savings habits because they put off saving until a future time, or face so many seemingly urgent needs today that it is difficult to save for tomorrow, or they simply forget to save. Reminders that bring savings goals to the “top of mind” are a low-cost way to address these barriers and help clients reach their savings goals.

This brief is part of IPA’s Nudges for Financial Health series, which is available as a combined booklet here. The other briefs in the series can be downloaded individually: The Power of Doing Nothing, Count on Commitment.

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Brief
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February 13, 2017
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How defaults can improve customer savings behavior

Despite good intentions, people often make less-than-optimal financial choices. In this series, we match insights from our global research in behavioral economics with specific financial product and service opportunities for U.S. providers. Providers can use these evidence-based insights to expand financial inclusion, improve client offerings, and continue to promote financial health.

Automatic (“opt-out”) enrollment is a simple product design modification in which consumers are informed they will be automatically enrolled in a product or service unless they choose to opt out. Setting the default to “opt-out” instead of “opt-in” has been shown to significantly increase uptake of certain savings products and lead to behavior change through automation, for example by increasing participation in retirement and savings plans. It is important that financial services providers use these tools with care, fully and conspicuously inform their customers about the product or service into which they will be enrolled, and give customers full freedom to make a different choice or opt out at any time.

This brief is part of IPA’s Nudges for Financial Health series, which is available as a combined booklet here. The other briefs in the series can be downloaded individually: Top of Mind, Count on Commitment.

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Brief
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February 13, 2017
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Helping clients stick to their goals and increase their savings balances with commitments

Despite good intentions, people often make less-than-optimal financial choices. In this series, we match insights from our global research in behavioral economics with specific financial product and service opportunities for U.S. providers. Providers can use these evidence-based insights to expand financial inclusion, improve client offerings, and continue to promote financial health.

Commitment devices are voluntary, binding arrangements that people make to reach specific goals that may otherwise be difficult to achieve. When built into savings products, commitment devices can help address behavioral and social obstacles to saving by providing a mechanism that forces people to save according to their self-set plans. These devices vary in terms of commitment activity, consequence for failing to fulfill the commitment, and control over how savings are spent. “Hard” commitments feature financial penalties for failure, whereas with “soft” commitments, the penalty is primarily psychological, as in letting down oneself or one’s community.

This brief is part of IPA’s Nudges for Financial Health series, which is available as a combined booklet here. The other briefs in the series can be downloaded individually: The Power of Doing Nothing, Top of Mind.

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Brief
Date:
February 13, 2017
English

Despite good intentions, people often make less-than-optimal financial choices. In this series, we match insights from our global research in behavioral economics with specific financial service and product design opportunities both for providers in the U.S. and in other countries. Providers can use these evidence-based insights to expand financial inclusion, improve client offerings, and continue to promote financial health.

This booklet combines a series of briefs, which are also available to download as individual briefs: Count on Commitment, The Power of Doing Nothing, Top of Mind.

Count on Commitment
Commitment devices are voluntary, binding arrangements that people make to reach specific goals that may otherwise be difficult to achieve. When built into savings products, commitment devices can help address behavioral and social obstacles to saving by providing a mechanism that forces people to save according to their self-set plans. These devices vary in terms of commitment activity, consequence for failing to fulfill the commitment, and control over how savings are spent. “Hard” commitments feature financial penalties for failure, whereas with “soft” commitments, the penalty is primarily psychological, as in letting down oneself or one’s community.

The Power of Doing Nothing
Automatic (“opt-out”) enrollment is a simple product design modification in which consumers are informed they will be automatically enrolled in a product or service unless they choose to opt out. Setting the default to “opt-out” instead of “opt-in” has been shown to significantly increase uptake of certain savings products and lead to behavior change through automation, for example by increasing participation in retirement and savings plans. It is important that financial services providers use these tools with care, fully and conspicuously inform their customers about the product or service into which they will be enrolled, and give customers full freedom to make a different choice or opt out at any time.

Top of Mind
Providing access to savings accounts is an important step in bringing financial services to the poor, but access alone does not guarantee people will save. Many people struggle to develop good savings habits because they put off saving until a future time, or face so many seemingly urgent needs today that it is difficult to save for tomorrow, or they simply forget to save. Reminders that bring savings goals to the “top of mind” are a low-cost way to address these barriers and help clients reach their savings goals.

 

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Brief
Date:
February 13, 2017

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