The COVID-19 pandemic threatens lives and livelihoods, and, with that, has created immediate challenges for institutions that serve affected communities. We focus on implications for local microfinance institutions in Pakistan, a country with a mature microfinance sector, serving a large number of households. The institutions serve populations poorly-served by traditional commercial banks, helping customers invest in microenterprises, save, and maintain liquidity. We report results from ‘rapid response’ phone surveys of about 1,000 microenterprise owners, a survey of about 200 microfinance loan officers, and interviews with regulators and senior representatives of microfinance institutions. We ran these surveys starting about a week after the country went into lockdown to prevent the spread of the novel coronavirus. We find that, on average, week-on-week sales and household income both fell by about 90%. Households’ primary immediate concern in early April became how to secure food. As a result, 70% of the sample of current microfinance borrowers reported that they could not repay their loans; loan officers anticipated a repayment rate of just 34% in April 2020. We build from the results to argue that COVID-19 represents a crisis for microfinance in low-income communities. It is also a chance to consider the future of microfinance, and we suggest insights for policy reform.
The income elasticity of labor supply is a central parameter of many economic models. We test how labor supply and effort in northern Ghana respond to exogenous changes in income and wages using a randomized evaluation of a multi-faceted grant program combined with a bag-making operation. We find that recipients of the grant program increase, rather than reduce, their supply of labor. We argue that simple models with either labor or capital market frictions are not sufficient to explain the results, whereas a model that allows for a positive psychological produc- tivity effect from higher income does fit our findings.
Uganda has made substantial advancements in nancial consumer protection policy in recent years but understanding whether and how the nancial sector complies with these new regulations can be a challenge in the absence of systematic monitoring. Setting rules is insufficient to ensure proper market conduct, so supervision of sales visits is needed to ensure that the rules established are upheld in practice. To provide a snapshot of current practices and compliance with existing guidelines on consumer credit information provision at the point of sale, Innovations for Poverty Action (IPA) conducted a “mystery shopping” exercise of lending institutions in three districts of Uganda. For this survey, a mystery shopper posed as a regular customer and, unannounced, visited lenders in order to discover information about the loan application process without the credit officer knowing they are being observed, and thus avoiding impacting their normal behavior or practices.
Los bancos de microcrédito pueden operar de manera más eficiente si sus asesores de crédito distribuyen su carga de trabajo de manera uniforme a lo largo del tiempo, lo que resulta en un flujo de caja más estable para el banco. Sin embargo, los asesores de crédito, como muchas personas, tienden a procrastinar. Esta evaluación en Colombia encontró que la introducción de objetivos a corto plazo, recordatorios positivos e incentivos, llevaron a un cambio significativo en la forma en que los asesores de crédito asignaron su tiempo y mejoraron su desempeño. No obstante, el efecto de estas pequeñas intervenciones se volvió significativo cuando los gerentes de sucursal fueron incluidos en la intervención.
Los productos financieros tienen el potencial de ayudar a las personas en condición de pobreza, sin embargo, la mayoría de las instituciones financieras son impulsadas por objetivos comerciales, y su personal puede no tener incentivos a ofrecer productos más adecuados para los clientes de bajos ingresos. Este estudio de auditoría tiene como objetivos determinar los tipos de información que las instituciones proporcionan a los clientes financieros de bajos ingresos en zonas urbanas de Colombia, e identificar diferencias en el trato de las instituciones hacia los clientes con base en el conocimiento financiero percibido.
Numerosos gobiernos en países de ingresos medios y bajos, como Brasil y México, han adoptado programas de transferencias monetarias condicionadas (TMC) como una red de protección social, pero la mayoría de los beneficiarios de estas transferencias tienen poca o nula experiencia en el manejo de productos financieros formales. Para contribuir a cerrar la brecha respecto a la capacidad financiera de los beneficiarios del programa de transferencias condicionadas del Gobierno de Colombia, Fundación Capital diseñó LISTA, un programa basado en la noción de "liberar la educación financiera" del aula mediante el uso de aplicaciones diseñadas para usarse en tabletas. Los investigadores colaboraron con la Fundación Capital y el Gobierno de Colombia para realizar una evaluación aleatoria (RCT por sus siglas en inglés) de LISTA para estudiar su impacto sobre el conocimiento y el comportamiento financiero. LISTA tuvo impactos positivos significativos en el conocimiento financiero, las actitudes, las prácticas y el desempeño de los participantes. Muchos de estos impactos persistieron incluso después de dos años, mientras que algunos disminuyeron con el tiempo. El impacto a largo plazo en la participación en el sistema financiero formal fue limitado, lo que sugiere que la educación financiera por sí sola puede no es suficiente para aumentar la inclusión financiera formal.
Can greater control over earned income incentivize women to work and influence gender norms? In collaboration with Indian government partners, we provided rural women with individual bank accounts and randomly varied whether their wages from a public workfare program were directly deposited into these accounts or into the male household head’s account (the status quo). Women in a random subset of villages were also trained on account use. In the short run, relative to women just offered bank accounts, those who also received direct deposit and training increased their labor supply in the public and private sectors. In the long run, gender norms liberalized: women who received direct deposit and training became more accepting of female work, and their husbands perceived fewer social costs to having a wife who works. These effects were concentrated in households with otherwise lower levels of, and stronger norms against, female work. Women in these households also worked more in the long run and became more empowered. These patterns are consistent with models of household decision-making in which increases in bargaining power from greater control over income interact with, and influence, gender norms.
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.
There is little evidence on how the large market for credit score improvement products affects consumers or credit market efficiency. A randomized encouragement design on a standard credit builder loan (CBL) identifies null average effects on whether consumers have a credit score and the score itself, with important heterogeneity: those with loans outstanding at baseline fare worse, those without fare better. Selection, treatment effect, and prediction models indicate the CBL reveals valuable information to markets, inducing positive selection and making credit histories more precise, while keeping credit scores’ predictive power intact. With modest targeting changes, CBLs could work as intended.
For the most vulnerable, even small negative shocks can have significant short- and long-term impacts. Few interventions that improve shock-coping are widely available in sub-Saharan Africa. Researchers test whether individual pre- cautionary savings can mitigate a shock-coping behavior with potentially neg- ative spillovers: transactional sex. Sex for money is a common shock-coping behavior in sub-Saharan Africa and is believed to be a leading driver of the HIV/AIDS epidemic. In a field experiment in Kenya, researchers randomly assigned half of 600+ participating, vulnerable women to a savings intervention that consists of opening a mobile banking savings account labeled for emergency expenses and individual goals. The intervention led to an increase in total mobile savings, reductions in transactional sex as a risk-coping response to shocks, and a decrease in symptoms of sexually transmitted infections.
Financial knowledge is critical for making sound decisions that foster financial health and protect consumers from predation. A widely-used tool for building this capability is financial education. Yet evidence suggests that conventional approaches which teach concepts in classroom-style settings are ineffective and expensive at scale, especially for lower-income users. More recent findings indicate that customizing financial education to the needs, interests, and location of participants may increase impact, though doing so in a cost-effective and scalable way remains challenging. This randomized evaluation of a tablet-based financial education program with mostly female recipients of a conditional cash transfer (CCT) program in Colombia offers evidence for how to design and scale an effective digital-based financial education program. Results indicate that the LISTA Initiative had significant positive impacts on financial knowledge, attitudes, practices, and performance, increasing for poorer, less educated, and more rural populations, with users exhibiting increased financial health over two years later. Critical mechanisms included well-designed content and a social learning component. Yet the longer-term impact on formal financial inclusion was limited, suggesting the possible benefits of combining supply-side solutions with financial education interventions.
We test whether the provision of multiple labeled savings accounts affects savings decisions and downstream outcomes in a field experiment with 481 entrepreneurs in urban Malawi. Treatment respondents received either one or multiple savings boxes, while a control group received nothing. Multiple accounts increased savings in treatment accounts by about 30%. Savings boxes had sizeable effects on a number of outcomes, including farming decisions, household expenditures, land purchases, credit extended to customers, and interpersonal transfers. However, we find no evidence that multiple accounts had larger downstream effects than single accounts.
Working with a private bank in Ghana, this study examines the impacts of a commitment savings product designed to help clients taking repeated overdrafts break their debt cycles. Overall, the product significantly increased savings with the bank without increasing overdrafts. However, after accounting for other sources of savings, the study finds that clients with above-median baseline overdraft histories do not accrue new savings during the commitment period. Rather, they draw down other savings to offset the committed amount and take on new debt. In contrast, individuals with below-median overdraft histories significantly increase savings during and after the commitment period.
Developing country lenders are taking advantage of fintech tools to create fully digital loans on mobile phones. Using administrative and survey data, we study the take up and impacts of one of the most popular digital loan products in the world, M-Shwari in Kenya. While 34% of those eligible for a loan take it, the loan does not substitute for other credit. The loans improve household resilience: households are 6.3 percentage points less likely to forego expenses due to negative shocks. We conclude that while digital loans improve financial access and resilience, they are not a panacea for greater credit market failures.