Innovations for Poverty Action (IPA) invites qualified offerors to submit proposals to (i) adapt an existing presential curriculum for a Human-Centered Design (HCD) training targeting financial service providers for online delivery, and (ii) virtually co-deliver four Online Human-Centered Design (HCD) Workshops for financial service providers in Lesotho and Indonesia, in partnership with IPA’s Financial Inclusion Program. The primary objective of these workshops will be to teach the basic concepts of human-centered design and apply these concepts to the creation of new credit products for women-owned small and medium enterprises.
It is often argued that people might take on too much high-cost debt because they are present focused and/or overoptimistic about how soon they will repay. We measure borrowers' present focus and overoptimism using an experiment with a large payday lender. Although the most inexperienced quartile of borrowers underestimate their likelihood of future borrowing, the more experienced three quartiles predict correctly on average. This finding contrasts sharply with priors we elicited from 103 payday lending and behavioral economics experts, who believed that the average borrower would be highly overoptimistic about getting out of debt. Borrowers are willing to pay a significant premium for an experimental incentive to avoid future borrowing, which we show implies that they perceive themselves to be time inconsistent. We use borrowers' predicted behavior and valuation of the experimental incentive to estimate a model of present focus and naivete. We then use the model to study common payday lending regulations. In our model, banning payday loans reduces welfare relative to existing regulation, while limits on repeat borrowing might increase welfare by inducing faster repayment that is more consistent with longrun preferences.
Convincing lending institutions to provide credit to the poor can be a challenge given that poorer clients often have limited to no credit histories and are therefore deemed high risk. A pilot study in Malawi showed that using fingerprints as unique IDs to track credit histories increased repayment behavior of microfinance borrowers, holding promise as a way to help more poor borrowers access credit. With support from USAID’s Development Impact Ventures, researchers collaborated with lenders and a centralized credit data repository in Malawi to evaluate the impact of this approach prior to its transition to scale. The implementation of the scale-up faced many challenges and researchers saw relatively low adoption of fingerprint identification by local microfinance institutions. These results highlight the challenge of scaling up a complicated technology in a resource-constrained setting, and the broader importance of evaluating interventions beyond the pilot scale before expanding them to reach larger populations.
The Social Media Usage by Digital Finance Consumer Project is part of IPA’s Consumer Protection Research Initiative. The objective of the project is to deepen the understanding of the types of consumer protection problems experienced by digital finance consumers across three countries and types of financial providers. It consists of a social media listening tool tested on digital financial services in Kenya, Nigeria and Uganda, and will be used to inform potential further experimentation with consumer engagement and complaint handling via social media by regulators and civil society.
The digitization of financial services has been on the rise in the past years and has experienced a particularly big leap after the COVID-19 pandemic due to the temporary closure of physical offices and bank branches of many financial service providers. As financial services go digital, so do consumers by sharing their experiences, complaints and reviews through online channels and social media. Increasing use of social media channels to share feedback, concerns, and challenges provides new opportunities for insights into issues affecting digital consumers which can complement traditional methods such as phone or in-person consumer surveys.
To explore these opportunities, IPA piloted a social media listening and analysis project for consumer protection monitoring in digital financial services. This project has been developed in collaboration with Citibeats, an Ethical AI platform analyzing unstructured text. The project collects historical data on consumer protection-relevant content published on Twitter, Facebook Public Pages and Google Play Store Reviews and analyzes it using Artificial Intelligence algorithms based on Natural Language Processing and semi-supervised machine learning. The analysis provides insights into the types of consumer protection issues faced by consumers across countries and financial providers, classified into four types: 1) Commercial Banks; 2) Telecommunication companies offering mobile money services; 3) Fintech start-ups mainly offering online lending products and payment methods; and 4) Microfinance institutions.
To learn more about the methodology and main findings of this project, click the "Download" button or the PDF preview image to the right to download the full report.
¿Puede el rediseño de los estados de cuentas de aportes a las pensiones aumentar la comprensión de los aspectos clave relacionados con el sistema de pensiones y mejorar la cobertura? Investigadores en Colombia se asociaron con Colpensiones, la administradora pública de fondos de pensiones de Colombia, para probar el efecto del rediseño de los extractos de pensiones en la comprensión de la información presentada a los beneficiarios y la identificación de posibles errores en sus extractos. El rediseño de los estados de cuenta condujo a una mejora en la comprensión de los beneficiarios de su información y a un aumento de las correcciones solicitadas, aunque estos efectos variaron según el tipo de beneficiario.
¿Cómo apoyan las transferencias monetarias a las poblaciones vulnerables recientemente designadas y trabajadores informales durante una crisis económica? Para ayudar a responder estas preguntas, los investigadores están estudiando el efecto de Ingreso Solidario, una nueva transferencia monetaria no condicionada en Colombia que se puso en marcha en respuesta a la pandemia del COVID-19. Ingreso Solidario atenderá a hasta 2,6 millones de hogares de renta media baja que no estaban inscritos en otros programas de asistencia social existentes, ampliando así la cobertura de la protección social a las poblaciones de renta media baja. Los investigadores están evaluando los efectos de la transferencia en los ingresos de los beneficiarios, el gasto alimentario y no alimentario, la participación en el mercado laboral y la adopción y uso de productos financieros digitales.
Founded in 2019, IPA Nigeria develops applicable research by building foundational research capacity and conducting evaluations in areas of pressing national concern. Examples of our work in this brief offer promising insights into critical issues that affect the lives of the Nigerian poor.
IPA Uganda conducted a random digit dial (RDD) survey on consumer protection issues with a completely virtual phone bank and a quota sampling protocol meant to cover a broad selection of adults in the country. Quota sampling involves placing calls until a quota is reached for each combination of respondent characteristics, whose prevalence in the target population is believed to be known. It is a good way to achieve samples that are representative along key dimensions. In some cases, it can increase time and monetary costs substantively to meet quotas for rare combinations of respondent characteristics.
I present evidence that unmet liquidity needs for indivisible, "lumpy," expenditures increase demand for betting as a second-best method of liquidity generation in the presence of financial constraints. With a sample of 1,708 sports bettors in Kampala, Uganda, I show that participants' targeted payouts are linked to anticipated expenditures, while winnings increase lumpy expenditures disproportionately. I show that a randomized savings treatment decreases demand for betting. And I use two lab-in-the-field experiments to show that unmet liquidity needs and saving ability are important mechanisms. These results cannot be explained by betting as a purely normal good.
We conduct a ﬁeld experiment offering graduated microcredit clients the opportunity to ﬁnance a business asset worth four times their previous borrowing limit. We implement this using a hire-purchase contract; our control group is offered a zero-interest loan. We ﬁnd large, signiﬁcant and persistent effects from asset ﬁnance contracts: treated microenterprise owners run larger businesses and enjoy higher proﬁts; consequently, household consumption increases, particularly on food and children’s education. A dynamic structural model with non-convex capital adjustment costs rationalizes our results; this highlights the potential for welfare improvements through large capital injections that are ﬁnancially sustainable for microﬁnance institutions.
Markets for consumer financial services are growing rapidly in low and middle income countries and being transformed by digital technologies and platforms. With growth and change come concerns about protecting consumers from firm exploitation due to imperfect information and contracting as well as from their own decision-making limitations. We seek to bridge regulator and academic perspectives on these underlying sources of harm and five potential problems that can result: high and hidden prices, overindebtedness, post-contract exploitation, fraud, and discrimination. These potential problems span product markets old and new, and could impact micro- and macroeconomies alike. Yet there is little consensus on how to define, diagnose, or treat them. Evidence-based consumer financial protection will require substantial advances in theory and especially empirics, and we outline key areas for future research.
Researchers study the impact of money on households during the COVID-19 pandemic. In March 2020, Colombia rolled out a new unconditional cash transfer (UCT) to one million households in poverty worth $19 (PPP $55.6) and paid every 5-8 weeks. Using an RCT and linked administrative and survey data, they find the UCT had positive (albeit modest) effects on measures of household well-being (e.g., financial health, food access). Moreover, the UCT boosted support for emergency assistance to households and firms during the crisis and promoted social cooperation. Finally, they explore the bottlenecks in expanding mobile money during a pandemic.
For those seeking to measure financial health in a quick and simple way, we recommend applying only the Access-to-Funds module of the questionnaire. The questions in our recommended Access-to-Funds module are identical to the 2020 Global Findex’s resilience questions in order to promote standardization in data collection across the sector. This alignment creates the added benefit of being able to leverage other data from the Global Findex database.
Our work also attempted to identify the most important questions from the remaining two sections, Financial Behavior and Access-to-Finance, to add to a longer version of a financial health survey instrument. Our analysis showed that particularly in the Financial Behavior section, none of the questions could be identified as clear winners across the multiple settings in which they were tested. For those wishing to use a longer version of our instrument to capture data on Financial Behavior and Access-to-Finance questions in addition to the Access-to-Funds measure, we recommend picking from the long-form version of our recommended survey instrument, and either selecting those indicators that may be most relevant to your setting or collecting responses on all and then testing to see which questions are most strongly correlated with financial health for your target population. Finally, we include a set of potential context questions, including questions about income volatility and predictability, which we find to be highly correlated with financial health.
From June 2018 to February 2019, Innovations for Poverty Action administered this survey to 11,876 individuals in seven countries. For a full discussion of the development, piloting, and empirical validation of these indicators, as well as findings, please consult this project’s final report.
IPA invites experienced research firms to submit proposals to deliver various research deliverables, including in-person stakeholder interviews, provide in-person support for a virtual human-centered design workshop, a quantitative survey, and to conduct supplemental qualitative research among women-owned MSMEs in Indonesia.
We examine some effects of Universal Basic Income (UBI) during the COVID-19 pandemic using a large-scale experiment in rural Kenya. Transfers significantly improved well-being on common measures such as hunger, sickness and depression in spite of the pandemic, but with modest effect sizes. They may have had public health benefits, as they reduced hospital visits and decreased social (but not commercial) interactions that influence contagion rates. During the pandemic (and contemporaneous agricultural lean season) recipients lost the income gains from starting new non-agricultural enterprises that they had initially obtained, but also suffered smaller increases in hunger. This pattern is consistent with the idea that UBI induced recipients to take on more income risk in part by mitigating the most harmful consequences of adverse shocks.