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.

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Working Paper
Date:
December 01, 2020

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.

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Working Paper
Date:
November 30, 2020
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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.

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Research Resource
Date:
October 23, 2020
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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.  

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Research Resource
Date:
September 15, 2020
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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.

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Working Paper
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September 02, 2020
Spanish

Se ha demostrado que en situaciones de emergencia la asistencia de dinero ayuda a los beneficiarios a mitigar las consecuencias económicas resultantes, por ejemplo, mediante el aumento de la seguridad alimentaria. La Devolución del IVA, una nueva transferencia de dinero incondicional en Colombia, asistirá a 1 millón de hogares de bajos ingresos en atravesar la crisis económica a causa de la pandemia del COVID-19. A través de una evaluación aleatoria, los investigadores podrán medir los efectos de la transferencia en la salud física y mental de los beneficiarios, la seguridad alimentaria, la seguridad financiera y el aprendizaje de los niños, entre otros. 

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August 11, 2020
Spanish

La propagación global del COVID-19 y las medidas de confinamiento para contenerle han incrementado el estrés económico y la violencia doméstica. Para enfrentar este desafío, los investigadores se han asociado en Colombia con IPA, Fundación Capital y Comfama para evaluar el impacto de una intervención interactiva basada en WhatsApp, que pretende mejorar la salud financiera y reducir la violencia doméstica al introducir consejos de comunicación de pareja en un programa existente de educación financiera. Los investigadores están midiendo el impacto en capacidad financiera, empoderamiento de las mujeres e incidencia de la violencia doméstica en el contexto de la pandemia por COVID-19. 

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July 24, 2020

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.

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Published Paper
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June 18, 2020
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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.

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May 14, 2020
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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.

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Report
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May 08, 2020

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.

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February 25, 2020
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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.

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February 25, 2020

We study a simple savings scheme that allows workers to defer receipt of part of their wages for three months at zero interest. The scheme significantly increases savings during the deferral period, leading to higher post-disbursement spending on lumpy expenditures. Two years later, after two additional rounds of the savings scheme, we find that treated workers have made permanent improvements to their homes. The popularity of the scheme suggests a lack of good alternative savings options, and analysis of a follow-up experiment shows that demand for the scheme is also due to the scheme’s ability to address self-control issues.

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Working Paper
Date:
October 30, 2019
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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.

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Brief
Date:
September 22, 2019

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