Access to banking services can help households better manage financial decisions. Yet households may not use the services if they do not trust the institutions, if service quality is poor, or if the services disrupt local financial relationships. Researchers examined the impact of access to banking services for the first time on households in rural Kenya.
In countries like India, female labor force participation is low despite rapid economic growth. In partnership with the government of Madhya Pradesh, researchers offered women individual bank accounts to evaluate the impact of increasing women’s financial control on labor market participation and earnings. Linking earnings from a government workfare program to women’s bank accounts led to increased employment both within the program and in the private sector.
In Mexico, as in many other countries, retirement savings levels are low. The situation is worse for informal workers and the unemployed, who cannot rely on employer contributions to help build their nest eggs.
While many low-income Americans have costly debt, they typically spend only a small proportion of their tax rebates to repay those debts. In partnership with Baltimore CASH, researchers are introducing postcards that encourage low-income tax filers to use their tax rebates to pay off debt, and varying the timing of postcard delivery, to evaluate the impact of these nudges on debt repayment.
Rainfall insurance is a potentially cost-effective way to protect farmers in low-income countries from adverse weather events, but its adoption has been low. Marketing rainfall insurance to farmers’ urban relatives, who often help support their rural family members, may increase its use. Researchers partnered with micro-insurance organization Planet Guarantee to study the demand for a rainfall insurance product marketed to urban relatives of farmers in Burkina Faso.
Commitment savings accounts—which reward users for reaching savings goals and penalize them for withdrawing early—have the potential to help people reach their savings goals, but concern over having enough cash on hand to cover emergencies may discourage some from using them. Changing the design of commitment savings accounts to pay incentive bonuses up front rather than at the end of a defined period may encourage more people to take advantage of them.
Credit reports may help low-income borrowers better understand their credit histories and allow them to make better borrowing decisions. However, even when credit report tools are freely available, borrowers rarely check their scores. Awareness campaigns may make credit reports more salient to consumers and in turn increase the use of credit reports in financial decision-making.
In Colombia, as in many other countries, workers face many barriers to saving for retirement. The situation is much worse for informal workers, who make up about 65 percent of the total workforce in Colombia.
Most public-sector workers and many private sector employees in developing countries are paid monthly, a schedule that means large lump-sum payments follow periods of relative scarcity. Employees who receive wages following a cash-strapped period may be more likely to buy temptation goods––spending large sums of money in ways they later regret.
Micro-loans are a promising means of promoting entrepreneurship, but conventional loan products are often unsuited to the needs of small businesses in developing countries. Offering microenterprise borrowers the ability to postpone loan payments when needed may encourage long-term investments in business expansion and help owners cope with financial hardship.
Governments must pay their employees for states to function, but frequent delays and leakage of salary payments can undermine government effectiveness. In partnership with the Ministry of Education of Afghanistan, researchers are conducting a randomized evaluation to study whether mobile salary payments (MSPs) improve learning by increasing teacher attendance and morale.
Pension systems aim to prevent poverty among the elderly and to help ensure people have adequate income across their lifetime. But, only a small proportion (25 percent) of the global labor force contributes or accrues pension funds, and in developing countries essentially no small firms’ employees have pension coverage.
In places with limited formal institutions, social and family networks play an important role in people’s lives, with friends and relations often sharing financial resources. The social norm which requires resources be shared may reduce incentives to work, with negative economic consequences.
Recent evidence suggests formal savings accounts can lead to increased savings for the poor, but uptake of bank accounts has been low. There is also evidence suggesting that savings for specific goals can potentially be increased by enabling people to commit money towards goal-specific “mental accounts”.