When children do not receive adequate nourishment in the first years of life, it can impair their physical and cognitive development and have long-term consequences on their earnings and productivity. In Myanmar, which has one of the highest rates of stunting in the Asia-Pacific region, Innovations for Poverty Action is working with researchers to evaluate the impact of maternal cash transfers and nutritional information on child malnutrition.
Despite the initial promise of microcredit, randomized evaluations have found at best modest effects of microloans on poverty. Digitized payments from government cash transfer programs provide a unique opportunity to offer microcredit while addressing some of its shortcomings, potentially reducing interest rates, default risk, and repayment issues.
There are an estimated 411 million mobile money accounts worldwide, allowing even the poor in remote areas to send and receive money at low cost. How access to this financial tool affects long-term financial well-being, however, is not well understood. In Kenya, IPA worked with researchers to track the economic progress of households as the M-PESA mobile money service expanded over six years.
Numerous developing country governments, such as Brazil and Mexico, have adopted conditional cash transfer (CCT) programs as a social safety net, providing billions of dollars in transferred funds to millions of low-income citizens, in many cases by depositing them directly into a bank account. However, most of these recipients have little to no previous experience with formal financial products, thus providing the opportunity for product-linked training.
Many microentrepreneurs in developing countries may lack the training or skills to make the most effective financial and business management decisions. In India, researchers tested a low-cost and easy-to-scale financial capability intervention that delivered easy-to-remember and easy-to-adopt rules of thumb via voice-based mobile phone messages.
Although the success of microcredit was originally attributed to the group loan model, there is little evidence on the relative impacts of individual lending versus group lending on household consumption, income, and enterprise creation. In this study, researchers randomly selected existing group-lending centers to convert to an individual liability model.
Microcredit has been successful in bringing formal financial services to the poor, but given that many microcredit clients live in poverty, this success has sparked a debate surrounding the question of how to set interest rates. In Ghana, researchers set out to measure how different interest rates on individual loans affect demand for the loans and if and how different interest rates affect borrower profile.
Lack of access to finance constrains small business growth—a problem that is exacerbated for Muslim business-owners, many of whom do not take out traditional loans for religious reasons. Innovations for Poverty Action is supporting research in Pakistan on a lease-based product that features more flexible repayment schedules, allows businesses to share risk with a large microfinance institution, and complies with local Islamic financial norms.
Farming is risky: a drought, bad harvest, or dip in crop prices can leave small farmers in developing countries without a steady income throughout the year. Attempts to mitigate these risks with agricultural insurance have typically been unsuccessful because farmers have chosen not to buy insurance. Researchers partnered with a large sugar cane company to see if delaying the premium payment until after the harvest would increase farmers’ demand for insurance.
Advances in payments technology have the potential to improve the efficiency of slow and corrupt public welfare programs. Researchers tested how Smartcards, which coupled electronic transfers with biometric authentication, affected the functioning of two government welfare schemes in India. They found that even though the new Smartcard system was not fully implemented, it resulted in a faster and less corrupt payments process without adversely affecting program access.
Behavioral research suggests that self-control, procrastination, attention, and other behavioral factors may limit individuals’ ability to save for the long-term. New mobile money platforms in many developing countries are creating financial products that can help low- and moderate-income individuals overcome these barriers.
Traditional savings accounts often have low or negative returns, which may explain why many poor households do not use them to boost their savings. Researchers are investigating the impact of a new product that allows Kenyans to invest small amounts of money in a low-risk, high-return infrastructure bond using their mobile phones.
Small business growth is crucial for helping the poor improve their livelihoods, but expensive and inflexible financial products restrict business owners’ access to credit and constrain profits. Innovations for Poverty Action is supporting research that examines whether new financial products can help Indian female market vendors pursue borrowing strategies tailored to their business needs, while building up a reserve of savings they can use to finance week-to-week inventory purchases.
Of the two billion people living on less than $2 per day, roughly half run a business. Finding effective approaches to enhance the productivity and performance of these businesses is considered key to economic growth in many developing economies.
The vast majority of the world’s poor save, yet they often do so informally even when research findings suggest that accessing savings accounts at formal institutions can help low-income households increase their savings, investments, and ultimately their income. Could temporary interest rate incentives increase formal account use among the poor?