While the accountability and inclusiveness of institutions are often considered key determinants of economic performance, there is little agreement about how institutions should be designed. Researchers evaluated the impact of a community-driven development program in Sierra Leone designed to establish more inclusive and accountable local decision-making infrastructure by providing villages with small development grants to be allocated by village committees.
Conditional cash transfers have proven effective as incentives for the extreme poor to visit a health clinic or send their children to school. But are such programs sustainable? If the cash assistance is taken away, will families find themselves back where they started before the program? In this study, researchers evaluate if financial education and business training can help recipients graduate from a conditional cash transfer program, and what type of training is most beneficial.
Researchers designed and piloted a program called Borrow Less Tomorrow (BoLT) that took a behavioral approach to debt reduction, combining an accelerated loan repayment schedule with peer support and reminders. Results from a sample of free tax-preparation clients in Tulsa, United States suggest a strong demand for debt reduction: 41 percent of those offered BoLT used it to make a plan to accelerate debt repayment.
The vast majority of new HIV infections occur in sub-Saharan Africa, where nearly 2 million people become infected with HIV/AIDS every year. This randomized evaluation examines the impact of two HIV prevention strategies among youth in Kenya: voluntary counseling and testing for HIV (VCT) and condom distribution.
How do migrants decide how much money to send home in remittances? Would they like to have some control over how much of the money is spent and how much is saved? This study offered a variety of special bank accounts to migrants from El Salvador living in Washington DC, offering the sender varying degrees of control over an account held in the receivers name. Migrants offered greater control sent significantly more.
In Mexico, the financial intermediary Caja Nacional del Sureste (CNS) observed that it was transferring a large amount of remittances to their clients but that very little savings was captured from this flow of money. Researchers partnered with CNS to investigate whether requiring clients to sign a non-binding agreement to save a predetermined amount of each remittance received could increase saving.
This research examines whether bank marketing and communication tools can help individuals save more and, in particular, switch from informal savings vehicles to formal sector methods (e.g., a bank account). In conjunction with Caja Municipal de Ica (CMI), IPA examines various methods of product design, beyond the financial incentive, of encouraging clients to complete their savings commitment.
Village Savings and Loans Associations (VSLAs) are thought to play a critical role in bringing financial services to rural areas of developing countries, where access to formal financial services is typically very limited. However, evidence on the impact of these groups has been sparse. In Ghana, Malawi, and Uganda, Innovations for Poverty Action worked with researchers and CARE to rigorously evaluate the impact of VSLAs on rural households.
Previous research suggests that many people lack the skills needed to calculate expected returns or present discounted values, which may cause them to make suboptimal financial decisions. Previous work by Hastings and Tejeda-Ashton in Mexico showed that the way that returns to a pension program were presented (in pesos versus as an annual percentage) affected price sensitivity. Another explanation offered for sub optimal financial decisions is the present bias of many decision makers, who a
Credit markets in developing countries can be hampered by a lack of basic financial mechanisms, such as the ability to screen loan applicants to improve repayment rates. Researchers evaluated the effect of (a) simple text message reminders and (b) financial incentives on borrowers' loan repayment. These methods had similarly positive effects, which suggests that the text message reminders may be a more cost-effective intervention.
To understand the potential gains from formal banking, we must first understand the risks and returns that the poor face from financial-service options in the informal sector. Yet, while informal financial products dominate the financial lives of the poor, we have scant data and analysis on either informal savings or informal debt.
Poverty, lack of female empowerment, and lack of education are major risk factors for childhood illness worldwide. Microcredit clients randomized to an educational intervention showed greater knowledge about child health, but no differences in child health outcomes compared to controls.
One of the most famous innovations of microfinance was the idea of “social collateral” – a way to guarantee the loans of people who have limited physical assets. However, it’s not clear that requiring group liability is actually a good thing. For instance, it can drastically raise the cost of a loan for a good client if she is forced to cover for other loans. Furthermore, it can force someone to guarantee people who take out much larger loans, which may prove to be impossible.
Microfinance has generated worldwide enthusiasm as a potential answer to economic development and poverty reduction. But high default risk and unproductive use of loaned funds plagues many programs. Researchers worked in Peru to measure the marginal impact of adding business training to a group lending program. The results of this study found business training slightly improved business practices, but had no impact on key business outcomes such as revenue and profit.
While informal savings groups are common around the developing world, their formats can limit flexibility in responding to members’ needs, particularly when it comes to loans or coping with unexpected expenses. In Mali, Oxfam’s Saving for Change (SfC) program allows groups of women to form a savings group together. Members can also apply for loans from the group, to be paid back with interest. When the group ends, the pool of funds with the loan interest is redistributed to the members.
IPA is working with Mumuadu Rural Bank (MRB) to study the response to and impact of a new account labeling savings product. Working with Susu customers and Susu agents, the study compares the success of this new product with the current Susu savings product. The new savings product has only a psychological difference: it allows the labeling of funds within an account so that deposits can be directed to a specific goal, such as health, education or business savings.