This note describes simultaneous borrowing and saving, and it provides evidence highlighting an explanation rooted in difficulties re-building savings. The explanation suggests why high interest rates on loans may even be a desirable attribute for some borrowers.

The global financial crisis provides a sharp reminder of how weak lending practices not only affect the lives of many people but also can have severe systemic consequences.  However, policies designed to protect may unintentionally restrict the extension of credit, especially to poorer borrowers.  

While the financial crisis provides evidence of the need for greater consumer protection, adding costs and complexity to credit processes may slow renewed formal lending.  Confronted by these growing pressures at a macro-economic level, policy makers and regulators face a “regulator’s dilemma”: how much and how to intervene in credit markets to protect not only those borrowers who already have access to formal credit, but also to protect access to credit itself. At the heart of successfully resolving this dilemma, as in all such dilemmas, is the process of carefully identifying and evaluating the trade-offs involved.

The FAI Policy Note “Consumer Protection in Credit Markets” advocates an evidence-based approach and provides pointers to help policy makers establish a regime of consumer protection appropriate to the state of development of different credit markets and in line with broader national objectives such as financial inclusion.

The first global estimate of its kind reveals that 2.5 billion adults do not use formal services to save or borrow.  Who are these ‘unbanked’ populations? Where do they live? How do they survive? And what lessons do these estimates hold for policymakers working to improve levels of financial inclusion for poor populations?

The authors describe important trade-offs that microfinance practitioners, donors, and regulators navigate. Drawing evidence from large, global surveys of microfinance institutions, they find a basic tension between meeting social goals and maximizing financial performance.  Potential trade-offs therefore arise when selecting contracting mechanisms, level of commercialization, rigor of regulation, and the extent of competition. Meaningful interventions in microfinance will require making deliberate choices – and thus embracing and weighing tradeoffs carefully.

Drawing on financial diaries research outlined in Portfolios of the Poor: How the World’s Poor Live on $2 a Day, this brief looks at ways to envision the next generation of services for the "bottom billion” by examining what is and isn’t working for poor households as they patch together their financial lives.

This brief offers insight into the ways poor households manage risks. Based on the financial diaries research outlined in Portfolios of the Poor: How the World’s Poor Live on $2 a Day, this brief outlines the formal and informal risk management tools used by poor households in Bangladesh, India and South Africa, such as insurance and savings, and examines how these tools can be improved to help the poor mitigate risk and plan for the future.

This note reviews innovations in the provision of credit.

This note reviews ideas and evidence about expanding access to saving products.

Uses data from SafeSave, a credit cooperative in the slums of Dhaka, Bangladesh, to examine how sensitive borrowers are to increases in the interest rate on loans.