The story of Becky and Jeremy Moore (names changed) from Financial Diaries was recently cited in a New York Times article about budgeting during the coronavirus. Becky and Jeremy’s story illustrates one major lesson from the Financial Diaries study of 2012–2013 — that financial insecurity is not simply a result of not having enough money, but rather of not having money at the right time, when it is needed. Financial Diaries documents how income volatility affects millions of Americans in different ways, from working on commission to unpredictable work hours, making it all the more difficult to set aside enough cash to weather a global pandemic.
Read MoreEpitaph for the Smart Campaign
Many microfinance loan officers in Pakistan receive a high proportion of their pay in performance bonuses that reward keeping delinquencies low. Normally, the performance incentives are well-balanced, and loan officers follow guidelines for respectful client treatment. But in the face of rising delinquencies due to the Covid-19 lockdown, FAI research reported a tendency for loan officers to resort to high-pressure loan collection tactics to protect their bonuses.
Read MoreMigration and Household Finances: How a different framing can improve thinking about migration - A podcast featuring Tim Ogden
In this podcast, produced by the Development Policy Center at Australian National University, Tim Ogden discusses a necessary new lens for research on migration and household finances, based on a paper co-authored with Micheal Clemens. Typically, migrant remittances have been treated as windfall income by policy makers and researchers. However, from a family’s perspective, remittances from a relative overseas are a return on investment. Thus, migration itself is a strategy for financial management.
Read MoreHopes and Fears for the Future of Digital Financial Services: Views from Five Experts
From the start of the outbreak, digital finance providers were seen as a solution to some of the effects of COVID-19. Mobile money providers potentially offer a safer alternative to cash and some governments immediately turned to digital solutions to distribute much needed cash relief. That digital providers offered creative solutions under pressure is laudable, but perhaps not surprising, as most digital services are born from an opportunity to improve a dysfunctional system.
Read MorefaiVLive Sources: Digital Financial Services, Inclusion, Exclusion and the Future of Pro-Poor FSPs
Thanks to everyone who joined our faiVLive webinar about the future of Digital Financial Services on June 26th. Below you’ll find the recording and a list of resources discussed or shared by panelists and attendees during the call.
Read MoreRegister for the next faiVLive, June 26 | Digital Financial Services, Inclusion, Exclusion and the Future of Pro-Poor FSPs
The pandemic has raised the profile of digital financial services, which have enabled amazingly rapid distribution of social support funds and may provide a path forward for delivering financial services safely and at scale. But there are important questions left to consider about the roll-out and ultimate impact of DFS. This edition of faiVLive brings together expert practitioners and researchers to address these questions, ranging from the impact of DFS on MFIs to digital security.
Read MoreMicrofinance Investors are Boxed In - and DFIs Need to Step Up
Thanks to the COVID-19 crisis, many microfinance borrowers can’t repay their loans. That in turn means that microfinance institutions (MFIs) won’t be able to fulfill obligations to their investors. And that means that microfinance investment vehicles (MIVs) will have trouble maintaining obligations to the ultimate funders, who are often large, well-financed Development Finance Institutions (DFIs). So, there’s a value chain that often looks like this: Customers < MFIs < MIVs < DFIs. And if the chain breaks down, customers end up alone and without support.
Read MoreHow resilient are we? A dive into the global data on how people deal with unexpected shocks
By Michelle Kempis and Jonathan Morduch
As the current pandemic pushes the global economy to the brink, we decided to take a look at what surveys say about how well households plan to deal with big emergencies.
The only truly global data we know are from the World Bank’s Global Findex survey. The Findex reports on household surveys from 140 countries, and it greatly enriches what we know about financial inclusion. One section is devoted to asking how respondents would cover a large emergency equivalent to 1/20th GNI of per capita. It’s an under-exploited resource—but see this and this —and a bit tricky to interpret.
Read MoreHrishipara Diaries: How One Community in Bangladesh Has (So Far) Weathered the COVID-19 Storm
One member of the Hrishipara community, realizing the demand for fresh vegetables and faced with the collapse of his usual work, sets up an improvised vegetable market in late April, 2020. Photo credit: Kalimullah
At FAI we have begun convening conversations with a small group of researchers collecting high-frequency data on the financial lives of households and small businesses. All members of the group are managing, through modified survey techniques, to continue (or start) data collection during the COVID-19 pandemic and lockdowns. Data collection is frequent, in some cases daily, but at least once a month. Our goal is to get a sense of the reach and scope of these somewhat similar studies, while facilitating collaboration among researchers to learn from one another, for example on streamlining and improving survey questions, and analyzing and interpreting high frequency data gathered in these circumstances. We also aim to support the use of the very granular data that emerges from these projects, contextualizing or aggregating it, to contribute to more informed, pro-poor policies and services.
Read MoreBanking on Human Capital: What Financial Institutions Need to Do – Now – to Enable a COVID-19 Recovery
Every crisis carries its own signature, unfolding with distinctive timing, impact and, ultimately, recovery. Floods have a short, sharp impact, and recovery begins as soon as the waters recede. Other crises, like the 2009 global financial meltdown, linger for years.
For the novel coronavirus, many epidemiologists predict a series of waves for the next year or so, with lockdowns beating back the virus only to have it flare up again when those measures are eased. As policymakers with limited information struggle to find the right balance between the health of people and the health of the economy (while also working to keep themselves in power), we can expect a juddering mix of policy-induced economic slowdowns that could go on for months – if not longer.
Read MoreWelcome Elisabeth Rhyne as FAI Visiting Fellow
We’re pleased to announce that Elisabeth Rhyne will be joining FAI as a visiting fellow. Former managing director of the Center for Financial Inclusion and a co-founder of the Smart Campaign, Elisabeth will focus on the issue of consumer protection, especially during the COVID-19 pandemic and its aftermath.
Read MoreFinancial Consumer Protections in Unprecedented Times
by Dave Grace and Elisabeth Rhyne
During the economic slowdown in response to the novel coronavirus, the position of financial institutions is in some ways analogous to that of medical workers fighting the virus—without the health risk. Financial institutions have a duty to help their clients, even though doing so exposes them to increased risk. This is especially true for microfinance institutions, financial cooperatives and other bankers who serve lower income and vulnerable people. For these providers, taking steps to help customers like forgiving loans or offering payment holidays potentially threatens their own survival. Financial institutions are asked to support their small business and household customers through this unprecedented situation, even while their own solvency is challenged.
Can Migration Patterns Help Predict COVID Outbreaks in South Asia?
Authors: Jean Lee (World Bank), Mahreen Mahmud (Oxford), Jonathan Morduch (NYU), Saravana Ravindran (UCLA), and Abu Shonchoy (Florida International U.). Click here for a PDF of this blog post.
Within one week in March, the lockdowns ordered by South Asian governments to combat the COVID-19 pandemic dramatically reversed rural-to-urban migrant flows. Our team’s early analysis shows that migration patterns may help predict the location of COVID outbreaks.
Read MoreResources from our faiVLive Webinar on COVID-19 and Microfinance
Thanks to everyone who joined our April 10 faivLive webinar on Global Pandemic Meets Microfinance: Impact on Poor Households and What the Industry Needs to Do Now, on Friday April 10. Below you’ll find a list of resources shared by panelists and attendees during the call.
Read MoreThe Truth about Training: What We Know about Training Programs for Small Businesses
Tim and David’s conversation focuses on the “big mystery” at the heart of the debate about training programs for micro, small, and medium enterprises (MSMEs). On one hand, we know that keeping a small business afloat in a constrained environment is extremely difficult and complex. We’ve also found that the types of skills taught in training programs—basic budgeting, marketing, record keeping, financial and inventory management—do matter for small firm profitability and growth. These facts should in theory create scope for huge business improvements as a result of training programs. So what’s the conundrum? These improvements are generally not detected in the research: David’s meta-analysis of 15 rigorous studies found no statistically significant impact of training on profitability or sales.
Read MoreRegister for Our Upcoming faiVLive on COVID-19 and Microfinance
This edition of faiVLive brings together expert practitioners and researchers to discuss how we should be thinking about the impact of COVID-19 and pandemic control policies on poor households in developing countries, what policy interventions are plausible and possible, what role does microfinance have to play, and what needs to happen to enable the global microfinance industry to be useful now and six months from now.
Read MoreFAI In the News: Those Who Most Need The $1,200 Stimulus Checks May Wait the Longest (Time)
“This particular element is going to hit lower income people much more than higher income people,” says Jonathan Morduch, the executive director of NYU’s Financial Access Initiative. “They really have a double whammy—their incomes are being hit, and also the mechanism to help them is going to take longer.”
Source: Abby Vesoulis, Time Magazine, Published April 1, 2020.
Read MoreCOVID-19: How Does Microfinance Weather the Current Storm
By Tim Ogden and Greta Bull
This blog post was originally published on CGAP.org.
COVID-19 has unequivocally arrived in the developing world. Hundreds of cases have been reported across Latin America and South Asia, and now there are at least 30 countries in Sub-Saharan Africa reporting infections. South Africa and India both announced yesterday that they would go into lockdown for three weeks, and others may soon follow. With health-care systems ill-equipped to cope with a pandemic, there are many reasons to believe that the effects of the virus in these countries will be even more damaging than in the developed world, with higher mortality rates.
Read MoreThe Most Vulnerable Small Businesses and Communities Will Be Left Behind Without Targeted Action: The Fed and Treasury Can Make Sure They Are Not
By Bill Bynum, Joyce Klein, and Tim Ogden.
This blog post was originally published on the Aspen Institute.org.
You’ve heard about how important small businesses are to the economy and the nation. You’ve heard various figures being proposed to help those small businesses: $300 Billion, $350 Billion, $500 Billion.
What you likely haven’t heard is who typically receives small business stimulus funds. Even with the vast figures being proposed those funds won’t reach the most vulnerable businesses or the most vulnerable communities. We know because we’ve seen it in the past.
Read MoreResources for MFIs and Investors: What We’ve Learned from Past Shocks and Crises
This morning we spoke with Deborah Burand, Professor of Clinical Law and Co-Director of the Grunin Center for Law and Social Entrepreneurship at the NYU Law School. She has a wealth of knowledge on how to support MFIs and investors after an economic crisis.
She shared with us summaries of two papers that look back on 2009-10 when MFIs ran into trouble following the 2008 global financial crisis.
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