Editor's Note: You're not hallucinating, experiencing a weird time warp or flashback. But maybe I am.
- Tim Ogden
1. What the Hell?
Yes, this is a new faiV, for the first time since [checks notes; checks notes again; checks calendar on current date; checks calendar on current date and year; hangs head in shame and disbelief] June, 2021. So, you (and I) could hardly be blamed for asking "What the hell happened?" The answer is complicated but mostly prosaic: my time has been focused on a seven-country financial diaries study, and three or four other field work projects that we've been running or participating in. But it's also that the world that the faiV existed in and was a part of has changed a lot. Here I don't mean the pandemic etc., at least not directly. I mean that the world of information creation and sharing has changed dramatically. As we contemplated reviving the faiV at various times in 2022 and 2023, we kept running into barriers like: what platform should we be using? What's getting through email filters now? How do we gather the information to write a faiV? Where are people posting now?
Given the long lay-off, it's valid to ask: is the faiV really back? and, If it is back, will it look like it used to? And the answers to those questions aren't really clear. We need your help to answer them.
While I'm gratified by the number of people who have asked me about the faiV and when it was coming back or told me that they found it valuable, I know that's a biased sample. I'm really interested in your thoughts on the value of the faiV now, in 2024. What gaps would it or could it fill? What does it need to do to be worth taking the time to read?
I'm also really interested in your experience in consuming information now. Given the seemingly inexorable deterioration of the Internet in general and social media in particular, what do you find useful? What do you read? What don't you read? I'm now on Threads and Bluesky (and Mastodon but I don't remember how to get on there) in addition to Twitter (no, I won't call it that other thing), but have struggled with both. If you're on either, follow me so I can follow you back and hopefully build a better network for seeing what's out there that's interesting and useful. And, please, please, please, don't be shy about just emailing me when you have something that you want to share with the world, or you've found something that you think others should know about.
I will note here that we are still using MailChimp for the next few weeks, but will almost certainly be moving to another platform. We had been planning a move to Substack way back in 2021, but that's really uncertain now not so much because of the whole Nazi kerfluffle, (a subject on which there is reason to doubt the underlying premises, and a great example of how much the Internet has devolved), but because of the dynamics of any platform that is trying to maximize eyeballs across its properties rather than just providing a platform. We may use Beehiiv, or just SquareSpace, or something else we haven't found yet (again if you have ideas or experience, please reach out!). The reason I bring this up is that as we attempt to get up and running again, there is always the concern that the faiV starts getting sorted into Spam or other filters that prevent you from getting it. We'll try to give lots of advance notice so you know to look for it and when we are changing platforms.
Now, on with the show.
2. Small Firm Diaries
As noted above, the bulk of the answer to "What happened to the faiV?" is: my time and attention has mostly been focused on fieldwork, specifically the Small Firm Diaries. If you don't know about it yet, you should! The short version is that after years of studying microfinance, I was really bothered that we didn't know about the firms that were ubiquitous in the areas where microfinance operates but were already large enough to have paid workers. With the substantial support of the Mastercard Center for Inclusive Growth, the Gates Foundation, Argidius Foundation, ANDE and UNESCAP we were able to do something about that: conducting financial diaries with 100+ small firms (which we defined as firms with 1-20 non-family paid workers) in seven countries, from Colombia to Fiji.
And now, you can start reading about what we found. There's a lot more coming over the next few months, but you can read our reports from Colombia, Nigeria, Kenya, and Indonesia, with Fiji coming soon, including country reports, financial services reports and firm profiles. And here's a video of a session at eMFP on financial diaries for firms (as opposed to households).
In the next few weeks we'll also be publishing some global overviews and slide decks, etc. but to give you a preview, there are four key findings:
Small firms with paid workers are a distinct group from microenterprises and larger firms, and they are broadly not served by MFIs
The largest group of these firms are interested in slow and steady growth, not rapid growth, what we call "Stability Entrepreneurs"
Their biggest challenge is access to liquidity and working capital, not asset capital (and they're broadly dissatisfied with the credit that is available in the market because it is not a good match for this need)
The workers in these firms are poor, and the work is very precarious—the workers absorb a lot of the volatility and risk the firms face
In addition to the main work, we have two very interesting RCTs in Uganda to get a better understanding of a few mysteries in the barriers these firms face. We're also starting up long-term panels in Colombia and Kenya to follow some of the firms for a few more years to better understand their long(er)-term trajectories and challenges. You'll of course be seeing research from the Small Firm Diaries in the faiV a lot over the coming months, but you can also subscribe to the Small Firm Diaries to get the earliest access to those materials.
Eagle-eyed visitors to the Small Firm Diaries site will also note that there is a menu that includes the US. We're working now to bring the Small Firm Diaries to the United States, in keeping with my strongly-held belief that there is a lot of overlap between the issues and challenges in low-income areas in the US and in less wealthy countries (more on that in the next item). If that's of interest to you, please reach out. I'd love to talk to you about SFD-USA.
3. Is That It?
Certainly Small Firm Diaries have occupied the bulk of the time in the past two years, but that's not the only thing that's been going on around FAI. Jonathan specifically has been working on a cash transfers in Compton/LA, and on following up on our earlier project on the impact of mobile money on urban-rural remittances in Bangladesh. Shortly we'll have a paper on the long-term effects in Bangladesh and we're just starting field work on replicating the project in India and Pakistan.
Jonathan (Morduch) and I have a new paper, forthcoming in the Oxford Review of Economic Policy, on how the rhetoric of microfinance subsidy has had long-term (deleterious) effects on conceptions of microfinance and social investment as a whole: What Win-Win Lost. I also have a new paper, also forthcoming in OxRep, with Joyce Klein of the Aspen Institute on what the global microfinance movement should learn from the history, and present, of microfinance in the United States. No, that sentence isn't backwards. The current state of the financial system in the United States isn't the result of a lack of microfinance, but the outcome of more than two centuries of the presence of microfinance. If you want to think more deeply about the future of microfinance globally, a good place to look is the present US.
If you really, really missed the faiV, here's a session at eMFP on Rethinking Financial Inclusion Impact Measurement Collectively, with Karina Bron Nielsen of CGAP and Scott Graham of FINCA. And here are two versions of a talk I've given about the state of digitization of microfinance, one for the BRAC Institute of Governance and Development, and one for the Microfinance Centre. On that topic (and informing those talks) is some work we did with Barbara Magnoni and EA Consultants on digitization of MFIs in Central America.
4. Microfinance Research
I know you don't read the faiV just to hear about what we're doing at FAI (though I hope that is part of it). So what's been going on in the rest of the world of microfinance, write large, research?
VoxDev has some very relevant updated VoxDevLits, including Training Entrepreneurs, Mobile Money, and Microfinance. I have to say I'm particularly grateful for the work VoxDev is doing here on summarizing research—and special thanks to Tavneet Suri, who started VoxDev but stepped down as editor-in-chief last year. I'm definitely feeling my age in trying to keep updating my priors based on new research and not just being stuck in the literature circa 2019.
To draw your attention to a few things under the rubric of updating priors, Emma Riley's paper on delivering microcredit to women via mobile money, is now forthcoming in AER. Bari, Malik, Meki and Quinn's paper on offering much larger microcredit loans in Pakistan is now published (and here's the VoxDev version). Both find a meaningful positive impact on households and/or firms. Here's a new review from Casaburi & Willis on "Value Chain Microfinance" and a overview of how and why British International Investment supports programs to expand SME credit (I found this really useful as an overview to research in an area I'm still catching up on). On a somewhat less positive note, here's a paper from Blimpo and Pugatch on unintended consequences of a program in Rwanda nudging youth toward micro-entrepreneurship. You'll probably note that a number of these specific papers align with or extend findings from the Small Firm Diaries.
5. Have We Been Here Before?
As I was preparing to write this new faiV, I went back to what I had saved from back in 2021. One of those pieces was a CFI blog post titled "Have We Been Here Before?" (about how funding flows to digital financial services were following in the same (unfortunate) footsteps of flows to microcredit from 10 years before). It could have been the title for my review of more than 200 tabs (yes, I still had 200 tabs saved from 2021, Workona for the win!)—the titles and subjects of many of those papers and articles remain highly relevant.
Don't worry, I'm not going to give you a tour of the what I was looking at back then, but I do want to look at one thing in particular that remains highly relevant with some new material: instant digital credit, BNPL , "paygo" and consumer protection. I do lump all these together, because many of the underlying issues are the same in my eyes.
CEGA has a new report on what they term Digital Instant Credit finding that the worst fears have not been realized but lots of reasons for concern and a need for better consumer protection. It is a "we have been here before" moment, and something Joyce and I spend time on in the OxRep paper mentioned above. Take for instance this piece from Next Billion from 2021 (one of those saved tabs) about regulating predatory lending apps. To think better about these issues—both about how the financial services world does and doesn't change, and the ever present need for consumer protection, I think it's definitely worth reading this piece about "How FinTech Failed" and this piece on how check cashing actually works and why it persists and is hard to displace.
Video of the Day
A profile of one of the firms in the Small Firm Diaries
The faiV is written by Timothy Ogden and produced by the Financial Access Initiative at NYU's Wagner Graduate School of Public Service
Email: fai-wagner@nyu.edu
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