Week of October 25, 2013

This week’s New and Noteworthy takes a big picture approach to microfinance regulation, behavioral economics the social enterprise sector, and academic research – asking what are the big challenges and how might we go about addressing them.

• FAI co-founder Sendhil Mullainathan and co-authors have a new short paper sub-titled “What Behavioral Economics is Not” , which is a good a description of this very useful attempt to clarify an often mis-used or misunderstood term. Highly recommended.

• On a related note, illustrating the need for Sendhil’s piece are these two posts (first, second) from Alex Tabarrok on Marginal Revolution about the layaway system. Be sure to read the comments as they illustrate the ongoing arguments over the policy implications of behavioral economics and it’s interaction with traditional economic analysis.

• Hannah Schiff of Value for Women writes a compelling post on why there is no such thing as gender-neutral financial services. She makes the point that banks should not bias services toward women but start removing the current bias toward men.

• Are we all on the same page when it comes to defining financial inclusion and microfinance? Grzegorz Galusek of the Microfinance Centre reviews some of the prominent definitions of these terms and the trend to conflate the two.

• The world of social entrepreneurs and social investing are full of small scale “development darlings” that get a lot of media attention but are they able to ever be profitable? Is that even a realistic expectation? Devex takes a deep dive on profitability in the social enterprise space.

• The Kenya Commercial Bank announced a new product that allows users to open a KCB account directly from their mobile phones.

• Like every major movement, Ignacio Mas contends that the mobile banking push has foundation myths. He takes a look back at these (agent banking in Brazil and Smart Communications’ mobile money service in the Philippines) to separate fact from fiction.
   
• Eleven microfinance experts recently weighed in on whether smarter regulation can restore faith in microfinance for a Guardian live chat session.

• From problems with the peer-review process, to the impacts of “publish or perish” on research,  this Economist piece exposes flaws in the academic research system and suggests ways to bring science back to its core principles.

• A recent Chicago Tribune article explores various models and approaches to bringing needed services to underserved communities, including financial services. In addition to Kiva, the piece highlights the Magic Johnson prepaid debit card. (n.b. To avoid logging into or creating a Chicago Tribune account to read the article, click here and select the first time in the Google search results titled "Serving the Underserved: Marketing to Make a Difference.")

Week of October 18, 2013

This week we explore whether technology is really a development silver bullet, if banks are too costly to absorb the unbanked, and two very different innovations in financial services in San Francisco.

• As the movement to bank the unbanked grows, Lisa Servon reminds us that the costs of “formal” banking services are often even higher than the costs of checkcashers and other non-traditional services.

• Charles Kenny and Justin Sandefur of the Center for Global Development have a “long read” in Foreign Policy, asking, “Can Silicon Valley Save the World?”

• The move to a cashless economy has been much slower than many advocates have predicted. Case-in-point, that a sandwich store in San Francisco, tech hub that it is, has gone cashless is actually news.

• University of Chicago social scientist Harold Pollack takes “rules of thumb” to a whole new level, claiming that all the financial advice you’ll ever need can fit on a 4x6 index card.

• Recently the New York Times ran two related opinion pieces on poverty – one focusing on how government anti-poverty programs ignore childless singles and the other by Joseph Stiglitz on the growing challenge of addressing inequality.

• San Francisco-based Mission Asset Fund brings documentation and guarantee services to the traditional lending circle model to help Latino residents build credit. A recent profile on NPR’s Marketplace highlights the hybrid formal-informal approach to financial services.

• After you pay for your sandwich with your phone, you might be able to walk next door to the drug store and do all of your banking – Walgreens announced it will begin providing financial services at 8,541 locations.

Week of October 11, 2013

This week’s New and Noteworthy includes continued discussion on some of the issues we’ve been blogging about like how to best deliver financial literacy, the benefits of cash transfers, and reasons why digital payments sometimes have low take-up rates.

• It seems we weren’t the only ones mulling over financial literacy last week. Richard H. Thaler, an economics professor at the Booth School, weighs in on the topic and the idea of “just in time” financial education for The New York Times.

• Earlier this week, FAI’s Tim Odgen asked why people aren’t paying with mobile money. It’s a question that is also on the minds of mobile payment operators in India as take-up of digital payment systems has been slow. Even in the US, some feel that the existing comfort with banking systems poses a challenge for a larger digital monetary system as highlighted in The New Yorker.
   
• In the debate on who should be on the front lines of digital payments – mobile operators or banks, GSMA argues that both are necessary for “cooperative competition,” which best serves customers.

• In the absence of government investment and formal banking, one area in China has developed a complex network of informal “shadow banks” to support SMEs.
   
• As cash transfers for the poor continues to gain traction as a development intervention,  GiveDirectly’s founder Paul Niehaus highlights their efficiency for NGOs and Aid Thoughts reminds us that while valuable, they cannot replace public goods.
   
• IPA reviews conversations around financial inclusion at the recent “Toward the Better Banked” event in New York.  One fundamental question explored by participants was - Should our goal be "banking the underbanked" into our current system, or should we be focused on transforming the system itself?

• And now for something completely different…David Roodman has a compelling blog post this week on why making the process in developing working papers (specifically those in the social sciences) more transparent is better for researchers everywhere.

Week of October 4, 2013

This week’s New and Noteworthy includes thoughts on both the transformative potential of digital banking as well as a defense of preventing a cashless economy. Also in our highlights are innovative uses for prepaid debit cards and research using mobile phone minutes as a proxy for income inequality.

• Earlier this week the Affordable Care Act officially went into effect. However, millions of uninsured Americans will still be left out of expanded coverage.
• As mobile banking becomes more ubiquitous and some predict cash’s demise, Oliver Burkeman reminds us that the “frictionless” cashless economy is not necessarily in our best interests. 
• As Myanmar emerges from decades-long conflict, it’s reopening its borders to foreign banks. The Economist explores how the nascent mobile and financial sectors have the “leap-frogging” potential to transform the financial services sector.
• FAI affiliate Ignacio Mas provides a deep dive into retail payments in the developing world and the challenges in bringing services to scale.
• The Atlantic highlighted a new study from Gutierrez, et al. that uses mobile phone communications and airtime credit purchases to map income inequality in Côte d'Ivoire.
• The talking points around prepaid debit cards usually involve mention of their high fees or alternatives to formal bank accounts. But Money Talk News takes a more positive spin offering seven innovative and practical uses for the products.
• Nancy Lee, General Manager of the Multilateral Investment Fund (MIF) at the Inter-American Development Bank Group, wrote the first in CGAP’s new blog series on gender and the role of finance. Lee’s insights focus on women entrepreneurs and their financial needs, which extend well beyond credit.

Week of September 27, 2013

This week’s New and Noteworthy focuses on policy and evaluation – in understanding youth savings in the developing world, looking deeper at the potential of conditional cash transfers in the US, and outlining the road to full financial inclusion.

• As part of its Financial Inclusion 2020 initiative, the Center for Financial Inclusion this week released its Five Roadmaps to Full Financial Inclusion, which offer recommendations and action points on topics including client protection, credit reporting, and addressing customer needs. CFI’s Managing Director, Elisabeth Rhyne, shared her thoughts on the project on the CGAP blog.
   

• Much has been written about the pros and cons of bitcoins (and their legal and regulatory repercussions), but Gene Frieda shares his thoughts on the WEF blogon the role of bitcoins as an alternative currency and a speculative commodity.
   
• Thailand has made progress in the area of financial inclusion (73% of the population has a bank account and only 3% have no access to formal finance whatsoever) but still has a problem when it comes to prevalence of loan sharks. The Economist highlights some interesting tactics that the government is undertaking to try to curb their activity.
   
• The concept of conditional cash transfers is nothing new and programs like Bolsa Familia in Brazil have shown some success. In the United States, New York City has pioneered the policy strategy domestically. Recent evaluation results of a program administered by MDRC show potential educational benefits, specifically for high school students.
   
• Many microfinance programs focus on access to financial services for adult populations. But if given the opportunity, would youth in developing countries save via formal services? This is one of the questions addressed by the YouthSave Initiative, which recently released a report of findings from its program targeting 12-18 year olds in Colombia, Ghana, Nepal and Kenya.

Week of September 23, 2013

After a short break, New and Noteworthy returns with a discussion on financial literacy, the true cost of cash, and the status of payment systems around the world.
 

• A new report from the Gates Foundation compares payment systems in more than 30 countries incorporating insights from more than 100 interviews with regulators and payments providers from around the world, including banks and telecommunications companies. It includes in-depth investigations in six countries – China, India, Kenya, Nigeria, the Netherlands and the United States.
   
• A blog post from the Harvard Business Review reports on the current status of the world’s women entrepreneurs, who now represent owners of 37% of SMEs globally.
   
• A US-based company called RoboCoin announced it will launch kiosks throughout Canada that allow customers to convert Bitcoins into cash.
   
• The New America Foundation released a report arguing that America has moved from a High Wages-Low Prices-Welfare system to a Low Wages-Low Prices-Tax Break system. The report highlights the drawbacks of this new system and offers some alternative structures.
   
• The New Yorker reviews a recent study by The Fletcher School at Tufts that shows low-income Americans spend an average of more than three times as much as their high-income counterparts to access cash.
   
• Can soap operas be a force for social change? According to The World Bank, there is evidence to suggest they can. A study in South Africa shows viewers of a popular television show Scandal! improved their financial literacy and behavior after watching episodes that incorporated financial education messages. On a related note, The World Bank blog explores the difference between financial literacy and financial capacity.
   
• This past week, the US Census Bureau released its annual report on poverty rates in the US. While the figures provide a snapshot of the economic situation in America, NPR reminds its listeners that the poverty rate does not include income from benefit programs such as food stamps and also does not take into consideration differences in cost of living for various localities.
   
• A new mobile payment service focused on Latin America called Regalii allows individuals to transfer funds by purchasing “mobile gift cards” at specific retailers—so that remittance senders can control where funds are spent. 

Week of September 9, 2013

In this week’s New and Noteworthy, mobile money is inspiring innovations in Kenya and new research points to the link between poverty and how the brain works.

• Last week Anandi Mani et al. released a study showing a link between poverty and decision-making ability based on changes in cognitive functions of Indian sugarcne farmers over a growing cycle. Two of the lead authors (Sendhil Mullainathan and Eldar Shafir) also released a book, Scarcity, which further explores the impact of poverty on mind-set and psychology.

• In The World Bank’s Development Impact Blog, David McKenzie recently explored the role of clinical equipoise in RCT development trials, that is – whether researchers have the obligation to prove the uncertainty of the expected impact of an intervention and to what degree.

• Recently a company called Kipochi launched an e-wallet service in Kenya, allowing international transfers via Bitcoins. The move has the potential to integrate M-Pesa with international services but some have concerns regarding security and regulatory issues.

• In a different part of Kenya, innovations in mobile money are expanding energy access in slums. The start-up access:energy uses wind turbines and solar panels to create “microgrids” in informal settlements, starting with one on Remba, an island in Lake Victoria. Users can pay for energy use using their mobile phones.

• Should we be looking to the pump when thinking about loan pricing? Recent blog posts from CFI and Microfinance Transparency use a gasoline analogy in discussing different (but related) issues. CFI explores a new Chilean system of reducing terms and conditions of loans into a two-digit number while Azish Filabi of the FRBNY looks at the issue of pricing transparency and consumer protection in Africa’s mircrofinance industry.

• In the wake of recent national debates around food stamps in the US, Al Jazeera published an in-depth profile of the complexities around the system, including for those who are fraudulent.

• A new study from the Center for American Progress shows that children growing up in regions in the US with higher rates of an economic middle class are more likely to move out of poverty than in regions where income inequality is high.

Week of September 2, 2013

In this edition of New and Noteworthy, we are highlighting the predictive power of economics, regulatory action around Bitcoin, and the intersection of privacy, technology and “mobile for development” programs.

• Last week, the U.S. marked the 50th anniversary of Martin Luther King Jr.’s famous “I Have a Dream” speech. While much has been made in terms of civil rights progress, a new survey from Pew Research shows the widening gaps between blacks and whites in terms of financial and economic well-being.
   
• Alex Rosenberg and Tyler Curtain wax philosophic in this New York Times opinion piece on the predictive power of economics and what that means for the next Federal Reserve Chairman.
   
• In much of the developing world, the adage of keeping money under the mattress is quite literal – often cash is kept in safe boxes or other hiding spots in the home.  A new IMTFI blog post addresses why the poor continue to keep money at home even if bank accounts are accessible.

• A recent report from the New America Foundation discusses principles of privacy and security in a time when mobile technology is gaining immense popularity in international development projects.
   
• Forbes reports that in the wake of a recent ruling by a federal judge declaring Bitcoin as real currency, the New York State Department of Financial Services subpoenaed 22 digital-currency companies and investors asking for information regarding a host of topics including money laundering controls and consumer protection practices.
   
• The future of banking may look like “a cross between an Apple Store, a Starbucks and a W Hotel lobby,” according to this article on the expansion of Umpqua Bank’s “bank-as-community” retail model.

Week of August 26, 2013

On a special Monday edition of New and Noteworthy, we find some new insights into debates we’ve covered at FAI in the past – the ethics of RCTs, the pros and cons of social impact bonds, the hype of cash transfer programs, and using behavioral economics to inform policy.

• In response to a recent feature on This American Life focused on the work of Heifer International and GiveDirectly, Chris Blattman wrote a blog post both advocating for cash transfer but also exploring the ethics of RCTs.
   
• Meanwhile Berk Ozler at the World Bank explores the data and research behind the hype of transfer programs.
   
• Social Impact Bonds are gaining traction in the social investment sector but not without critics. Recently Adrian Brown wrote “cashable savings” undermines the bonds while Steve Goldberg counters that funders should just be more selective when using this tool.

• Stephen Colbert puts a humorist twist on the recent news that President Obama assembled a team of behavioral economists to advise his administration.

• Zeti Akhtar Aziz, Governor of Bank Negara Malaysia, recently wrote an opinion piece that makes the case for using proportionate regulation (regulation associated with various levels of risk) to advance financial inclusion and foster innovation in developing countries.
   
• Microfinance products like savings accounts and loans have many applications, not just funding small businesses. For example, a new smart card helps women with maternal health and family insurance, The New York Times explores applications in providing access to water and sanitation, and farmers may seek to benefit from mobile money applications.

• Finally, The New York Times notes that pawn shops are aggressively adding financial services to their list of offerings—and customers are responding by doing more of their “banking” at such outlets.

Week of August 16, 2013

This week’s new and noteworthy includes new perspectives on ongoing debates, including the US’ Social Security system, Social Impact Bonds, and the intersection of behavioral economics and policy.
 

• In December 2010, the Indian state of Andhra Pradesh passed a law that severely restricted the operations of micro-inance institutions. New research from Renuka Sane and Susan Thomas measure the impact of microcredit withdrawal and find that average household expenditure dropped by 19 percent relative to a control group after the ban with some evidence of higher volitity in consumption.

• In discussing financial services and microfinance, it is easy to get caught up in talk of numbers like interest and repayment rates. However, Alejandro Drexler reminds us that much of the day-to-day impact of MFIs is built on relationships, particularly between the loan officer and the borrower. His recent research focuses on the importance of interpersonal relationships in the lending process.

• FAI affiliate and co-founder Sendhil Mullainathan explores the complexities and trade-offs in health care economics, including the impact of an economic concept called moral hazard, in this New York Times piece. To learn more about moral hazard, check out our new video on the topic. We also welcome your feedback on our #FAI101 series in the comments section or on Twitter - @financialaccess. 

• Robert Townsend published a new paper addressing various meanings of “accounting for the poor,” including valuing their economic contributions to GDP. The working paper version is available here.
   
• There has been a lot of buzz lately about Social Impact Bonds but MaRS Centre Fellow Jessica Leifer explores whether their popularity could increase a phenomenon called “cream skimming” (think reverse brain drain).
   
• Recently MTFI fellows Ishita Ghosh and Kartikeya Bajpai released the second part in their blog series on the intersection of remittances, savings, and mobile money. Part one is located here.
   
• Speaking of mobile money, a new smartphone app helps to control spending by tracking what you don’t buy. Earmark allows users to log all of the times they passed up that morning latte or cab ride home to see how much they are saving over time. The app also has a goal-setting feature to keep users motivated and allows them to pin big-ticket items they can buy using all those saved funds.
   
• A new report from the Institute for Women’s Policy Research illustrates the share of income Social Security provides to different gender, age, race/ethnic, and marital groups, while also highlighting other sources of income for the US’ growing elderly population.
   
• In the current version of the Stanford Social Innovation Review, Paul Brest and Kelly Born answer the question “When Can Impact Investing Create Real Impact?”