Evidence on Financial Inclusion Products and Programs Alison Fahey - - PowerPoint PPT Presentation

Evidence on Financial Inclusion Products and Programs

Alison Fahey | Policy Manager, J-PAL 8 March 2016 | SAMN Conference | Delhi, India

Agenda

• Introduction to IPA and J-PAL
• Evidence on Financial Inclusion Products & Programs

– Innovate and Evaluate: Mobile-izingSavings in Afghanistan – Replicate and Communicate: Reminders to Save in Several Countries – Go to Scale: Simplifying Financial Literacy Training with Rules of Thumb in the Dominican Republic and India

• Introduction to Randomized Evaluations
• Opportunities for Collaboration with IPA and J-PAL
• Question & Answer

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Innovat ations ns for Poverty Action n (IPA)

Innovate Evaluate Replicate Communicate Scale

Work with partners to generate new ideas Identify what works and what doesn’t using randomized controlled trials (RCTs) Repeat experiments to take results from promising to proven Communicate policy results to help practitioners and policymakers pick the most effective products and programs Help scale up effective programs

IPA was created in 2002 to discover and promote effe fective solut ution

• ns to
• glob
• bal

al pov

• verty prob
• blems.
• Design & test behaviorally-informed programs and products that encourage

healthy financial decisions among the poor

• Financial capability work supported by the Citi Foundation

Financial Inclusion Program (FIP)

IPA’s extensive country office network has supported over 500 compl pleted and ongoing ng evalua uations ns

4

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

J-PAL’s mission is to ensure that policy is informed by evidence and research is translated into action

5

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

J-PAL L has more than 700 ongoing and compl pleted d projects across 8 sectors in 64 count ntries

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Evidence ce on Financi cial Incl clusion Product cts & Programs ms

Innovate and Evaluate: Mobile-izing Savings in Afghanistan

7

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

• Low rates of formal savings in low-income countries
• 4% in Afghanistan, 13% in South Asia, 16% in SSA
• 42% of developing country workers in/above middle-class
• Many barriers to saving
• Credit and liquidity
• Transaction costs, lack of infrastructure
• Intra-household, intra-family dynamics
• Behavioral explanations: Inattention, forgetfulness, salience, complexity,

self-control

• In high-income countries, automatic payroll deduction is one of

most effective means to encourage savings

• 85% of Danes are “passive savers”
• In U.S., automatic deduction increases participation by 50%-90%

Why are formal al savings ngs rates es so low? ?

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

• Secondary mobile money account

with basic functionality (check balance, transfer out)

• Automatic payroll deduction option

–Up to 10% of monthly salary –Auto-deposited to M-Pasandaz

• n payday

–Matching incentives provided by employer

“M-Pasan anda daz”: Mobile money-ba based d saving ngs accoun unt

Afghanistan| | Ros

• shan

Firm employees

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

This study is funded by the Citi IPA Financial Capability Research Fund supported by the Citi Foundation

What is the impact of default status and matching incentive level on savings balances?

1.

• 1. Default

t enrollment nt statu atus

A. A. Default lt Out:0% of salary auto-deposits to M-Pasandaz B. B. Default lt In: 5% of salary auto-deposits to M-Pasandaz

– Note: Employees can change rate at any time by calling HR

2.

• 2. Matching

ng incenti ntive level

i. No matching incentives provided ii. 25% match on all contributions iii. 50% match on all contributions

– Note: Employees cannot change plan type

Evalua uation n Design

Afghanistan| | Ros

• shan

Firm employees

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

This study is funded by the Citi IPA Financial Capability Research Fund supported by the Citi Foundation

Default enrollment increased contributions.

• “Default in” group is 40 percentage points more likely to

contribute

• “Default in” save extra 2500 Afs. (US$40) in 6 months
• Roughly equivalent to a 50% employer match

M-Pasandazgenerated new savings.

• No evidence that employees reduced other savings
• Evidence of longer-term behavioral change

The effect of default assignment was substantial.

• 47% of employees with no incentives still contribute 5%
• 45% with strong incentives still contribute 0%

Defaul ult enrollme ment nt increas ased d contribu butions ns and total saving ngs

Afghanistan| | Ros

• shan

Firm employees

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

This study is funded by the Citi IPA Financial Capability Research Fund supported by the Citi Foundation

12

Evidence ce on Financi cial Incl clusion Product cts & Programs ms

Replicate and Communicate: Reminders to Save

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Reminders to save can help clients pay attention to their financial goals.

Image credit: pixgood.com Image credit: Aaron Dibner-Dunlap

Reminders to Save

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

• Clients made a plan for monthly deposits or set a goal savings amount
• Clients received monthly reminders to save
• Researchers varied message content to determine which message content

was most effective: +/- framing, mention goal and/or incentive

• A comparison group received no reminders

What is the impact of simple reminders to save on clients’ savings account balances?

Remind nders to Save

Phili lipp ppine ines, Peru, u, Boliv livia ia | First Val alle ley Ban ank, Ban ank of ICA, Ecofut utur uro Existing bank clients

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Reminder messages can increase savings balances if they bring the benefits of saving to top of mind.

• Sending any type of reminder

increased the likelihood of reaching savings goal by 5%

• Messages that mentioned the savings

goal and the reward for saving worked best

• In Peru, increased savings

balances by 13%

• In Bolivia, increased savings

balances by 11%

Remind nders to Save

Phili lipp ppine ines, Peru, u, Boliv livia ia | First Val alle ley Ban ank, Ban ank of ICA, Ecofut utur uro Existing bank clients

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Messaging Replications

Why and how does sending people text messages improve saving and payment behaviors? What is the best way to implement effective messaging programs?

Reminders to Save

Citi IPA Financial Capability Resea earch Fund | Glob

• bal

al

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

This study is funded by the Citi IPA Financial Capability Research Fund supported by the Citi Foundation

17

Evidence ce on Financi cial Incl clusion Product cts & Programs

Going to Scale: Behaviorally-Informed Financial Literacy Training

Introduction Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Opportunities for Q&A

Behavioral ally-inf nforme med d fina nanc ncial al literac acy traini ning ng

Dominic inican an Republic ublic | ADOPEM Microentrepreneurs

• Meta-analysis of over 200 studies found close to

zero effect on financial management behavior

Potential Solution: Behaviorally-informed training that focuses on simplicity:

• Keep two “drawers” – business and household
• Assign yourself a weekly salary
• If you “borrow” from the business, pay it back
• Only give credit to customers if prior credit is paid
• ff

Financial literacy training and counseling do not seem to change behavior.

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Behavioral ally-inf nforme med d fina nanc ncial al literac acy traini ning ng

Dominic inican an Republic ublic | ADOPEM Microentrepreneurs Standa dard d Accounting Program Rule-of

• f-ThumbTraining

Compa parison

• Standard approach to

small business training

• Content focused on

double-entry accounting, working capital management, and investment decisions

• Simple rules / routines

rather than comprehensive knowledge

• Content focused on

separation of business and personal accounts

• No training

Can a simpler training have a larger impact on business outcomes?

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Behavioral ally-inf nforme med d fina nanc ncial al literac acy traini ning ng impr proved d behaviors

Dominican Rep epublic | ADOPEM Microentrepreneurs

8%*** 11%*** 12%*** 6%** 0% 2% 4% 6% 8% 10% 12% 14%

• Sep. Cash

Keep Records

• Sep. Accounts
• Calc. Revenues

% of Respondents Using Practice

Traditional Accounting Rule of Thumb

Drexler, Fischer and Schoar, 2014. Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

And increased busine ness revenu nue inde dex x 0.11 standar ard d deviat ations ns

Dominican Rep epublic | ADOPEM Microentrepreneurs

+RD$979*

• 800
• 600
• 400
• 200

200 400 600 800 1000 1200

Avg, Week Bad Week Weekly Revenues, RD$

Traditional Accounting Rule of Thumb

Drexler, Fischer and Schoar, 2014. Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Behavioral ally-inf nforme med d fina nanc ncial al literac acy traini ning ng

Dominic inican an Republic ublic | ADOPEM Microentrepreneurs

• No impact detected from standard accounting

training on business practices or revenue

• Relative to comparison, rule-of-thumb training

improved:

• Financial management / recordkeeping
• Revenue (especially sales during “bad” weeks,

which increased by 19%)

• Compared to standard accounting, rule-of-thumb

more effective among low-skilled individuals

Simplifying content can improve knowledge and behavior, especially among those with limited initial skills.

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

What is the impact of a mobile phone-based rules-of-thumb training

• n the financial behavior of microentrepreneurs?

Photo credit: www.ashoka.org

Going ng to scal ale: Providi ding ng timely useful ul finan ancial al manag ageme ment advice via a mobile

India ia | Janalaks kshmi Microentrepreneurs

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

This study is funded by the Citi IPA Financial Capability Research Fund supported by the Citi Foundation

Introduct ction to randomize zed evaluations: Monitoring is diffe ferent from evaluation

Is the intervention working as planned?

Youth have poor savings behavior Provide youth with financial education Youth are trained in financial concepts Youth are equipped to deal with own financial decisions Youth improve their savings behavior PROBLEM INPUT / ACT CTIVITY OUTPUT OUTCO COME IMPACT CT

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Youth have poor savings behavior Provide youth with financial education Youth are trained in financial concepts Youth are equipped to deal with own financial decisions Youth improve their savings behavior PROBLEM INPUT / ACT CTIVITY OUTPUT OUTCO COME IMPACT CT

Introduct ction to randomize zed evaluations: Impact evaluation

Is the intervention having the desired impact?

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Before the program starts, eligible individuals are randomly assigned (via LOTTERY) to two groups.

GROUPS ARE STATISTICALLY IDENTICAL BEFORE PROGRAM

• Two groups continue to be identical, except for treatment.
• Later, compare outcomes (savings, health, test scores) between the two

groups.

• Any differences between the groups can be attributed to the program.

Randomi mized evaluations are a powe werful tool to measure impact ct as they use the comp mparison group as counterfact ctual

Treatment Group

=

Comparison Group TREATMENT

J-PAL | THE USE OF RANDOMIZED EVALUATIONS IN DEVELOPMENT

26

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

We use randomize zed evaluations to construct ct a counterfa fact ctual

J-PAL | THE USE OF RANDOMIZED EVALUATIONS IN DEVELOPMENT

27

Time Outcome (Total Savings) Impact of program Intervention & Randomized Evaluation

Total average savings of youth Total average savings of youth who were randomly offered (TREATMENT) Total average savings of youth who were randomly not t offere red (CONTROL)

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Impact: What is it?

Time Primary Outcome Impact Intervention

J-PAL | THE USE OF RANDOMIZED EVALUATIONS IN DEVELOPMENT

28

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Opportunities for collaboration with IPA PA and J-PAL PAL

If your organi nizati ation n is intere reste ted to collab abor

• rat

ate on a financ ncial al inclus usion

• n project:

t:

• Product Design
• Financial Skills, Awareness, Knowledge
• Consumer Protection

Or if you would like to learn n more re about

• ut evidenc

nce on financ ncial al inclus usion,

• n, pleas

ase cont ntact t me: afahey@povertyactionlab.org

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Questions?

Introduction to IPA & J-PAL Innovate & Evaluate Replicate & Communicate Go to Scale Introduction to Randomized Evaluations Opportunities for Collaboration Q&A

Thank you!

To collaborate with us, email afahey@povertyactionlab.org

Research ch Refe ference ces

• Ashraf, Nava, Dean Karlan, and Wesley Yin. "Tying Odysseus to the Mast: Evidence from a

Commitment Savings Product in the Philippines." The Quarterly Journal of Economics 121.2 (May 2006): 635-672.

• Blumenstock, Josh, et al. “Mobile-izing Savings: Defined-Contribution Savings on a Mobile Platform

in Afghanistan.” Working Paper (October 2015).

• Drexler, Alejandro, Greg Fischer, and Antoinette Schoar. “Keeping It Simple: Financial Literacy and

Rules of Thumb.” American Economic Journal: Applied Economics 2014, 6(2): 1–31.

• Karlan, Dean et al. “Getting to the Top of Mind: How Reminders Increase Saving.” Working Paper

(October 2014).

• Thaler, Richard H, et al. "Save More Tomorrow™: Using Behavioral Economics to Increase Employee

Saving." Journal of Political Economy 112, no. S1 (February 2004): S164-S187.