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Increasing agricultural production and revenue are important goals in Haiti, where even though 65% of the population is employed in agriculture, food shortages are still common. A key element in expanding production is increasing the availability of agricultural credit from Haiti’s financial institutions. However, convincing financial institutions to expand agricultural lending can be difficult because they perceive it as high-risk for the institution. USAID/Haiti’s HIFIVE project, an Associate Award under the FIELD-Support LWA, is addressing these issues with new risk mitigation and incentive structures.

This success story explores recent developments at Le Levier, a federation of 20 credit unions with 200,000 member-clients, which is participating in an innovative USAID credit guarantee program that provides 50% risk coverage for a variety of agricultural credits.

This paper assesses the impact of educational intervention on knowledge, attitude and willingness-to-pay for health insurance using occupational solidarity. It also explores the views of relevant actors on occupational solidarity-based health insurance. Based on multiple regression analysis and experimental design, the combined results of the experiments indicate that the educational intervention has improved the knowledge and willingness to pay for health insurance among informal sector workers in Bangladesh.

Saving is hard for most people, rich or poor, educated or not. Setting aside even small sums of money on a regular basis requires a conscious trade-off between buying something now in favor of achieving long-term goals, and even the most prosperous struggle to translate this intention into sustained savings. Saving may be especially difficult for poor individuals, as daily needs and family obligations may distract attention from meeting savings goals. This seminar will discuss implications of results from research that aim to help poor individuals overcome some of these barriers to saving.

Studies conducted by Innovations for Poverty Action researchers have shown that innovative savings products that allow individuals to set voluntary amounts and timelines can help them overcome other demands on their money and meet their goals. Products evaluated rigorously have included formal and informal hard commitment savings products with withdrawal restrictions, as well as soft commitment devices such as labeled savings accounts. Despite promising results, there is still much to learn about the interplay between commitment devices and end-user characteristics like time preferences and savings goals, as well as the mechanisms through which commitment devices work for the poor.

Dr. Dean Karlan, Dr. Nava Ashrad, and Dr. Wesley Yin conducted an experiment in Philippines, where they offered commitment savings products to a subset of 710 randomly selected clients of a Phillipine bank. Since after 12 months the average savings balances increased, this study demonstrated that commitment savings products can result in lasting change in savings beyond the initial, positive short-term response to the new product.

In this paper, Dr. Pascaline Drupas and Jonathan Robinson used data from a field experiment in Kenya to explore why providing individuals with simple, informal savings techniques can increase investment in preventive health and reduce vulnerability to health shocks.

Limited trust, not lack of education or product knowledge, appears as the key barrier to take-up of health insurance in a randomized field experiment indicating priorities for insurers, regulators and donors interested in increasing product take-up.

Researchers divided members of 150 tea collection centers into four groups: a basic marketing group, where information about the product was provided; an education group, where marketing was augmented with an intense ten-week course on financial literacy using study circles; a peer-referral group, where members had an opportunity to reduce the costs of membership by enrolling their peers, and a control group where no insurance was offered.

Researchers found no impact of the financial literacy training on take-up. This was puzzling because the attendance rate was high and a post-quiz showed that the participants increased knowledge from the course. The absence of effects from the education, despite high compliance and apparent learning after the training, suggest that limited education is not the main barrier to insurance participation. Researchers believe that lack of trust may be a greater barrier to take-up, as was suggested by results from a related experiment measuring members’ trust in the insurer.

Combining the financial instruments such as savings and insurance makes sense when considering the complex financial lives of low-income households. Low-income households often experience challenges to manage cash flows, cope with risks, and raise money to meet large, unplanned expenses. These households can benefit from using a combination of financial tools to meet their financial needs, highlighting a need for composite financial products like savings-linked insurance.

This briefing note presents a framework that can be used to analyse the design of savings-linked insurance products. It uses the framework to assess a new wave of products targeted at the low-income market in India and presents lessons and trade-offs that insurers must consider when designing these products.

On March 11, 2012, professors Pascaline Dupas and Jonathan Robinson published a study on "Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya" which was conducted in 2006, 2007, and 2008 and funded by The Abdul Latif Jameel Poverty Action Lab (J-PAL) and Innovations for Poverty Action (IPA). Sampling was done in three waves with a total of 200 people. Dupas and Robinson worked with the Financial Services Association, a village bank in the market town of Bumala between Nairobi and Kampala, in order to offer savings accounts to randomly selected microenterpreneurs. These savings accounts did not pay interest, but clients were charged for withdrawals. The researchers analyzed savings account usage, which was recorded daily in logbooks over the period of several months. The researchers found that women benefited from these accounts and invested more in their businesses than men. Additionally, there was not a very high uptake of savings accounts, which could be attributed to people's mistrust of village banks. To learn more, please refer to the following post by David Roodman called “First Randomized Trial of Microsavings."

In October of 2011, economists Lasse Brune, Dean Yang, Xavier Giné and Jessica Goldberg published a new study on commitment savings. This study was conducted with the help from the formal bank Opportunity International Bank of Malawi. This study supports some of the earlier findings from a study by professors Pascaline Dupas and Jonathan Robinson and provides interesting additional information. This study focused on male tobacco farmers, who received loans from the Opportunity International Bank of Malawi as part of a 10-15 member group. As David Roodman pointed out in his blog post, “this study was designed to shed light on why commitment savings accounts help people, by measuring impacts on intermediate variables.”

In October 2006, USAID launched the $80 million Agriculture, Rural Investment and Enterprise Strengthening (ARIES) Program. Administered by the Academy for Educational Development in partnership with FINCA, the World Council of Credit Unions, ACDI/VOCA, MISFA, and Shorebank International, ARIES aimed to create a strong foundation for a sustainable, market-driven rural finance program in Afghanistan that would also expand employment opportunities. By establishing or partnering with commercial banks, microfinance service providers and rural financial cooperatives, ARIES supported the provision of a broad range of financial services to rural microentrepreneurs and households. ARIES accomplishments included 222,000 loans delivered to 65,000 borrowers and $130+ million in capital injected into the Afghan economy through 119 financial services outlets. ARIES was particularly successful in reaching out to female borrowers who represent 49 percent of clients by loans made. In September 2009, ARIES had ongoing activities in 24 of Afghanistan’s 34 provinces. Models for expanding access for formal financial services under ARIES included:

• Creating a network of Sharia-compliant Islamic Investment and Finance Cooperatives (IIFCs), which offer nearly 40,000 formerly unbanked Afghans access to savings, loans, and leasing services.
• Establishing a wholesale window for small and medium enterprise lending in the Microfinance Investment Support Facility for Afghanistan (MISFA-A), which supports commercialization of the Afghan financial sector.
• Establishing a non-banking financial services company, Afghanistan Rural Finance Company (ARFC), which guides and lends to rural and agribusiness small and medium enterprises.

This report includes a general overview of program accomplishments and impact, detailed sections on the activities under specific program components, along with sections on challenges and lessons learned.