Vulnerable

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.

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.

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.”

According to the latest "World report on disability," published jointly by the UN World Health Organization and the World Bank in 2011, one billion persons around the world live with a disability, of which a large proportion are in developing nations. As human interfaces in finance and commerce are replaced by digital interfaces and new payment systems, ensuring that these systems are accessible and operable by persons with disabilities is critical.

In this seminar, the presenters report on the latest accessibility standards and innovations in mobile technologies and how they may be leveraged to solve accessibility issues from reading banknotes and accessing ATMs, to completing micro-payments and using web-based services. The presentation concludes by reviewing the role of various stakeholders involved in deploying accessible mobile solutions for persons with disabilities. This undertaking represents a significant opportunity given that the number of mobile phones in service will be greater than the world population in 2012 with high rates of adoption among developing nations.

"Money on the Move: Payments and Transfer of Money Behavior of African Households" offers an in-depth look at the payment behavior of Sub-Saharan Africans, based on survey results from 11 African nations.

The presentation sheds light on the markets that would be most welcoming of new technologies and innovative partnerships. A special focus is put on the payment behavior of the poorest parts of the population and those living in rural areas. In short, there is evidence of surprisingly high levels of domestic payments and remittance behavior. Up to 76% of the population in Kenya, and 53% of the adult population across the 11 countries had paid or had been paid by a counterparty in a different part of the country in the prior 30 days, while less than 5% reported any international remittance activity. Some common stereotypes hold up - senders are richer, more educated, and urban. However, there are also surprises - receivers are equally rich and poor, rural and urban. Most of this money is being moved in cash, either carried in person or by an intermediary of some kind, leaving lots of room for service providers to capture this market by providing better, more formal alternatives.