Financial Inclusion
By producing evidence on financial inclusion for what works, what does not work and how change takes place, we contribute to the achievement of the Sustainable Development Goals - the universal call of our time end poverty, protect the planet and improve the lives of everyone, everywhere.
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What Matters for Consumer Credit Choice? Non-Standard Disclosures in the Philippines
| Researchers: |
Michael King , Paolina Medina, Roland Umanan and Benjamin Radoc |
| Partners: |
Philippine Competition Commission |
| Location: | Philippines |
| Sample: | 4,000 Filipino citizens |
| Timeline: | 2023 |
| Theme: |
Digital Credit, Consumer Protection |
| Description: |
This study focuses on the digital credit landscape in the Philippines, where the popularity of high-interest, short-term loans raises concerns about consumer protection. The research aims to understand the socio-demographic and behavioral characteristics of digital credit users, how they differ from non-users, and the impact of behaviourally-informed, non-standard disclosures on consumers' loan choices. The study employs a discrete choice experiment conducted online with 4,000 respondents, half nationally representative and half prospective digital credit borrowers. The choice task involves selecting the most preferred option from 9 hypothetical digital credit products, presented differently in treatment arms and a control group to evaluate the effect of disclosure format on consumer decision-making. |
Strategies for Reducing Non-Institutional Fraud and Building Trust in a Digital Market Platform
| Researchers: |
Michael King , Chaning Jang and Daniel Putman |
| Partners: | CoAmana |
| Location: | Nigeria |
| Sample: |
3,600 small and medium enterprise (MSME) owners |
| Timeline: | 2021-2023 |
| Theme: | Digital Security, Consumer Protection |
| Description: |
The prevalence of fraud in Nigeria makes it hard for MSMEs to distinguish between real communications from digital service providers, and for example, phishing messages from scammers. This leads to a lack of trust in client communications and an unwillingness to use digital services. To address this issue, we explore two promising solutions, a Unique Communication Code (UCC) and education on fraud, to ascertain their impacts on susceptibility to non-institutional fraud and trust in, and willingness to use digital financial services. Conducted in partnership with Amana Market, a digital platform in Nigeria that offers access to market information and financial service to MSMEs, this study involves an RCT with newly onboarded MSMEs. MSMEs will be randomized at onboarding into one of three groups; a control, an arm provided with a UCC and an arm who will receive ongoing education about fraud. To estimate impact, we will use administrative and endline survey data to measure a range of outcomes around susceptibility to fraud, trust in platforms, and engagement with the platform. Findings from this study will help improve consumer protection and support digital security for Africa’s large and growing platform and financial services sectors. |
To acccess this dataset, please email Dr Michael King kingm4@tcd.ie
Innovative Lending Products for Women-Led SMEs in Nigeria
| Researchers: |
Michael King, Tricia Koroknay-Palicz, Sreelakshmi Papineni and Siegfried Zottel |
| Partners: | World Bank, Access Bank |
| Location: | Nigeria |
| Sample: | 6,000 clients |
| Timeline: | 2020-2022 |
| Theme: | Financial Inclusion |
| Description: |
Women entrepreneurs in Nigeria face higher barriers than men do to access finance, especially in providing traditional forms of collateral for loans, since most assets that lenders accept are typically registered to men. This impact evaluation measures the impact of an innovative credit product designed to surmount long standing collateral constraints faced by women entrepreneurs by using cash flow to determine credit worthiness. This study examines how the cash flow loan product affects firm performance and productivity and changes in the owner’s household income, consumption, power relations, decision-making and standard of living. Working with one of the largest retail banks in Nigeria, this project involves 6,000 SMEs. |
| Researchers: |
Dr. Tara Bedi, Prof. Michael King, and Anu Puthenmadathil Jose |
| Partners: |
This research project is funded by ING, Trinity College Dublin and the Irish Research Council and the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 713279. |
| Location: | Kolkata, India |
| Sample: | 1,000 couples |
| Timeline: | 2020-2021 |
| Theme: | Financial Inclusion and Gender |
| Description: | This study revisits the topic of joint accounts and assesses how their terms, increasingly varied due to innovations in the fintech sector, affect allocation decisions. Through an experimental setting we assess the impact of labelling, transparency and spousal approval on expenditure allocations of spouses. We also assess the impact of personally earning money on subsequent expenditure decisions of couples under different joint account terms. To achieve this, we conduct a lab-in-the field experiment with a total of 1,000 couples. At the lab we collect behavioural/demographic characteristics (including preferences, decision making and bargaining power) for both spouses. Using a two-stage randomisation, we first randomise couples into a ‘task’ or a ‘gift’ stream, before randomising 200 couples into each of five treatment arms with differing joint account terms, under which spouses are asked to complete an allocation decision. We derive important insights in three ways as follows; (1) insights that inform consumers about how best to structure their finances between individual and joint accounts, (2) insights for traditional banks on how they might allow greater flexibility in terms and (3) insights for the fintech sector on how within account labelling, transparency and approval rules affect spousal decision making. |
To apply to access this dataset, please email Dr Michael King kingm4@tcd.ie
| Researchers: |
Michael King and William Jack (Georgetown University) |
| Partners: |
Chaitanya WISE |
| Location: | India |
| Sample: | 3,351 female micro entrepreneurs and/or involved in agriculture |
| Timeline: |
2019-2022 |
| Theme: |
Financial capability, product design, savings |
| Description: |
Small business growth is crucial for helping the poor improve their livelihoods, but expensive and inflexible financial products restrict business owners’ access to credit and constrain profits. Innovations for Poverty Action is supporting research that examines whether new financial products can help Indian female market vendors pursue borrowing strategies tailored to their business needs, while building up a reserve of savings they can use to finance week-to-week inventory purchases. The products feature increased flexibility in borrowing and repayment schedules, as well as an offsetting locked savings account that allows clients to build up savings while reducing interest rates on their loans. |
| Researchers: | Syon Bhanot, Michael King, Paolina Medina, Reed Orchinik |
| Partners: |
The City of Philadelphia |
| Location: | Philadelphia, PA USA |
| Sample: |
6,859 youth in Philadelphia |
| Timeline: |
2019-2021 |
| Theme: | Financial Literacy |
| Description: | In this project, we explore the impact of various financial incentive schemes on the likelihood that young people (high school aged) complete a financial literacy training course online. The population in this study are high schoolers (~16-18 years old) living in Philadelphia, many of whom are from low-income backgrounds and all of whom are part of the Philadelphia Youth Network's WorkReady program (which provides summer jobs for youth in the city). In our study, we randomly assigned the sample to receive one of three email messages advertising a voluntary financial literacy training course online. One group did not receive a financial incentive to complete the course, one group received a fixed financial incentive to complete the course ($40), and one group received a lottery incentive to complete the course (a chance to win one of four $1,000 prizes). |
| Researchers: |
Shane Byrne, Kenneth Devine, Michael King and Yvonne McCarthy |
| Location: | Ireland |
| Sample: | 12,000 Irish households |
| Timeline: | 2020 |
| Theme: | Targeted communication |
| Description: |
Under-refinancing limits the transmission of accommodative monetary policy to the household sector and costs mortgage holders in many countries a significant fraction of income annually. We test whether targeted communication can reduce the attention frictions that inhibit transmission by partnering with a large bank to analyze a field experiment testing messages sent to 12,000 Irish households. While we find only small effects of disclosure design improvements, a reminder letter increases refinancing by 76%, from 8.9% to 15.7%. To interpret this reminder effect, we extend and estimate a mixture model of inattentive financial decision-making to allow for disclosure treatment effects on attention. We find that reminders increase the likelihood mortgage holders are attentive by over 60%, from 24% to 39%. A conservative back-of-the-envelope cost-effectiveness calculation implies that the average reminder letter generated €42 of mortgagor consumption (€605 per refinancing household). Our results illustrate that targeted central bank communication such as refinancing reminders could have a larger effect on refinancing than a standard policy rate cut. Reminders could further strengthen the refinancing channel and stimulate local consumption even when policy rates are at the zero-lower bound or set in a monetary union. |
| Researchers: |
Michael King and Paolina C. Medina |
| Partners: | Banorte Bank |
| Location: | Mexico |
| Sample: | 1.6 million clients |
| Timeline: | 2019-2020 |
| Theme: | Psychology of spending and choice of payment method |
| Description: |
This project studies how the choice of a payment method affects total individual spending. Using detailed administrative data from a large field experiment incentivizing bank clients to pay with their debit cards, we test the competing predictions of several behavioural and rational models. According to these models, individuals spend more, less or the same when they pay with debit cards, cash or credit cards. As the adoption of electronic payment methods grows around the world, the direction of our results has direct implications for the personal finances of vulnerable households, as well as for monetary and fiscal policy to stimulate consumption in the economy. |
| Researchers: |
Selim Gulesci, Andreas Madestam (Stockholm University), Francesco Loiacono (IIES), Miri Stryjan (Aalto University) |
| Partners: | BRAC |
| Location: | Uganda |
| Sample: | 2,340 firms |
| Timeline: | 2014-2020 |
| Theme: |
Microcredit contracts and firm productivity |
| Description: | We examine how key aspects of the most common form of financing -debt- may inhibit young firms' expansion. While access to credit is crucial for firm growth, SMEs in developing countries are often credit constrained. Even when they have access to credit, the types of loans available to them are not very suitable for productive investments. Starting or expanding a business entails learning how to use inputs efficiently, such as hiring additional workers. There is often uncertainty about demand that is harmful for small businesses without adequate resources. This implies that revenues not only are volatile but that it takes time to build up a revenue stream, as returns are back-loaded. Another concern is large and indivisible startup costs in the form of bulky investments such as machines. Meanwhile, most debt contracts available to micro-entrepreneurs in developing countries (often offered through MFIs) involve constant repayments starting shortly after loan disbursement and loan sizes that are capped because of information asymmetries. The implication is that these contractual features, together with firms’ production technology, may distort investment toward inputs that involve less learning, less uncertainty, and smaller projects; hampering firm growth. To shed light on the extent to which these theoretical mechanisms limit the effectiveness of credit, we collaborate with BRAC Uganda's Small Enterprise Lending Program to study the effect of the credit terms on starting firms' input use, profits, and repayment performance. Small and medium-sized firms are the engines of the Ugandan economy, comprising over 90% of the private sector and BRAC Uganda has been lending to such firms since 2008 through its Small Enterprise Lending Program. The loans range from 2.5 million to 20 million Ugandan Shillings and are repaid monthly with a maturity of 12 months at an annual interest rate of 25%. We collaborate with the program in order to examine the effect of credit contract terms on starting and newly established firms’ use of inputs, profits, and repayment performance. Using a randomized-controlled trial methodology we ask whether standard contractual terms, such as constant and monthly repayments and small initial loan amounts, are particularly restrictive for firms with specific constraints. |
| Researchers: |
Michael King and Anuj Singh |
| Partners: |
Trinity College Dublin |
| Location: | Ireland |
| Sample: | 3,000 adults |
| Timeline: | 2018-2019 |
| Theme: |
Consumer Protection and Behavioural Finance |
| Description: | Financial products with a cashback feature typically cost consumers more in the long run, but their popularity is rising in the mortgage and credit markets. Using a nationally representative online sample in Ireland, this paper finds that consumers who are younger, less educated, suffer from present bias, and are inattentive are more likely to choose costly cash back mortgages. Further, the experiment provides strong evidence that advanced disclosure improves financial decision making of customers and that negative nudges, or advertising, encourages prospective buyers into more costly mortgages |
To apply to access this dataset, please email Dr Michael King kingm4@tcd.ie
| Researchers: |
Michael King and Syon Bhanot (Swarthmore College) |
| Partners: |
World Bank i2i Grant |
| Location: | Zambia |
| Sample: |
84,000 Natsave customers |
| Timeline: |
2017-2018 |
| Theme: |
Financial Inclusion and Financial Capability |
| Description: | Working with Natsave, Zambia, this project employs a novel text-messaging-based intervention to: 1) identify the behavioral barriers that lead to low engagement with formal financial services amongst those using the services; and 2) test strategies to help people overcome those barriers to increase engagement and financial security. Additionally, the study provides the first evidence on the impact of conversational, two-way text messaging designed to encourage savings and improve loan repayment behaviors through Q&A capabilities and efforts to enhance trust in formal financial products. The study worked with 84,000 Natsave customers and involved both phone surveys and in-person surveys. |
To apply to access this dataset, please email Dr Michael King kingm4@tcd.ie
| Researchers: |
Michael King and Tara Mitchell |
| Partners: |
Financial Sector Deepening, Kenya |
| Location: | Kenya |
| Sample: | 3,600 members from 1,200 savings groups |
| Timeline: | 2014-2017 |
| Theme: | Microfinance |
| Description: | This is a joint research project with Financial Sector Deepening (FSD), Kenya. In 2013, FSD together with its partners developed and piloted an Android application, known as e-recording, to savings groups to digitise their recording of financial records. Following this pilot, the application was rolled out to savings groups at the beginning of 2015. The introduction of this technology offers the potential to make a step change in the performance of savings groups and be a catalyst for increases in household level savings. The e-recording device records group transactions at each meeting and provides, on request, basic financial reports at the individual and group level. By using a randomised control trial methodology, this study assesses the impact of the e-recording device on group performance, sustainability, transparency and consumer protection and savings and borrowing by members. It also investigates the existence of local spill-over effects on other savings groups caused by improved exposure to technology, greater expectations of transparency and switching between groups in the treatment area. While the central research questions relate to the impact of the e-recording device on the performance of savings groups and changes in household financial management practices, the underlying policy question relates to the role technology can play in the future success of savings groups. Will the introduction of technology lead to a cementing of savings groups in the landscape of financial services used in sub-Saharan Africa? What level of training is required for successful rollout? To what extent do technological or other spill-overs exist? |
To apply to access this dataset, please email Dr Michael King kingm4@tcd.ie