NYU Wagner

Financial Access Initiative

Jonathan Morduch, Managing Director
Web Site: www.financialaccess.org
Phone: (212) 998-7523

The Financial Access Initiative (FAI) is a consortium of researchers at NYU, Yale, Harvard and IPA focused on finding answers to how financial sectors can better meet the needs of poor households.

It is based at the Robert F. Wagner School of Public Service at New York University, and was launched with an initial 5 year $5 million grant from the Bill and Melinda Gates Foundation. It is led by Managing Director Jonathan Morduch and directed by Professors and primary researchers Sendhil Mullainathan (Harvard University), and Dean Karlan (Yale University).

What is Financial Access?
Financial access refers to the ability of all people to use reliable and convenient financial instruments to manage their finances and grow their wealth.

Why is Financial Access Important?
Studies show that there is a strong negative correlation between the degree of access to finance in a country and the level of poverty – in fact the World Bank goes as far as to say that access to finance is not simply correlated to poverty levels but is actually a driver of poverty eradication. Anecdotally, we can see that without good financial services, those with very little lack the best means to invest what they have productively or to cope with the major shocks that inevitably accompany and exacerbate poverty.

What do we know about Financial Access?
Over the past quarter century substantial strides have been made to increase the access of poor households to quality financial services. Increasingly, we see financial institutions offering innovative and profitable products that reach ever poorer and more challenging segments of populations. And yet still, scores of people – in some countries 80 to 90 percent of their populations – are excluded for mainstream services.

What is needed to open Access?
To expand financial access process and product innovations, regulatory reforms, and expanded financial intermediation are all required. While key decision-makers are eager to move forward, holes in their knowledge slow their steps.

How can Research help?
The Financial Access Initiative conducts substantive research on what works and what doesn’t work to open access – and uses this research to inform the policy decisions necessary to rapidly scale up financial access for the under-served poor. Most of the research involves collecting data about the conditions and opportunities of poor households.

FAI will work with decision-makers to identify critical knowledge gaps and then undertake substantive research to fill these gaps. In many cases, this requires re-visiting academic debates with new data and putting evidence into conversation with new ideas from economics, psychology, and sociology. Opening up questions and placing knowledge in the right hands are critical steps in enabling more of the poor to exit poverty.

So What Does the Financial Access Initiative Actually Do?
The Initiative has three main activities, each aimed at increasing policy-relevant knowledge on expanding access to finance:

1. Systematize evidence and communicate lessons. We clarify and organize what is known (and what needs to be known) about the unmet demand for and impact of finance by the poor. Emphasis is placed on presenting the information in actionable frameworks and targeting regulators, donors, and other key decision makers.
2. Generate new evidence. Through randomized control trials we fill important knowledge gaps on the nature of demand for financial services; the extent of impacts of financial access on incomes, businesses, and broader aspects of well being; and mechanisms that can increase impact and scale.
3. Frame policy and regulatory issues. We describe policy options for central bankers and regulators focusing on experiences across countries, hurdles, and possibilities. The outputs are independent, rigorous guides to policy with an emphasis on direct effects and trade-offs of policy choices.