Expanding Banking Access to the Poor: New Gates Foundation Initiative Based at WagnerThe importance of access to finance in building the wealth of low-income individuals in developing countries is clear, but there are many questions about how to improve that access most effectively. The anecdotal success stories about microfinance are well known; substantive research on how to increase and improve access is still lacking.
Now, a five-year Financial Access Initiative funded by a $5 million grant from the Bill & Melinda Gates Foundation will bring together top researchers from Harvard, NYU, Yale, and Innovations for Poverty Action to assess existing research on global financial access, generate new evidence through field work, and inform regulatory policy.
"As donors in this space, it is critical that we make decisions informed by sound research," said Bob Christen, Director of Financial Services for the Poor at the Bill & Melinda Gates Foundation. "We hope that the Financial Access Initiative will yield data, analysis, and research that decision makers need to deliver financial services that markedly advance the well being of the poor."
One of the biggest hurdles to opening up financial sectors to those living in poverty is a lack of hard data and analysis about how poor households manage their finances and cope with risk: which financial products do the poor use and why, who has access to what, at what cost and where. The impact of regulation and government policy on the broad availability of finance is still badly understood. Most fundamentally, despite the anecdotes, rigorous evidence is lacking on the economic and social impacts of different interventions and policies.
Director and Principal Investigator Jonathan Morduch said: "The Financial Access Initiative will systematically address important knowledge gaps and contribute to a much stronger understanding of the issues hindering access to good financial services."
Under the direction of Morduch, a professor at New York University, the Initiative is based at NYU's Robert F. Wagner Graduate School of Public Service and is co-directed by professors of economics Sendhil Mullainathan of Harvard and Dean Karlan of Yale. Christina Barrineau, who formerly headed the International Year of Microcredit for the United Nations, will lead the Initiative as Managing Director.
Field research will be coordinated by Innovations for Poverty Action, an organization based in New Haven, Connecticut, and headed by Dean Karlan. The research will build on studies with existing microfinance partners in a dozen countries including Mexico, Peru, India, Pakistan, Ghana, and the Philippines. The Initiative is also developing new collaborative relationships to broaden the potential of the research and dissemination of findings.
To reach Christina Barrineau, call 212.998.7536 or send email to Christina.firstname.lastname@example.org.
Faculty Honored for Research on the Racial Test Score Gap
NYU Wagner Professors Leanna Stiefel, Amy Ellen Schwartz, and Ingrid Gould Ellen have won the first annual L. Douglas Wilder Award for Scholarship in Social Equity and Public Policy. The award was given for their recent article in the Journal of Policy Analysis and Management entitled "Disentangling the Racial Test Score Gap: Proving the Evidence in a Large Urban School District."
The Standing Panel on Social Equity of the Washington, D.C.-based National Academy of Public Administration (NAPA), a 40-year-old organization, honored the professors at the Social Equity Leadership Conference on February 7, 2008, held at Arizona State University. The judges termed the work an example of exemplary scholarship and a substantial contribution to social equity, selecting it from a field of 15 finalists.
In the study, the professors measure the size and distribution of the racial and ethnic gaps in performance in New York City's elementary and middle schools. The data allow them to explore the role of many factors at the school and classroom level in shaping racial disparities. They are able to explain variations within and between schools, using a complete census of students. They also complement their analyses of the black/white test score gaps - standard in the research literature - with a wider focus that also compares whites with Hispanics and Asians.
Professors Stiefel, Schwartz and Ellen teach at NYU Wagner, while Professor Schwartz - who also teaches at NYU Steinhardt - directs NYU's Institute for Education and Social Policy, a partnership of Wagner and Steinhardt.
FAI Researching How Low-Income Americans Use Financial Products [Video]
The Financial Access Initiative (FAI) at New York University's Robert F. Wagner Graduate School of Public Service has launched an important new study to better understand the financial lives of low-income Americans.
FAI, in partnership with Bankable Frontier Associates and The Center for Financial Services Innovation, will track families in four geographic regions in the U.S. over 16 months and collect highly detailed data on household financial activity. The study promises a timely and independent look at how low-income Americans are managing their financial lives. The $3 million project is supported by a grant from the Citi Foundation and the Ford Foundation.
FAI's managing director discusses the launch of the U.S.-centered financial diaries project in this video. The managing director is Jonathan Morduch, professor of public policy and economics at the Robert F. Wagner Graduate School of Public Service at NYU.
The "Financial Diaries" methodology employed to conduct this research has been successfully applied in Bangladesh, India and South Africa. The results of that FAI research were detailed in a groundbreaking book Portfolios of the Poor: How the World's Poor Live on $2 a Day (Princeton University Press, 2009). Instrumental in broadening conceptions of global poverty, the book revealed that poor households lead surprisingly active and sophisticated financial lives, driven by the need to cope with irregular and unpredictable incomes but few reliable tools to absorb economic shocks.
"Improving access to reliable, flexible financial products and services is an important step to help poor and low-income households better manage their economic lives," says Professor Morduch. "The Financial Diaries research has proven to be an effective means of gathering important information to inform the design of these kinds of financial tools."
"The findings in Portfolios of the Poor provided an eye-opening look at the financial lives of the poor in other countries, and we're excited to use this lens in the U.S. context," says Brandee McHale, Chief Operating Officer at the Citi Foundation. "This research can fill an important gap in the current data on how low-income families in our own backyards are making ends meet and help reduce the barriers to financial well-being that these families currently face."
In the U.S., the Federal Deposit Insurance Corporation (FDIC) found that some 17 million adults live in households without any bank accounts. Another 43 million have accounts but are "underbanked," relying on non-bank services such as pay-day lenders and pawn shops. Yet, there is little concrete data about the needs, preferences and use of financial services by low-income families.
"Remarkably, more than 30 million low-income families across the U.S. lack access to traditional banking and financial systems," says Frank DeGiovanni, director of financial assets at the Ford Foundation. "This landmark study will help us to better understand their financial lives, greatly improving the ability the financial industry of nonprofits, and policymakers to meet their needs and increase the quality, affordability, and accessibility of financial services."
To conduct this groundbreaking research, the U.S. Financial Diaries team will spend one-and-a-half years with 300 families, distributed across 4 research sites-in the South, the Northeast, the Midwest and the West. Researchers will meet with families every two weeks to collect highly detailed data on household cash flows.
This methodology of regularly observing household finances over long periods of time allows researchers to identify often-overlooked strategies of financial management, such as the use of informal borrowing and lending with neighbors and family members. The study is designed to capture spending and savings habits that often remain hidden in large surveys. The findings will be published in a series of reports beginning in mid-2012.
Financial Access Initiative research on the unbanked cited in House testimony
The Financial Access Initiative, a research consortium of leading development economists that is focused on substantially expanding access to financial services for low-income individuals worldwiide, was cited by U.S. Rep. Dan Maffei (D-NY) at a hearing on the future of the microfinance poverty-fighting strategy on Jan. 27 conducted by the House Subcommittee on Domestic and International Monetary Policy, Trade, and Technology. Among other facts, Rep. Maffei noted FAI's finding that 2.5 billion people currently have no savings or credit account with a tradition or alternative financial institution (see study "Half the World is Unbanked, Oct., 2009) The congressman's videotaped remarks begin at minute 19:28 here.
Additionally, FAI research was cited at the hearing in testimony by Susy Cheston of Opportunity International (see P. 6).
The Financial Access Initiative is housed at the Robert F. Wagner Graduate School of Public Service. Its managing director and lead researcher is Jonathan Morduch, professor of public policy and economics at NYU Wagner.