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FAI Researching How Low-Income Americans Use Financial Products [Video]

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

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.

Ford Foundation Announces 2003 Winners of Leadership for a Changing World Awards

Ford Foundation Announces 2003 Winners of Leadership for a Changing World Awards

The Ford Foundation has announced the 2003 winners of the Leadership for a Changing World awards. The 17 awardees, selected from a pool of more than 1,300 nominations, represent individuals and leadership teams that are tackling some of the nation�s most entrenched social problems. Launched in September 2000, Leadership for a Changing World is a program of the Ford Foundation in partnership with the Robert F. Wagner Graduate School of Public Service at New York University and the Advocacy Institute in Washington, D.C.

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