Microfinance

Originally posted on www.youthsave.org

In this podcast, Payal Pathak, policy analyst for the Global Assets Project at the New America Foundation, highlights key takeaways from YouthSave’s Financial Institution Learning Exchange in Nairobi, Kenya. During the event, members of the YouthSave Project including Consortium representatives, financial institutions and researchers gathered to discuss and debate several questions emerging from the youth savings field; for example, can youth savings accounts be commercially sustainable? This is the first podcast in a series featuring interviews of the Project's financial partners who discuss how their respective banks define the business case for the YouthSave Product. 

Today, the Asset Building Program and the Center for Social Development at the Washington University in St. Louis released the final report in the “Creating a Financial Stake in College” series. The fourth report “Ideas for Refining Children’s Savings Account Proposals” makes a case for establishing formal mechanisms for low- and middle-income children to save. Author William Elliott argues that a systematic, national approach to children’s savings accounts is a critical part of improving access to postsecondary education, particularly for low- and middle-income students.

“Creating a Financial Stake in College” is a four-part series of reports that focuses on the relationship between children’s savings and improving college success. This series examines: (1) why policymakers should care about savings, (2) the relationship between inequality and bank account ownership, (3) the connections between savings and college attendance, and (4) recommendations to refine children’s savings account proposals.

Last week, the Economist ran a series of articles on India’s Unique ID program that echoed themes that the Global Assets Project has been writing about for some time. Specifically, as we have argued, the Economist pointed out that delivering public benefits as cash into recipients’ bank accounts, as opposed to via in-kind methods such as grain, would make the Indian government more efficient, prevent corruption and eliminate ghost workers.

The Global Assets Project has written extensively about the virtues of international aid agencies and national governments transferring money directly to poor households. As such, we are thrilled to see a US-based NGO, GiveDirectly, taking this idea "to the streets" and enabling people to directly donate money to poor households in Kenya via their mobile phones. Similar to other cash-transfer programs, GiveDirectly’s model is incredibly efficient, with around 90 cents of every dollar ending up in the hands of beneficiaries, and enables recipients to decide for themselves how to go about meeting their needs.

When Muhammad Yunus won a Nobel Peace Prize in 2006 for his work on microfinance with the Grameen Bank in Bangladesh, he would have been mortified to know that a version of his model would one day force his country’s poor into the organ trade. At the time, microfinance (particularly the practice of giving small loans to the unsalaried poor with low to no collateral) was revered for its ability to “do good while doing well.” In other words, it enabled people to escape poverty while turning a profit.

By Rani Deshpande, YouthSave Director, Save the Children

Originally posted on www.youthsave.org

“If it could rid itself of gender discrimination, the average developing country would grow at least two percentage points faster each year.”  At least so argues Marcelo Giugale, the World Bank’s Director for Poverty Reduction and Economic Management in Africa, in a recent op-ed that likens the current state of many global economies to one in which “half of all machines [are] misplaced: tractors [are] sent to hospitals, brain scanners to barber shops, hair driers to construction sites, cranes to car factories and crash-test dummies to farms.”

Originally posted on www.youthsave.org

A new blog post, “Why Financial Literacy Fails (and What to Do About It)” takes a strong jab at the efficacy of financial literacy interventions saying “Time and again, [its] efforts have failed. They don’t make any noticeable difference in the way we spend and save.” While mixed results from studies measuring the impacts of financial education indicate that the jury is still out on its effects on individuals’ financial behaviors, the author goes on to make a valid point with which I whole-heartedly agree: “financial literacy isn’t enough.” That is, financial success is not necessarily determined by how well individuals can calculate interest rates, but how well they are able to delay gratification for immediate consumption, control their emotions, and overcome other psychological barriers that prevent most human beings from making rational choices, such as saving. 

Originally posted on www.youthsave.org