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We study the impact of a mobile-app-based behavioral intervention on youth's financial literacy and financial behavior in Peru. To maximize the chances to reach out-of-school youth, we provided access to a user-friendly budget recording tool coupled with regular enumerators' visits and the delivery of SMSs during a 27-week period. The bundled treatment had positive and significant effects on financial literacy and knowledge about prices of goods and services. The probability of saving and savings deposits were not affected, but usage of credit increased both at the extensive and intensive margins. Average treatment effects on financial literacy and behavior were driven by youth without previous exposure to financial education, suggesting that the bundled intervention prompted specific subgroups (i.e., youth with lower levels of financial knowledge) to invest more in financial literacy. [ABSTRACT FROM AUTHOR]

Understanding the financial context of the lives of female sex workers (FSWs) is essential to address structural drivers of HIV risk. We used a financial diary methodology to record daily financial transactions over six weeks from a stratified purposive sample (n = 34) of FSWs in Addis Ababa, Ethiopia. FSWs also provided information on their experience with gender-based violence and condom use. FSWs generated 90.1% of total cash from sex work, with a median weekly income of USD 60.53. They engaged mostly in protected vaginal sex, earning approximately USD 4.57 per act. Food, housing, and clothing represented the largest areas of expenditure. Around 17% of expenses were recorded as costs of sex work (e.g., alcohol). Median weekly expenditures accounted for 62% of median weekly income. Nearly all participants reported depositing money into savings at least once over six weeks, while 71% reported a loan transaction during the six-week period, most as borrowers. Findings suggest that financial literacy and formalized savings activities, with life skills and empowerment training, have potential to build FSW's economic resilience, mitigating a structural driver of sex work and HIV risk. [ABSTRACT FROM AUTHOR]

There is by now ample evidence that the poor lack access to basic financial services. It is, therefore, no surprise that financial inclusion has become a focus of attention for development professionals seeking to alleviate poverty around the world. However, the nature of poverty and deprivation, the livelihood, and the financial needs of the poor vary widely across different contexts. In India, for instance, the financial needs and practices of the poor differ across rural and urban areas. An in-depth understanding of the financial behavior of the rural and urban poor is essential for designing the right product-mix that addresses their needs. Our study contributes to this goal by examining how the rural and urban poor in the state of Tamil Nadu, India, manage their money. We adopted the “Q-squared” methodology (combining quantitative and qualitative methods) to gain a holistic understanding of the financial behavior of these two distinct populations. We used financial diaries to collect data on income, consumption, savings, borrowing and lending from a sample of poor households over a period of six months. Our research subjects were mostly women. In general, the study found that these populations shared a similar practice of diversifying portfolios of savings, borrowing and insurance products. At the same time, the research found evidence of diverse financial needs of the rural and urban poor. Mainly, the study found that the two disctinct populations differ in (a) the activities for which they use the various financial tools and (b) the degree of access to a diversified portfolio of services.

This is the 2-page executive summary for the IMTFI Working Paper: Patterns of Financial Behavior Among Rural and Urban Microfinance Clients: Evidence from Tamil Nadu, India.Over the past decade, development planners in India and beyond have increased their efforts at targetting financial inclusion as a means of poverty alleviation. However, the nature of poverty and deprivation, the livelihoods, and the financial needs of the poor vary widely across rural and urban India. The study by IMTFI researchers Lakshmi Kumar and Jyoti Prasad Mukhopadhay seeks to identify some key differences in the financial behavior of the rural and urban poor as an essential step towards designing more targeted financial tools. The study used financial diaries to collect data on income, consumption, savings, loans, and insurance from a sample of poor households over a period of six months.

The economic impacts of COVID‐19 lockdowns on poor and vulnerable households living in rural areas of developing countries are not well understood due to a lack of detailed micro‐survey data at the household level. Utilizing weekly financial transaction data collected from households residing in a rural region of India, we estimate the impacts of India's COVID‐19 lockdown on household income, food security, welfare, and access to local loan markets. A large portion of households living in our study region is reliant on remittances from migrants to sustain their livelihoods. Our analysis reveals that in the month immediately after India's lockdown announcement, weekly household local income fell by INR 1,022 (US$ 13.5), an 88% drop compared to the long‐term average with another 63% reduction in remittance. In response to the massive loss in earnings, households substantially reduced meal portions and consumed fewer food items. Impacts were heterogeneous; households in lower income quantiles lost a higher percentage of their income and expenditures, but government food aid slightly mitigated the negative impacts. We also find an increase in the effective interest rate of local borrowing in cash and a higher demand for in‐kind loans, which are likely to have an adverse effect on households who rely on such services. The results from this paper have immediate relevance to policymakers considering additional lockdowns as the COVID‐19 pandemic resurges around the globe and to governments thinking about responses to future pandemics that may occur. [ABSTRACT FROM AUTHOR]

Final Report/Synopsis of Research Results: This paper explores the relationship between the usage of mobile technology for loan repayment and client’s behavior towards mobile value storage, utilizing as a case the experience of micro-borrowers already using the m-banking loan repayment service offered by one rural bank in the Philippines. The hypothesis is that the usage of mobile technology for loan repayment can lead to an increase in client confidence in mobile money and thus bring about wider adoption of other mobile banking services, particularly of a savings mechanism that allows borrowers to save in the bank via the mobile phone. The study seeks to gain insights on how mobile banking fits into the perceptions, values and uses that are attached to money and other forms of wealth among the poor as well as to review how clients tend to move to other uses of mobile money, particularly in storing and saving value. The paper also uses empirical data to suggest how mobile money applications might be designed to better suit the needs and interests of poor savers.

Case study from IMTFI Research Study: Evaluation of Money Management Strategies between the Urban and Rural Ultra Poor

Financially vulnerable, low-income individuals are more likely to experience financial exclusion as they are unable to access financial services that meet their needs. How do they cope with economic instability, and what is the role of social networks in their coping strategies? Using financial diaries, we explore the day-to-day monetary transactions (n = 16,889) of forty-five low-to-moderate income individuals with restricted access to mainstream lending in Glasgow, UK, over a six-month period. Our sample includes users of microcredit and financial advice, as well as nonusers of these services. Findings reveal that informal lending to avoid the pernicious effects of short-term illiquidity was pervasive among these individuals. However, taking informal loans often strains valuable social capital and keeps people from building up a formal credit footprint. Our findings suggest that financially vulnerable populations would benefit from policies that focus on alternative financial mechanisms to help stabilize income-insecure individuals in the short-term. [ABSTRACT FROM AUTHOR]

Combining quantitative with qualitative data, through a unique methodology of financial diaries, we generate thick descriptions of the informal business involving peddling of vessels and other products in Ramanagaram, Karnataka, India. By dovetailing the cash inflows from the businesses to loan repayments, we show that a standardized microfinance loan is unsuited to their business cash flows. Informal businesses are marked by seasonality and volatility springing from the contextual and socio-demographic circumstances of households running them. A keen understanding of such businesses is imperative for making the informal sector vibrant enough to support the economic lives of the poor.

Health insurance can improve health-seeking behaviors and protect consumption from health shocks but may also crowd out informal insurance. This paper therefore examines whether impacts of health insurance depend on households’ access to informal insurance, as proxied for by mobile money usage. Based on high-frequency financial diaries data collected in rural Kenya, we find that households with weaker access to informal insurance cope with uninsured health shocks by lowering subsequent non-health expenditures by approximately 25 percent. These same households are able to smooth consumption when health shocks are insured, due to lower out-of-pocket health expenditures. In contrast, households with access to informal insurance are able to smooth consumption even in the absence of formal health insurance. For this latter group, health insurance increases healthcare utilization at formal clinics and does not crowd out gifts and remittances during weeks with health shocks. These findings provide guidance for insurance schemes aiming to target the most vulnerable populations. [ABSTRACT FROM AUTHOR]

We use data from the US Financial Diaries study to relate episodic poverty to intrayear income volatility and to the availability of government transfers. The US Financial Diaries data track a continuous year's worth of month-to-month income for 235 low- and moderate-income households, each with at least one employed member, in four regions in the United States. The data provide an unusually granular view of household financial transactions, allowing the documentation of episodic poverty and the attribution of a large share of it to fluctuations in earnings within jobs. For households with annual income greater than 150 percent of the poverty line, smoothing within-job income variability reduces the incidence of episodic poverty by roughly half. We decompose how month-to-month income volatility responds to the receipt of eight types of public or private transfers. The transfers assist households mainly by raising the mean of income rather than by dampening intrayear income variability. [ABSTRACT FROM AUTHOR]

In response to the methodological challenge of embedding remittances to counter dominant development discourses, this paper aims to contribute to remittances research by discussing financial diaries in Muy Muy, Nicaragua. Based on longitudinal and integrated quantitative and qualitative tracking of migrant household practices, financial diaries facilitate explorations of the social and contextual dimensions of remittances that may help account for their heterogeneous character. In particular, the paper highlights the partiality of diaries as well as the translocal interdependency and irregularity of household practices, providing clues for integrating remittances instead of isolating them as neutral instrumental transfers. It uses the example of household debt to further anchor remittances locally, illustrating how financial diaries can expose the changes and considerations that are part of household practices, including remittances. The paper concludes by suggesting that financial diaries need a decisively qualitative framework and may be particularly useful in contexts characterised by multiple migrations. [ABSTRACT FROM AUTHOR]

Using an innovative data set that involved 90 poor women logging in daily household financial diaries for a period of 11 months in 2008-2009 in the town of Ramanagaram, Karnataka, India, we address the following question: Do women use money differently from men? Comparing weekly cash expenses of 19 female-headed households with similar male-headed households, we arrived at several nuanced conclusions. For example, among the poorest households, women showed a greater tendency towards spending household cash on food items and they spent less on fuel and entertainment as compared with the male-headed households. Among the microfinance borrowers in our sample, the poorest among the female-headed households showed spending on jewellery, in contrast to the borrowers in the male-headed households spending on household assets. The fact that financial diaries data are more fine-grained and detailed than one-off surveys allows us to generalize these results for the urban-poor working in the informal sector. [ABSTRACT FROM AUTHOR]

Despite its promise as a powerful tool for alleviating poverty, research suggests that microfinance has had only a modest impact on development. Misallocation of funds by clients has been implicated as a major impediment to microfinance success. In this study, clients received training on how to track (but not manage) their cash flows during the first two meetings of the microfinance loan cycle. Examination of weekly cash flow shows that clients immediately invested the majority of their funds into the businesses and carefully managed revenues and expenditures to maintain sufficient food and other household expenditures throughout the loan cycle. It is not possible to know whether this behaviour occurred as a result of monitoring cash flow because clients who do not keep cash flow records do not have a reliable way to report expenditures. However, exit interviews provide evidence that cash flow tracking enhanced financial performance and control. When asked whether tracking cash flows affected their understanding and behaviour, half or more of the subjects responded that tracking their cash flow helped them to understand the importance of investing in the business, identify unnecessary expenditures and/or develop a better understanding of their revenues, expenses and profit. By investing a small amount of time in helping clients track cash flows, lenders can empower clients and potentially improve both the repayment and productive benefits of the loans they make. Copyright © 2013 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This piece is an attempt to synthesize our learnings about poverty and action research using the financial diaries methodology among the urban poor at Ramanagaram, a town 60 km away from Bangalore, India. We introduced a participatory component in the financial diaries methodology by asking our respondents (all women) to be the diary writers. This helped narrowing the gap between the researchers and researched towards understanding data on the lives of the poor. It spurred an on-going relationship with our diary writers and enabled us to take a critical look at several mainstream conclusions about poverty. For example, eating out and expenditure on snacks by women, especially in women-headed households is not to be considered a temptation good but an expense arising from the informal nature of her employment, allowing her little time towards household chores. Similarly, buying a TV (sometimes by borrowing money) was often prompted by the drudgery of onerous job–work done from home, rather than from the need to emulate the Joneses. A small self-help livelihoods venture grew out of the interaction, which we helped setup. This study reinforces the need to have more action research with the poor, if meaningful solutions need be sought to their problems. [ABSTRACT FROM AUTHOR]

How we think about poverty is colored by how we measure it. For economists, that often means seeing poverty through quantities measured in large, representative surveys. The surveys give a comprehensive view, but favor breadth over depth. Typical economic surveys are limited in their ability to tease out informal activity, and, while they capture yearly sums, they offer little about how the year was actually lived by families. Year-long financial diaries provide a complementary way of seeing poverty, with a focus on week by week choices and challenges. The result is a re-framing of poverty and its relationship to money, calling for greater attention to financial access and a broader notion of how finance matters.