Policy Insights in Finance
J-PAL’s Finance sector seeks to understand how access to financial services can reduce poverty and spur economic development by helping households smooth consumption, make investments, and manage risk. Our policy insights below summarize general lessons from randomized evaluations on increasing access to capital through microcredit and spurring self-employment through a multi-faceted approach for the extreme poor.
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Emily Breza (Harvard University) and Emanuele Colonnelli (The University of Chicago Booth School of Business), Finance Co-Chairs
Photo: Surya Banda | J-PAL
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Digital financial services to improve formalized access and inclusion
Last updated: June 2024
Digital financial services have dramatically improved access to formal accounts, especially for marginalized communities. Increased access to digital services has led to a reduction in remittance transaction costs, which has facilitated sharing of financial burdens and alleviated poverty.
Building stable livelihoods for low-income households
Last updated: October 2023
A multifaceted livelihood program that provided low-income households with a productive asset, training, regular coaching, access to savings, and consumption support led to large and long-lasting positive impacts on their standard of living. Additionally, recipient households were better positioned...
Designing financial services and social protection programs to enhance women’s economic empowerment
Last updated: February 2021
Providing women in low- and middle-income countries with financial resources or financial services did not consistently lead to economic empowerment if women were unable to maintain control over the use of funds within their households. Financial inclusion and social protection programs should...
Reducing the costs of saving
Last updated: July 2020
High costs associated with formal bank accounts are often cited as a key obstacle for low-income households to save in formal financial institutions, but lowering the cost of savings does not consistently increase savings flows, likely due to a multitude of other barriers. Given the positive welfare...
Reducing the cost of lending to low-income borrowers
Last updated: April 2018
Product and market innovations that generate more information about borrowers, reduce transaction costs, and encourage repayment all address factors that contribute to the high cost of microcredit in low- and middle-income countries.
Credit Despite the fact that high-return investments seem to be available to low-income households in developing countries, these households have historically lacked access to loans and other financial services. Microcredit was initially designed to overcome the barriers preventing financial institutions from lending to the poor, but the traditional model does not have transformative impacts for the average borrower. Innovations to better target high-potential entrepreneurs and reduce the costs of delivering credit can help financial service providers better meet the needs of low-income borrowers.
Microcredit: Impacts and promising innovations
Last updated: May 2023
Findings on the impacts of microcredit continue to evolve. Early evidence from randomized evaluations in low- and middle-income countries showed that the classic microcredit model did not lead to transformative impacts on income or consumption for the average borrower across many contexts. However...
Additional Insights
Using cash transfers to improve child health in low- and middle-income countries
Last updated: May 2020
Cash transfer programs conditional on the use of health products and services generally increase uptake and improve child health outcomes among households that receive them. Cash transfers that increase uptake of healthy behaviors in the short term can improve cognition and educational outcomes in...
