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November 2012

Is Mobile Banking Breaking the Tyranny of Distance to Bank Infrastructure? Evidence from Kenya

Michael King's picture

 Distance to financial services has long been a constraint for financial inclusion in Sub-Saharan Africa, a region characterized by an especially high proportion of rural dwellers. Suggestive evidence for the role played by geographic isolation in financial exclusion in Sub-Saharan Africa is provided by the new Global Findex database, which finds that rates of formal financial inclusion are considerably lower in rural areas (see Figure 1).1

Microfranchising in Nairobi hits the BBC

Owen Ozier's picture

Photo credit: Sophia Jones-Mwangi/IRC This week, the BBC and the International Rescue Committee blog both featured a project that I am evaluating together with coauthors Maddalena Honorati and Pamela Jakiela.  IRC approached us because they were interested in conducting a rigorous impact evaluation of their project.

Here are a few of the things IRC has to say about its project:

"NAIROBI, Kenya —

In many ways, 19-year-old Susan Kayongo is a typical Kenyan teenager. Brought up by her grandmother in Eastleigh, one of Nairobi’s poorest neighborhoods, she did well in primary school but could not afford to continue her education. Her future looked bleak, like so many young women in her country with little education and work...

Susan partnered with nine other teenagers like herself to open the Downtown Salon. Located in a repurposed freight container left behind in the inner city, the parlor is surprisingly inviting, its white walls decorated with bright posters of trendy cuts. The women sell beauty products and hair extensions as well as style hair."

From Behavioral Economics to Behavioral Design

Martin Kanz's picture

This week’s FPD Chief Economist Talk featured Sendhil Mullainathan, Professor of Economics at Harvard University and co-founder of Ideas42, a non-profit that  uses insights from behavioral economics to inform the design of products, innovations and policies. Sendhil is well known as one of the leading thinkers in behavioral economics and much of his research has focused on topics at the intersection of psychology and development economics, ranging from corruption in the allocation of drivers’ licenses to the role of psychology in the take-up of micro-finance and consumer loans — all very important issues that matter for what we do at the Bank and so Sendhil’s talk provided great food for thought!

Should Wall-Street Be Occupied?

Maya Eden's picture

What would the United States look like without a financial industry? This question is the starting point of my recent paper, “Should Wall-Street Be Occupied? An Overlooked Price Externality of Financial Intermediation.” At first glance, the recent crisis suggests a grim answer to this question. As financial activity collapsed, the real economy halted. Lack of financing was associated with record-level unemployment, low investment, and overall reduction in economic activity.

Much of the thinking about the social value of finance has been framed in these terms: we know that finance is important because it performs many socially useful roles, and when financing “dries up,” the economy suffers. However, this logic is somewhat flawed, because the consequences of a shock to financing may be different from a permanent reduction in financing. Equating the two is similar to equating the mental state of someone who just got divorced with the mental state of someone who is single: disappearance is very different from absence, because presence creates dependence. Once you have a spouse, you become emotionally attached, as well as financially and logistically dependent. Once that spouse leaves, it may be difficult to re-adjust.