Finance & Microfinance 

Explore J-PAL's current and ongoing work in finance & microfinance. 
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The evidence on microfinance shows that poor people’s ability to capitalize on financial opportunities varies greatly. Details matter and a one-size-fits-all product will not bring benefits to all. While increasing access to microcredit does not produce sweeping, dramatic transformations, it does appear to have some important—though modest—outcomes for certain people. Some individuals leverage financial services to smooth or change their consumption patterns, some to manage risk, and some to make investments (although evidence suggests not all borrowers want to grow a business).

Research on savings has shown that transaction costs, market failures, and behavioral constraints limit poor people’s ability to save. Facilitating access to formal savings accounts can increase savings and investment while commitment savings devices can help people to save more in accordance to their own goals. Helping people to save their way out of poverty can be much cheaper and less risky than helping people borrow their way out of poverty.

J-PAL’s Finance Program brings together leading academics to expand both the understanding of how household and firms demand and use financial services and how financial service providers perform and engage in the market. The program is especially interested in recent financial innovations that are improving the quantity and quality of financial access for all levels of financial actors.

Recent evidence suggests that product innovations, new contract structures, and regulation can be effective tools for overcoming market failures. With public, private, and nonprofit institutions working to increase financial access around the world, the time is right to explore new ideas, expand conceptual frameworks, and collect compelling evidence in order to better understand financial constraints, especially among the poor, as well as the implications of alternative policy strategies.

To generate rigorous scientific evidence for best practices, J-PAL’s Finance Program works with Innovations for Poverty Action (IPA) and uses randomized evaluations to measure the impact of specific interventions, assess efficacy of product and process innovations, and understand more about why financial markets fail in the first place.

The program will synthesize key insights and evidence while identifying new research areas that are conceptually and practically appropriate in expanding access to quality financial services as a mechanism to reduce poverty and spur economic development. By helping to define such a research agenda, the Finance Program provides a framework for decision-making built around rigorous evidence. This framework will help generate research that offers practical tools that policymakers, development practitioners, and donors can readily access and use to guide finance policy decisions.

The program also works collaboratively with the Policy Group at J-PAL and IPA to coordinate the dissemination of key findings in finance research to policymakers and to encourage and provide support for the scale-up and replication of successful programs in the field.