In 2018 we shared insights on savings, credit and payments. The third edition of the EGM has folded 25 additional studies into the evidence base. Through compounding existing evidence and/or presenting new insights on the impact [or not] of different design and delivery mechanisms, these studies are valuable additions to the evolving impact story. We highlight the new insights from these additional studies.
Complementary insights were observed regarding the use of two-way SMS and behavioral science to improve savings – with an important caution that the wrong message is worse than no message at all. There was additional early evidence on the benefits of coupling savings products with business training for women – that made a case for the value in testing the various design and delivery mechanisms. New insights were located on the effects of labeled savings accounts for resilience and welfare outcomes, but questions on impact mechanisms were raised. Lastly, we noted additional evidence supporting the need to be aware of how different client segments experience impact, some segments may benefit more, or less.
For the first time since the launch of the EGM, we now have a number of insights on the effect of digital credit on longer term outcomes – an area that was previously lacking. We learned that the design and delivery of digital credit products varies the impact that is observed. For example:
- Low-value, short-term loans improve household liquidity and response to shocks, but were not found to have effects on wealth, consumption or labor outcomes.
- By digitizing the delivery channel of business loans, women benefited from reduced visibility of the loan and thus pressure to share and significantly improved their business and household outcomes.
- Service or product linked loans that are adapted to the client segments income cycles produced the desired effect. For example, education loans increased children in school.
Digital payments and transfers are the most studied digital finance products to date. From folding in new studies, we’ve found out the following:
- Additional insights to support that person-to-person (P2P) transfers saves users’ time and money users due to greater access to agents.
- Limited evidence supporting a link between using P2P and improving savings behavior or value of saving.
- Supportive evidence has been added to the already high evidence count related to the positive impact of P2P in facilitating risk sharing and improving household ability to cope with various shocks in the short term.
- However, there is limited evidence to support that P2P impacts the longer-term economic welfare of households.
Micro, Small and Medium Enterprises (MSMEs) and Digital Financial Services
This year we’ve also put a spotlight on a specific client segment: MSMEs. However, we found that very few studies have been conducted on the impact of MSMEs using digital financial services. When studies have been conducted, they’ve focused on women predominantly, and offline MSMEs exclusively. Based on the four studies, we learned that:
- Digital savings has a clear role to play in business development, but the impacts are greatly enhanced when coupled with investment in additional business training.
- By digitizing the delivery channel of business loans using mobile money, women benefited from reduced visibility of the loan, and thus a reduced pressure to use the loan for non-business purposes. This appeared to promote the use of the loan for business purposes and to significantly improve their business outcomes with downstream effect on household outcomes.
- The adoption of a merchant payment system, which included access to credit, was found to smoothen sales volatility and increase safety perceptions, in particular for smaller businesses.
We encourage those of you interested in the impact question to fill in the gaps and enable the digital finance community to understand the impact of various digital finance products delivered in their nuanced ways. Beyond a product-level analysis, the EGM comprises other learning, such as the types of product design and delivery mechanisms gaining traction, segmenting findings by population types and market level, or even methodological approaches to measuring digital finance impact. The EGM can be used as an entry point for all of these inquiries.
As financial health is one of the themes of Financial Inclusion Week, it’s heartening to see evidence where digital financial products can positively affect financial health and beyond. However, not all products have the same impact and some have shown negative impacts. The greatest impact we can have through resources like the EGM is in using the knowledge of the digital finance community to make better choices on both testing impact and designing better products.