<p>Interviews with CFI Advisory Council members.</p>


Evelyn Stark is assistant vice president at MetLife Foundation and a CFI Advisory Council Member. She leads MetLife Foundation’s financial health strategy which seeks to improve outcomes for low- and moderate-income people by advancing the use of high-quality financial services. Before joining MetLife Foundation, she held leadership roles at the Gates Foundation, USAID, and the World Bank. Before that, she spent several years implementing financial inclusion programs in East Africa.
<h2>Responding to COVID-19</h2>
When COVID-19 emerged in early 2020, the foundation worked quickly to commit $25 million to support partners with urgent needs and longer-term relief efforts. For projects such as <a href="https://bfaglobal.com/finnsalud/insights/covid-19-y-las-microempresas-mexicanas/" target="_blank" rel="noopener noreferrer">FinnSalud</a>, this meant a shift in research focus to understanding how people were coping as the crisis deepened and became the new normal. For financial institutions, such as credit unions, this meant stress testing and managing risks to survive the crisis. And for the foundation’s early-stage fintech partners, the focus was on helping manage their funds and hold onto savings, and pivoting their products and services to meet changing needs and the inability to meet customers in-person.

A common trend for many of the foundation’s partners was a shift to digital. Stark credits the existing partnerships in the industry between microfinance institutions and credit unions, for instance, and nonprofit partners such as Accion and BFA, in helping institutions adapt. These trusted partnerships fostered knowledge sharing and allowed institutions to learn from others in the industry. Many funders, like MetLife Foundation, also worked closely with grant partners to adjust grant agreements to determine how funds could be most effective in the changed context.

“The pandemic demystified things for microfinance institutions and traditional banks that have been cautious to get on board with digital. Boards and senior management were already thinking about digital, but COVID brought with it a sense of urgency,” Stark notes.
<h2>Behavioral Science and the Promise of Digital</h2>
Stark was an early proponent of behavioral science in financial health and believes that understanding how people make decisions is key to improving outcomes. One of the Foundation’s current partners, <a href="https://advanced-hindsight.com/commoncents-lab/" target="_blank" rel="noopener noreferrer">Common Cents Lab</a> at Duke University, leverages behavioral science to increase the financial well-being of low-income people in the US, Mexico, China, and Turkey. Common Cents Lab has been working closely with fintechs, nonprofits, and credit unions to design innovative products that incorporate behavioral insights to improve financial health.

The combination of behavioral science, fintech, and digital services has the potential to be highly effective at improving the financial health of low-income consumers. Keeping the customer at the center is essential to make sure that the industry doesn’t get caught up in the "cool stuff” that technology can deliver, but remains focused on what low-income people want and need to improve their financial lives, Stark points out.
<blockquote class="pullquote--right">Together, behavioral science, fintech, and digital services can improve the financial health of low-income consumers.</blockquote>
“We need to think of behavioral science as much more than automation or nudging. Identifying the real issues that make saving money difficult, or that make digital funds susceptible to less optimal spending decisions, is how we’ll be able to create the right fintech environment to encourage the behaviors that enable individuals and families to succeed in reaching their financial goals.”

Likewise, Stark is concerned about the over-hype of what data can deliver, especially where most transactions still happen in cash. The data available to the institutions about their customers is often only a sliver of their financial information; cash transactions and transactions from other institutions are not visible.

“We have a long way to go in making the data useful for our customers while making sure that we protect customers now.”
<h2>Financial Health Through the Lens of Jobs</h2>
Income is a significant driver of financial health; without living wages, the ability to save, repay debts, and plan for the future is much more difficult. Stark is working with the foundation’s grant partners, who are focused on jobs and employment to embed financial services at the source of income.

“Whether people earn their jobs through formal employment or through gig work, there are opportunities to leverage the ‘paycheck’ (even if there is no actual paycheck). Opportunities to designate income – before or when it’s received – toward emergency, education or retirement savings, to debt repayment, or to purchase insurance or other benefits – enables people to take more control over their financial health.”
<blockquote class="pullquote--left">Working with grant partners in the jobs and workforce space has helped the foundation focus on financial lives of different kinds of workers.</blockquote>
Several of the foundation’s partners focused on tech jobs. Whether they are based in Chile or New York City, tech jobs offer decent wages and don’t necessarily require a college degree. Partners have historically focused on the hard and soft skills, and on working with employers to ensure a hiring pipeline, but they hadn’t considered the students’ financial health. After the partners started talking to the students about their financial health using structured interviews, they realized not only how indebted many of their young people were when they entered the classes, but also that they did not have plans for how they would manage their significantly larger incomes once they obtained full-time tech work. With that knowledge, these partners are incorporating planning and money management discussions with their students, and with the employers who will hire them.

“Working with grant partners in the jobs and workforce space has really helped us -- and them -- focus on the financial lives of different kinds of workers, and seek to tailor financial solutions for them.”
<h2>Looking Ahead: CFI’s New Strategy</h2>
The COVID crisis has prompted Stark to think about how we create solutions for bigger problems in our markets – the income gap, food insecurity, education, and health care. Being truly cross-sectoral in focus is essential.

Stark believes CFI’s new strategy is right for the moment. CFI’s newer focus areas -- <a href="https://centerforfinancialinclusion.org/about/what-we-do/financial-inclusion-week/financial-services-for-mitigating-and-adapting-to-climate-risk/" target="_blank" rel="noopener noreferrer">climate change</a>, <a href="https://centerforfinancialinclusion.org/rethinking-financial-inclusion-at-the-data-margins/" target="_blank" rel="noopener noreferrer">data for inclusive finance</a>, and <a href="https://centerforfinancialinclusion.org/about/what-we-do/womens-financial-inclusion/" target="_blank" rel="noopener noreferrer">women’s financial inclusion</a> – will help inform how the inclusive finance community navigates the post-pandemic world.

“COVID has made all of us even more aware that there are roles for players in the public and private sectors and for nonprofits, and there are benefits to forging partnerships. COVID has made it even more clear that there are systemic issues that cannot be resolved by a single product and require systemic change.”

Behavioral Science for Financial Health in a Digital World: An Interview With Evelyn Stark

Jennifer Tescher, CEO of the <a href="https://finhealthnetwork.org" target="_blank" rel="noopener noreferrer">Financial Health Network</a> and CFI <a href="https://centerforfinancialinclusion.org/about/advisory-council/">advisory council</a> member, is used to drawing the attention of regulators, policymakers, bankers, and financiers to financial health inequities in the U.S. With the pandemic raging, these inequities have only become more evident – and the need to draw attention to them even more urgent.

Tescher’s passion for financial health research and consumer advocacy has been at the forefront of her work since founding the Financial Health Network (formerly the Center for Financial Services Innovation) in 2004. Recently, Tescher has been hosting leaders on her <a href="https://emerge.finhealthnetwork.org/explore/emerge-everywhere/" target="_blank" rel="noopener noreferrer">EMERGE Everywhere podcast</a>, writing <a href="https://www.forbes.com/sites/jennifertescher/?sh=6d85aef6612a" target="_blank" rel="noopener noreferrer">articles</a>, and <a href="https://www.youtube.com/watch?v=xFkLqcZd0g8&amp;feature=youtu.be" target="_blank" rel="noopener noreferrer">speaking</a> about building financial health ecosystems so everyone can benefit.
<h2>COVID-19’s Impact on Racial and Financial Inequities</h2>
As Tescher sees it, the typical data used to gauge the overall health of the economy bears little resemblance to the financial lives of most Americans. Compare the stock market’s recent rally to the <a href="https://www.wsj.com/articles/weekly-jobless-claims-coronavirus-01-14-2021-11610573648" target="_blank" rel="noopener noreferrer">rising unemployment claims</a> and the disconnect becomes clear. Adding in COVID-19’s disproportionate impact on people of color, the ramifications of the current economic crisis -- including the loss of wealth and unemployment -- also become clear.

"What's different this time around is that we're having a conversation about systemic racism and the numerous structural challenges Americans face,” Tescher said in a recent interview with CFI.
<blockquote class="pullquote--left">Over two-thirds of Americans are still not considered financially healthy.</blockquote>
While the Financial Health Network’s <a href="https://finhealthnetwork.org/research/u-s-financial-health-pulse-2020-trends-report/" target="_blank" rel="noopener noreferrer">U.S. Financial Health Pulse: 2020 Trends Report</a> indicates that financial health has actually improved, Tescher highlights that over two-thirds of Americans are still not considered financially healthy, and much of the improvement can be attributed to the decade-long financial recovery finally trickling down to middle and lower-income Americans – a recovery that is now over. The report further highlights that financial health disparities have widened when considering race and income. “Taking into account COVID-19, Black Americans, people with low incomes, and women are bearing the brunt of the economic burden,” the report states.
<h2>“Breaking Silos” with the EMERGE Podcast and Platform</h2>
Highlighting COVID-19’s impact on racial and economic inequity is just one way Tescher champions the need for meaningful action to address financial health. Another way has been hosting the <a href="https://finhealthnetwork.org/programs-and-events/emerge-financial-health-forum/" target="_blank" rel="noopener noreferrer">EMERGE: Financial Health Forum</a>. Given the restrictions of COVID-19, EMERGE was reimagined this year. The Financial Health Network team created a new platform for the forum and has since leveraged that platform for a range of content such as blog posts, virtual events, and the podcast.

The idea behind the podcast, as listeners quickly learn, is the need to “break silos” to further financial health. And the diversity of professionals Tescher has on the show indicates that she means it: Dan Schulman of PayPal, Mayor Melvin Carter III, Jelena McWilliams of the FDIC, and Bill Bynum of HOPE are a few of her recent guests.

“The leaders that I’ve been privileged to interview during the first few months of Emerge Everywhere are flourishing during these challenging times precisely because of their ability to embrace complexity, demonstrate empathy, and act boldly. They see in 3-D,” Tescher points out.

Although the topics Tescher addresses in her podcast are focused on financial inclusion, she makes it a point to discuss topics relevant to leadership, industry partnerships, gender, and community engagement. For example, in the episode “<a href="https://emerge.finhealthnetwork.org/podcasts/episode-5-banking-with-empathy/" target="_blank" rel="noopener noreferrer">Banking with Empathy</a>” with McWilliams, the pair discuss disenfranchisement and inclusion in financial services as well as Jelena’s personal and financial challenges after immigrating to the U.S. with only $500.

It may seem like there isn’t much her guests have in common, but each episode includes key requirements to creating a holistic approach to financial health and (re)building the economy to work for everyone. For example, we learn in one episode that one of those requirements, feeling what it’s like to go without, is taken literally for employees at PayPal: Dan Schulman requires his staff to spend a day living without digital financial services.
<h2>Tescher on CFI’s Priorities in Inclusive Finance</h2>
With regard to <a href="https://centerforfinancialinclusion.org/about/what-we-do/financial-inclusion-week/" target="_blank" rel="noopener noreferrer">CFI’s four strategic priorities</a> – data risks and opportunities, mitigating and adapting to climate risks, consumer protection, and women’s financial inclusion -- Tescher believes that although these areas could be tackled individually, the intersection and interconnection amongst these topics are what interest her.

“Thinking about CFI’s priorities together as one is where the geographic boundaries become less relevant, which creates an opportunity for the financial inclusion industry to collaborate.”

Climate change is still an evolving topic that Tescher and her team are thinking through. The U.S. is lagging behind the rest of the world in terms of both the ramifications -- i.e. droughts and food shortages, and risk management -- as they relate to climate change’s impact on financial services and consumer financial health. When it comes to climate change, it is important to recognize the connection between physical and financial health, Tescher notes.

On gender, Tescher points out that women historically have not had the same financial health outcomes as their male counterparts, yet <a href="https://www.sciencedirect.com/science/article/abs/pii/S0305750X10002330" target="_blank" rel="noopener noreferrer">women have shown</a> they are better at repaying debt like mortgages or microloans. The challenge now is connecting women to tools that are aimed at helping them become entrepreneurs and financially healthy.

Financial Health Network’s <a href="https://finhealthnetwork.org/research/consumer-data-sharing/">data work</a> continues to be one of its main policy priorities. Tescher sees the importance of data rights as a means to <a href="https://finhealthnetwork.org/research/give-consumers-control-of-their-financial-data/" target="_blank" rel="noopener noreferrer">empower consumers</a> to have control over, and access to, the information they need to make better decisions and leverage data for good.

“Consumer protection is certainly an aspect of financial data; however, the focus shouldn’t be solely on how data is used for bad, but also how to use data for good.”

Breaking Silos and Challenging Inequities in America: An Interview with Jennifer Tescher

Following nearly a year of limited direct access to the lives of the vulnerable people who are the subject of his research, Prof. <a href="https://wagner.nyu.edu/community/faculty/jonathan-j-morduch" target="_blank" rel="noopener noreferrer">Jonathan Morduch</a> -- economist, co-founder of the <a href="https://www.financialaccess.org/" target="_blank" rel="noopener noreferrer">Financial Access Initiative</a> (FAI), scholar of the lives of the poor and <a href="https://centerforfinancialinclusion.org/about/advisory-council/" target="_blank" rel="noopener noreferrer">CFI Advisory Council</a> member – has been working beside a white-hot forge of projects, continuing to help shape the global body of knowledge about the lives that inclusive finance seeks to improve.

“It’s been a very busy time, even though we haven’t been able to do what we really want to do, which is being in the field: doing surveys, doing research, getting to know people and better understand problems.”

For Prof. Morduch and his <a href="https://www.financialaccess.org/about" target="_blank" rel="noopener noreferrer">team</a>, co-led by Timothy Ogden, that’s meant building partnerships and assembling teams for four different projects focusing on people from a range of backgrounds: from ultra-poor workers migrating to Dhaka from northwest Bangladesh, to families in Compton, California, struggling in a pandemic-scarred economy.
<h2>Small Firm Diaries: Applying the “Portfolios” Model</h2>
Perhaps the most visible of these so far is the <a href="https://www.smallfirmdiaries.org/" target="_blank" rel="noopener noreferrer">Small Firm Diaries</a> project. Morduch, co-author of “<a href="https://www.amazon.com/Portfolios-Poor-How-Worlds-Live/dp/0691148198" target="_blank" rel="noopener noreferrer">Portfolios of the Poor</a>” and <a href="https://www.usfinancialdiaries.org/" target="_blank" rel="noopener noreferrer">U.S. Financial Diaries</a>, is part of a team that will apply the financial diaries model -- collecting data from hundreds of poor households frequently and regularly over a long period of time (at least a year) -- to firms with 1 to 20 employees, in contrast to CFI’s <a href="https://centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/" target="_blank" rel="noopener noreferrer">research</a> on MSMEs, which has been focused on collecting and analyzing survey data on COVID-19's impact on the financial health of owners of a broader range of business sizes.

“There’s a lot of great research available on small firms from different angles – liquidity, gender, how they use digital services... The diaries instead present a chance to look at firms holistically, without imposing a particular agenda from the start. The diaries are a way to understand the lives of firms and whom they employ, whom they serve – and whom they are served by – and try to understand them on their own terms.”
<blockquote>The diaries present a chance to look at firms holistically, without imposing a particular agenda from the start.</blockquote>
With financial support from the Mastercard Center for Inclusive Growth, the Bill &amp; Melinda Gates Foundation, and the Argidius Foundation, the team will collect data for one year from firms in Colombia, Fiji, Indonesia, Kenya, Ethiopia, Uganda and Nigeria. In addition to following cash flows, the researchers will also complete qualitative interviews in roughly 100 households per country from a variety of sectors.
<h2>From South Asian Cities: Researching Digital Remittances Back Home</h2>
A second project Prof. Morduch is leading is digitally connected and builds on a <a href="https://www.aeaweb.org/articles?id=10.1257/app.20190067" target="_blank" rel="noopener noreferrer">pilot in Bangladesh</a> that connected ultra-poor families – whose working-aged children were employed mostly in garment factories in Dhaka and who were largely excluded from technology -- with digital networks to send money home easily. This pilot intervention revealed a 25 percent boost in money going to home villages; the team also found that consumption was smoothed during the lean season and increased overall. The project was spearheaded to fill a knowledge gap in the impact of domestic remittances. Beyond the numbers, it has also changed the way Prof. Morduch has viewed microfinance interventions, which have traditionally been about bringing resources like microcredit to grow businesses in villages.

“This project shows other ways to improve rural conditions. One is to make it easier for younger people to move to cities where they can be more productive and earn higher wages. What about the people who are left behind in rural areas? They can benefit if migrants have reliable ways to send money home.” In addition to introducing the technology to urban migrants and their rural families, the team translated the digital interfaces (which were mostly in English) and gave users hands-on experience. The initial result? Active use of the product went from 20 percent to 70 percent.

The team hypothesized that urban-to-rural remittances would become more frequent as a result of the digital ease of transacting. Surprisingly, the frequency remained largely the same, but the amounts grew.

While the financial and usage results were positive, the treatment group of migrants reported worsened physical and emotional health. The team suspects that migrants started working longer hours as expectations to remit were increased by the digital technology.
<blockquote class="pullquote--left">The team suspects that migrants started working longer hours as expectations to remit were increased by the digital technology.</blockquote>
“It’s a reminder that digital financial services can disrupt social relationships. All of a sudden, migrants are available to their families all the time, both to talk and to send money. This changes how we go through life. These technologies can be powerful, but they disturb a social balance.”

With support from the Bill &amp; Melinda Gates Foundation, the team will replicate the work in six other sites in India, Pakistan and Bangladesh.
<h2>To the Homes of Compton: A Guaranteed-Income RCT</h2>
Prof. Morduch is also part of a group that’s working on a guaranteed-income randomized control trial in Compton, California, involving several hundred families whose incomes are below twice the U.S. poverty line. The purpose of this RCT is to test a premise about <a href="https://www.youtube.com/watch?v=Yw4jRO5rYf8" target="_blank" rel="noopener noreferrer">being poor and facing instability</a>: while financial services’ role in smoothing consumption via saving and borrowing is critical, the poor also need a “<a href="https://www.microsave.net/files/pdf/BN_13_Money_Managers_The_Poor_and_Their_Savings.pdf" target="_blank" rel="noopener noreferrer">usefully large sum</a>” from time to time.

As Morduch says, families need to both “smooth” and “spike” during the year.

“These are different savings problems. We tend to focus on smoothing, but both smoothing and spiking are really hard for poorer households, and they call for different solutions.” So for the duration of the experiment, some families will get a check every couple of weeks (smoothing), and another group will get a larger disbursement of funds less frequently, which Prof. Morduch and his collaborators hope will allow them to support important purchases.

Morduch points out that even though the U.S. has the Earned Income Tax Credit (a <em>de facto</em> lump sum payment in the form of a tax refund) and programs -- like SNAP -- to support food purchases for low-income families (a smoothing mechanism), “we never really step back and think about them as financial mechanisms, and that’s what the Compton project is all about.”

Indeed, thinking about stability’s role has been a common theme throughout his planning and executing of projects. “One of the great inequalities in life is that people who have better paying jobs also have more stable jobs. People who earn the least have the least protection and stability.”
<blockquote class="pullquote--right">"People who have better paying jobs also have more stable jobs. People who earn the least have the least protection and stability.”</blockquote>
With that instability and seasonality of employment for the poor, there needs to be more frequent measurements to understand poverty, be them quarterly, or monthly, as opposed to yearly. And the kind of instabilities we saw in "Portfolios of the Poor" are also faced by American workers as the power of labor (i.e., declining unions, <a href="https://www.investopedia.com/terms/m/monopsony.asp" target="_blank" rel="noopener noreferrer">monosponies</a>) falls away, Morduch points out. The Compton project could help inform ways to better collect data frequently.
<h2>A New Primer on Financial Inclusion</h2>
As if that weren’t enough to keep them busy, a new book is also in the works. "Financial Inclusion: What Everyone Needs to Know," by Prof. Morduch and Ogden, will be an explainer organized in Q &amp; A form, a chance for the pair to “pull together ideas and evidence that we talk about all the time, but that may be new to readers.” Prof. Morduch pointed out that while organizations like CFI implicitly explain topics by offering solutions, a book that explains the problems for a broader audience will help advance financial inclusion objectives even more. The book is slated for fall 2021 release.
<h2>CFI’s Strategic Shift</h2>
In some ways, Prof. Morduch’s strategizing and planning is similar to that undertaken by CFI, for whom he has advised for many years. And the excitement is shared.

“CFI’s strategic priorities show an organization that’s truly looking forward, while also looking back. CFI is not losing sight of unfinished agendas in women’s financial inclusion and consumer protection while looking forward to challenges like climate risk, where there doesn’t yet exist a well-formulated agenda.”
<blockquote>"CFI is not losing sight of unfinished agendas in women’s financial inclusion and consumer protection while looking forward to challenges like climate risk, where there doesn’t yet exist a well-formulated agenda.”</blockquote>
For the latter topic, Morduch urges CFI to make it clear why climate risk is important for people concerned with financial inclusion. “If everyone worried about finance also understands why they should get excited about climate risk, then they will follow CFI, and they will push CFI to push harder, and I am excited about that possibility.”
<h2>Wanted: Closer Public Sector Involvement</h2>
Whether it’s CFI, FAI or other organizations advocating for inclusive finance, Morduch believes that public sector interventions need more prominence.

“The microfinance ethos, in some sense, got us off on the wrong foot. It seemed very anti-government in the beginning -- a private sector intervention. Politically, that was aligned with the moment, but it cut off important conversations. Instead of minimizing connections to public action, financial inclusion should be coming alongside steps by governments to support citizens. That’s one of the great omissions of the financial inclusion conversation: it has been too optimistic about the power of finance alone to address inequality.”

We at CFI agree that the conversation must go beyond private sector interventions: “How are public policy, social safety nets, systemic discrimination or other underlying issues influencing people’s financial health circumstances?” Mayada El-Zoghbi, CFI Managing Director, <a href="https://centerforfinancialinclusion.org/covid-19-reveals-the-limits-of-individual-action-and-market-based-solutions/" target="_blank" rel="noopener noreferrer">asked</a> readers of this blog last June.

And we’re looking forward to learning and comparing what we’ve discovered.

Prof. Jonathan Morduch’s Four New Projects

Interviews with CFI Advisory Council members.

Shradha Modi

Garrett Jaso

Ezra Mannix

North America

United States

Bangladesh

Colombia

Ethiopia

Fiji

India

Kenya

Latin America and The Caribbean

Nigeria

Pakistan

South Asia

Sub-Saharan Africa

Uganda

Behavioral Insights

Challenges and Crises

Enabling Environment

Financial Capability

Financial Health

Financial Inclusion Strategy

Personal Financial Management

Policy, Regulation and Government Initiatives

Resilience

Entrepreneurs of MSMEs

Payments

Refugees and Migrants

Remittances

Saving

Underserved Groups

Blog Post