Dean Karlan

Yale University

Innovations for Poverty Action

M.I.T. Jameel Poverty Action Lab

Child and Youth Financial

Inclusion

Takeaways

Not going to hear “do this and all will be solved”

– If problems were that easy, we wouldn’t have such gatherings…

Two main hoped-for takeaways:

– Get ideas on best ideas, inspired by theory, tested in practice

– Answer is often in the process

• The “how” is as important as the “what”

• Lesson for the high-level:

– Setup the right process for a learning program

When to translate research to action?

How do you translate lessons from place A to B?

– Good theory

– Good evidence

Session Overview

1. Policy Challenges

– Youth unemployment

– School financing for households

2. Case studies

3. Conclusions & Way Forward

Big Picture: Two Policy Challenges

Youth unemployment

– Regulatory

– Labor market frictions

– Human capital: vocational, basic skills and character

– Access to finance (for both education & entrepreneurship)

School finance for households

– Take Egypt as an example

• Financing for tutoring, school supplies, fees, exams.

• Low access to savings

• Similar issues around the world.

Translating research to action

Step One: What is the theory of change?

“Economic” failures

– Perfect information??

• High search costs or information acquisition costs

– Zero transaction costs??

• High transaction costs for bank accounts

– Both?

“Behavioral” failures

– Disciplines, time inconsistency, attention

– Youth: Perhaps “behavioral” failures can be addressed, but before habits and behavioral patterns are formed?

– Commitment: how to structure?

Translating research to action:

Step two: Tinkering

One key lesson:

– Subtle variation: savings account withdrawal in cash or

voucher?

– Tinkering matters!

– Sometimes the “idea” isn’t what matters so much.

– But the “how” is what matters very much.

THREE EXAMPLES

New Evidence in Child and Youth Finance

SaLSa

The Policy Problem

Youth (16-28)

– Forming long term habits

– Entrepreneurship/labor: need money to make money, facilitate

savings

The specific challenge:

– Education alone sufficient?

– Account access alone sufficient?

– Or need both?

Access to Accounts Theory of Change

Access to Savings

Accounts

Exposure to services

Awareness of what’s available

Trust services

Improved savings

behavior

Variations

Financial Education Theory of Change

Financial Education

Precise financial

knowledge

Understand financial

self

Trust financial services

Informed financial decisions

Variations

Three Evaluations

1. SaLSa – Uganda

Relative impacts of 2 programs:

Financial education and Group savings

account

– Church of Uganda youth groups (16 – 28 years)

– May 2010 – August 2011

Co-investigators: Julian Jamison (Federal Reserve) and Jonathan Zinman (Dartmouth)

Financial Education

Savings Accounts

Research Questions

Intersection of Programs

BOTH

SaLSA: Financial Knowledge Index

-0.1

-0.05

0

0.05

0.1

0.15

FE + Account Account Only FE Only Control

Std Dev Change

Treatment Groups

*** ***

SaLSA: Total Self Reported Savings

-10

0

10

20

30

40

50

60

FE + Account Account Only FE Only Control

Percent Change

Treatment Groups '000s UGX (winsor 5%)

***

**

SaLSa: Final Balance of Deposits, Admin

0

50

100

150

200

250

300

FE + Account Account Only

Percent Change

Account Treatment Groups '000s UGX (winsor 5%)

**

SaLSa: Total Earnings

-5

0

5

10

15

20

25

30

FE + Account Account Only FE Only Control

Percent Change

Treatment Groups '000s UGX (winsor 5%)

**

* *

Super Savers

Policy Challenge

Households report lacking funds for education expenses

Many choices:

– Subsidize school expenses more

• Budget

• What to subsidize?

– Improve school quality, training, etc.

Tinkering matters!

Basic theory

Basic problem: no cash for school expenses

Yet stated desire to have savings

We all make plans

And fail

And regret

And do it again

Three Evaluations

Super Savers – Uganda

Variations on savings accounts:

Cash payout vs Voucher payout

– Variation on parent participation

– Primary schools (10 – 15 years)

– September 2009 to September 2011

Co-investigator: Leigh Linden (University of Texas – Austin)

Results

Outcomes of Interest

Savings behavior

– Self-reported behavior

– Administrative data (Super Savers)

Also interested in process outcomes, to understand

– Intermediate outcomes/process outcomes

– Results on savings

Super Savers: Self Reported Savings

-40

-30

-20

-10

0

10

20

Cash w/ ParentOutreach

Voucher w/ ParentOutreach

Cash w/o ParentOutreach

Voucher w/o ParentOutreach

Control

Percent Change

Treatment Groups '000s UGX (winsor 1%)

**

Super Savers: 2011 School Supplies Index

-300

-200

-100

0

100

200

300

Cash w/ ParentOutreach

Voucher w/ ParentOutreach

Cash w/o ParentOutreach

Voucher w/oParent Outreach

Control

Percent Change

Treatment Groups From classroom visits

**

Super Savers: Normalized Test Scores

-0.25

-0.2

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

0.2

Cash w/ ParentOutreach

Voucher w/ ParentOutreach

Cash w/o ParentOutreach

Voucher w/oParent Outreach

Control

Std Dev Change

Treatment Groups

**

Aflatoun

Three Evaluations

3. Aflatoun – Ghana

Variations on financial education:

Social & financial education vs

Financial education only

– With school savings club

– Primary and junior secondary schools (6 – 14 years)

– August 2010 to July 2011

Co-investigators: Jim Berry (Cornell) and Menno Pradhan (University of Amsterdam)

Aflatoun: Savings Attitude Index

-0.05

0

0.05

0.1

0.15

0.2

Aflatoun HMB Control

Std Dev Change

Treatments

**

Aflatoun: Financial Literacy Index

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

Aflatoun HMB Control

Std Dev Change

Treatments

Aflatoun: Savings Behavior Index

0

0.05

0.1

0.15

0.2

0.25

0.3

Aflatoun HMB Control

Std Dev Change

Treatments

**

***

Aflatoun: Work Index

-0.1

-0.05

0

0.05

0.1

0.15

0.2

0.25

Aflatoun HMB Control

Std Dev Change

Treaments

*

CLOSING

New Evidence in Child and Youth Finance

Closing

Takeaways

Youth:

– Access to savings and financial education positive

change

– Complements? If not, tradeoffs! Which is cheaper?

Inconclusive results on financial knowledge

Impacts non-financial outcomes too

– Education spending

– Participation in workforce

Tinkering matters….

An Opportunity:

Role of NGOs in Financial Access

Innovation

Unreached

– Too young

– Too poor

– Too rural

Trust

Closing

Way Forward

Guiding principles

– Access matters

– Make it easy

Evidence from elsewhere

– Context appropriate?

– Politically viable?

Evidence from within

– Does it work?

– How to make it work best?

Thank you!

dean.karlan@yale.edu