Improving Financial Capability
for Migrant Workers
and their Families
A Review of the Evidence
Beniamino Savonitto
Global ...
International Remittances
• Expecting $436 billion this year (WB 2014)
• Harness remittances for development goals?
• evid...
Are migrants and their families taking
healthy/optimal financial decisions? Are they
under-remitting or undersaving … comp...
IPA’s Approach
• Look for solutions to poverty problems
• Generate insights on what works and what does
not through random...
IPA’s Approach
• Replicate these tests with different partners in
different contexts
• Ensure that those findings are usef...
Barriers
• Financial illiteracy and lack of information
• Transaction costs
• Behavioral barriers
• Transnational househol...
Financial Illiteracy
• Evidence on impacts of financial education for
adults are mixed (Xu and Zia 2012, Miller et al. 201...
Financial Illiteracy
Training Families in Indonesia (Doi, McKenzie and Zia - 2012)
pre-migration workshops (2 day for migr...
Information Sessions in the Pacific (Gibson, McKenzie andZia
2012)
2 hrs on cost of remittance methods
+ knowledge (for gr...
Reducing Costs in El Salvador (Aycinena, Martinez and Yang
2010)
Price discount on remittances from $9 to $8, $7, $6, $5, ...
To tackle behavioral barriers and help with transnational
household dynamics.
Savings Accounts in El Salvador (Ashraf,Ayci...
Conclusion
Body of evidence is still quite small:
• Encouraging results from financial education
• Many barriers at play
•...
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Beniamino Savonitto - 2014 Conference on Global and European Trends in Financial Education in Istanbul

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This presentation by Beniamino Savonitto was made during session 3 at the High-level Conference on Global and European Trends in Financial Education held on 22-23 May 2014 in Istanbul, which explored the role(s) of the private and not-for-profit sectors in financial education, financial literacy and innovation for young people and financial education for migrant workers and their families. Find out more at http://www.oecd.org/daf/fin/financial-education/2014-conference-global-european-trends-financial-education.htm

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Beniamino Savonitto - 2014 Conference on Global and European Trends in Financial Education in Istanbul

  1. 1. Improving Financial Capability for Migrant Workers and their Families A Review of the Evidence Beniamino Savonitto Global Financial Inclusion Initiative Innovations for Poverty Action High-level conference on global and European trends in financial education 22-23 May 2014 - Istanbul, Turkey
  2. 2. International Remittances • Expecting $436 billion this year (WB 2014) • Harness remittances for development goals? • evidence on impact of migration on development mixed & difficult to measure • Significant portion of household income • both on the migrant side and on the recipient side
  3. 3. Are migrants and their families taking healthy/optimal financial decisions? Are they under-remitting or undersaving … compared to a world with perfect markets and fully attentive, rational and consistent decision-making Financial Capability Are migrants and their families taking optimal financial decisions? Or are they under-remitting or undersaving? Many barriers that may lead to suboptimal behavior: • Financial illiteracy and lack of information • Transaction costs • Behavioral barriers • Transnational household dynamics
  4. 4. IPA’s Approach • Look for solutions to poverty problems • Generate insights on what works and what does not through randomized evaluations How have the lives of individuals changed, compared to how they would have changed, in the absence of the program?
  5. 5. IPA’s Approach • Replicate these tests with different partners in different contexts • Ensure that those findings are useful to, and used by, practitioners and policy makers IPA has over 400 completed and ongoing studies around the world in finance, SME, health, agriculture, education and governance
  6. 6. Barriers • Financial illiteracy and lack of information • Transaction costs • Behavioral barriers • Transnational household dynamics
  7. 7. Financial Illiteracy • Evidence on impacts of financial education for adults are mixed (Xu and Zia 2012, Miller et al. 2014) • Findings from early research on migrants. Training for Migrants in Qatar (Seshan and Yang 2014) 5-hour motivational workshop on savings and joint decision-making + savings and remittances for migrants with lower prior savings levels + joint decisions on financial plans + wife’s financial practices
  8. 8. Financial Illiteracy Training Families in Indonesia (Doi, McKenzie and Zia - 2012) pre-migration workshops (2 day for migrants, 2 half-days for family) on financial planning & management, savings, debt management, use of remittances, insurance Only migrant = awareness = knowledge = behavior = savings Just family or both + awareness + knowledge + behavior + savings (both only) Training Migrants in Singapore (Barua, Shastry and Yang - prelim) 27 hour training over 9 months on savings and control over savings and remittances = knowledge = behavior + some increase in control
  9. 9. Information Sessions in the Pacific (Gibson, McKenzie andZia 2012) 2 hrs on cost of remittance methods + knowledge (for groups with less knowledge and experience) = behavior (switching providers) = remittance levels Lack of Information
  10. 10. Reducing Costs in El Salvador (Aycinena, Martinez and Yang 2010) Price discount on remittances from $9 to $8, $7, $6, $5, $4 $1 reduction  $25 increase in remittances No evidence of crowd-out; increased frequency Transaction Costs
  11. 11. To tackle behavioral barriers and help with transnational household dynamics. Savings Accounts in El Salvador (Ashraf,Aycinena, Martinez,Yang 2013) Offer/Assistance to open savings accounts for family, migrant, or migrant and joint + savings in joint account No evidence of crowd-out of other savings = Remittance levels Better Products Edupay in Italy (De Arcangelis et al. – prelim) Pilot of a direct payment of school fees or ability to send ‘labeled’ remittances + substantial increase in education investment + direct payment only marginally better than label
  12. 12. Conclusion Body of evidence is still quite small: • Encouraging results from financial education • Many barriers at play • Importance of thinking about transnational households • Improvement of financial capability will likely come from a variety of interventions and product improvements Thank you bsavonitto@poverty-action.org www.poverty-action.org/financialinclusion

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