The Poor Pay More…Everywhere
A guest post by Megan Thibos
The development folks and the social policy folks need to hang out more. That may sound like a strange way to start a post on a blog about “finnovation,” but I’m convinced that many of the problems—and the finnovations—in developing countries and industrialized countries aren’t all that different at the end of the day. Sure, there’s all kinds of contextual factors that are wildly different, but the same basic market failures happen everywhere. The poor pay more for goods and services because they deal in small quantities and live in neighborhoods not served by mainstream providers. Yet at Harvard Kennedy School, where I’m doing my Master’s in Public Policy, there’s a development track for those that want to work internationally, and a social policy track for those that want to work domestically. Very few students or classes attempt to combine the two.
Especially when it comes to finnovation, the central challenge is the same as well: how to get around the fact that small-balance accounts and labor-intensive delivery & marketing channels are very expensive, and find a way to provide products and services that meet the unique needs and lifestyles of low-income populations at a price they can afford. More often than not, as Christine Eibs Singer, CEO of E+Co said last week when I had the privilege of sitting in on MIT’s finnovation class, “the implementation IS the innovation.” Incidentally, Christine is a fantastic example of how the domestic and global can collide—she’s using the same public-private finance techniques she used to develop land parcels at the Port Authority of New York to back clean-tech energy entrepreneurs in the developing world.
But how do you actually go about taking product concepts that have worked elsewhere and re-purpose them for an entirely different context? I’m currently working on a project for Doorways to Dreams (D2D), a Roxbury (Boston) nonprofit dedicated to improving savings products and opportunities for low-income consumers in the United States. My project evaluates opportunities for D2D to expand their scope from savings into risk management for low-income U.S. families. I’m trying to figure out how to take the concept of an ASCA (Accumulating Savings and Credit Association, a more complex version of the ROSCA or Rotating Savings and Credit Association), a self-help informal financial mechanism used in Bangladesh and elsewhere, and turn it into a formal product that could be offered by a U.S. credit union. The key idea lies in bundling together savings, credit, and insurance in such a way as to give the client an opportunity to use savings behavior in lieu of past credit behavior to provide risk profile information to the institution. I think the idea has promise in theory, but the devil will definitely be in the details of the implementation.
Megan Thibos is currently pursuing her Masters in Public Policy at the Harvard Kennedy School. Her academic and career interests are centered around creating pathways for social and economic mobility through more equitable and accessible housing, finance, and labor markets—in both developing and industrialized country contexts. For her Masters capstone project, Megan is evaluating opportunities for the development of risk management tools and products specifically tailored to the needs of low-income U.S. families for Boston-based nonprofit Doorways to Dreams.
