And if you're really good and read the whole thing, I'll put up a post with loooots of pictures about the days I spent at beautiful Lake Bunyonyi last weekend...
Thanks Uncle Bernie!
Daniel:
I read the literature that you sent. I'm a little confused - As I understand it Innovations for Poverty Action is the agency that is collecting data for use in developing an educational program to encourage savings. What I don't understand is how encouraging savings will help a population that is 50% under 15 years old.
Shouldn't they be working on life expectancy?
Plus - How can a population that is in an "informal economy" actually have savings? Doesn't an "informal economy" imply cash transactions and barter?
Besides, why would they want any record of the amount of money they have - won't they then be liable to be moved into a more "formal" economy and be subject to taxes?
I am thinking back to your great grandfather who had a pushcart on the lower east side of NY. He existed in an informal economy and I'm willing to bet that he did not ever have a bank account.
What is the sort of commerce that these people are engaged in? Do they produce anything or are they just vendors?
What do they do with the money that they make - do they have enough of a surplus to put it into a savings account?
Bernie
Hi Bernie,
So for this project specifically, IPA is both developing the intervention as well as conducting the assessment of the intervention. Specifically, we've developed a financial education curriculum, which a partner organization will deliver to these youth clubs, and we will measure the impact of delivering that education.
Why are we focusing on financial literacy rather than a more "fundamental" factor, such as life expectancy? And why to youth?
I can understand the perspective that focusing on anything other than improving the most basic well-being factors (such as life expectancy) is a bit silly, particularly somewhere with such a low expectancy (49, if I remember correctly). There are a couple problems with only focusing on life expectancy.
First of all, Uganda's massively youth-skewed population is not necessarily solely due to low life expectancy. I have not done literature review on this topic, so take it with a grain of salt, but my understanding is that over the past couple decades, Uganda's wealth and welfare have improved pretty dramatically. Resultant (at least in some proportion) from this is a massive increase in fertility rate - Uganda has one of the highest fertility rates in the world. Combining this with the civil war in the north and the HIV/AIDS epidemic (the former of which has ended and the latter has become dramatically reduced, in the past few years), which together did a pretty effective job of killing off a generation or so, and you get a pretty heavily youth-skewed population
Sticking to the life expectancy measure, though...
The first, and most fundamental, question is what determines/effects life expectancy? We could just focus on cause of death, pick the top cause and throw everything we have at that. But that's looking symptomatically rather than systematically. The argument could be made that improving a person's savings behavior will actually result in longer life expectancy. If someone can effectively put aside small amounts of money from the time they're 15, when they get some illness when they're 45, they'll be able to pay for treatment. Anecdotaly, it seems to me that this is often the massive constraint to people's well-being: being able to afford basic (and very cheap) healthcare. Teach people to be savers, and they'll live longer. Theoretically.
Ideally, I would love to measure life expectancy in our sample population across control and treatment groups, but the simple logistical problem is that we only have enough funding for a 1 year gap between baseline and endline surveys (and a sample population of only ~2800), so we will not have statistical power to see statistically significant changes in life expectancy.
At a more organizational-mission level, IPA is interested in more immediate, short-term outcomes/effects. The big-picture hope/idea is that IPA finds and replicates some results and then disseminates that result to the development world at large in order to contribute to guiding development down the most effective path. So with what we find in a project, we will say "if you want to cause X change in a population, the most effective way to do so is using Y treatment", and we will publish and present the hell out of it.
An intervention whose sole outcome of interest was increasing life expectancy would have to be so massive and long-term, that by the time the results of the intervention were ascertained, it would be years too late - the setting/context would have changed so dramatically over the ensuing years that the findings could very well be contemporarily irrelevant.
And why try to turn 15-year-olds into "savers"? Uganda has the massive opportunity for a sea-change. With such a huge proportion of the population still in its "impressionable" stage, creating culture shifts in the population now could drastically change the future of the country. If these 15-year-olds growing up thinking (and acting on the thought that) saving in formal banks is the way to go, a huge amount of investment will be pumped into the formal financial sector, raising the possibility for pretty significant national financial growth (more money in banks --> better credit/loan terms for borrowers --> easier to start businesses, buy welfare-improving durable goods, pay for welfare-improving services such as higher education and health-care, etc.).
Of course we're not going to see any effects that significant in such a small, short-term project, but we hope to see is significant enough changes in key indicator variables to justify encouraging relevant NGOs/development orgs to undertake the intervention. Or, just as importantly, if we find NO change from our intervention, we will publicize the hell out of it and tell everyone not to waste their money on this type of project, and instead try other interventions.
The other big-picture factor is that financial literacy education is becoming the new hot topic in development economics, but there is VERY little rigorous research supporting its effectiveness, so we're trying to contribute some definite findings (be they positive or negative) to that literature.
Regarding the issue of whether saving in a bank is "good" for someone - that's something we've struggled with. What we decided is that in this curriculum we're not going to encourage any specific behavior. Instead we're just trying to educate about different options and create rational actors, in terms of saving behavior. It very well may be that for a young person, it's more rational to save in box in their home, rather than in a formal bank (maybe the bank's too far away, charges fees that are too high, would cause intra-family conflict, etc). But regardless we want to educate that SAVING is the way to go, as opposed to borrowing (a lot of Ugandans over-borrow due to lack of understanding of the cost of borrowing, and wind up losing a lot of money or, worse, their homes or other important assets), and create individuals who can manage their money effectively (e.g., write a budget) and make educated choices about how best to use their money.
The potential of informal-economy income becoming officially recorded and thus taxable would fall into the category of reasons why a formal bank account may not be the best option for any one individual at any given time in their life. I actually do not know the official rules on the books regarding this, though - definitely something to look into!
There are a pretty wide range of occupations/money-making activities, ranging from basic service, to farming to market-vending to craftsmanship.
A lot of people will report that they just "don't have enough money to save", often because "all the money [they] make goes right back into [their] business", but you'll find that, first of all a lot of times that's not actually true and instead a result of a lack of understanding of cost/revenue/profit, and/or that so much money is passing through their hands that if they just moved that money through a bank account, they would make a pretty considerable amount of money in interest. It boils down to lack of education
Wow, I got a lot more long-winded than I intended to! Sorry! But I hope this clarifies a bit.
So for this project specifically, IPA is both developing the intervention as well as conducting the assessment of the intervention. Specifically, we've developed a financial education curriculum, which a partner organization will deliver to these youth clubs, and we will measure the impact of delivering that education.
Why are we focusing on financial literacy rather than a more "fundamental" factor, such as life expectancy? And why to youth?
I can understand the perspective that focusing on anything other than improving the most basic well-being factors (such as life expectancy) is a bit silly, particularly somewhere with such a low expectancy (49, if I remember correctly). There are a couple problems with only focusing on life expectancy.
First of all, Uganda's massively youth-skewed population is not necessarily solely due to low life expectancy. I have not done literature review on this topic, so take it with a grain of salt, but my understanding is that over the past couple decades, Uganda's wealth and welfare have improved pretty dramatically. Resultant (at least in some proportion) from this is a massive increase in fertility rate - Uganda has one of the highest fertility rates in the world. Combining this with the civil war in the north and the HIV/AIDS epidemic (the former of which has ended and the latter has become dramatically reduced, in the past few years), which together did a pretty effective job of killing off a generation or so, and you get a pretty heavily youth-skewed population
Sticking to the life expectancy measure, though...
The first, and most fundamental, question is what determines/effects life expectancy? We could just focus on cause of death, pick the top cause and throw everything we have at that. But that's looking symptomatically rather than systematically. The argument could be made that improving a person's savings behavior will actually result in longer life expectancy. If someone can effectively put aside small amounts of money from the time they're 15, when they get some illness when they're 45, they'll be able to pay for treatment. Anecdotaly, it seems to me that this is often the massive constraint to people's well-being: being able to afford basic (and very cheap) healthcare. Teach people to be savers, and they'll live longer. Theoretically.
Ideally, I would love to measure life expectancy in our sample population across control and treatment groups, but the simple logistical problem is that we only have enough funding for a 1 year gap between baseline and endline surveys (and a sample population of only ~2800), so we will not have statistical power to see statistically significant changes in life expectancy.
At a more organizational-mission level, IPA is interested in more immediate, short-term outcomes/effects. The big-picture hope/idea is that IPA finds and replicates some results and then disseminates that result to the development world at large in order to contribute to guiding development down the most effective path. So with what we find in a project, we will say "if you want to cause X change in a population, the most effective way to do so is using Y treatment", and we will publish and present the hell out of it.
An intervention whose sole outcome of interest was increasing life expectancy would have to be so massive and long-term, that by the time the results of the intervention were ascertained, it would be years too late - the setting/context would have changed so dramatically over the ensuing years that the findings could very well be contemporarily irrelevant.
And why try to turn 15-year-olds into "savers"? Uganda has the massive opportunity for a sea-change. With such a huge proportion of the population still in its "impressionable" stage, creating culture shifts in the population now could drastically change the future of the country. If these 15-year-olds growing up thinking (and acting on the thought that) saving in formal banks is the way to go, a huge amount of investment will be pumped into the formal financial sector, raising the possibility for pretty significant national financial growth (more money in banks --> better credit/loan terms for borrowers --> easier to start businesses, buy welfare-improving durable goods, pay for welfare-improving services such as higher education and health-care, etc.).
Of course we're not going to see any effects that significant in such a small, short-term project, but we hope to see is significant enough changes in key indicator variables to justify encouraging relevant NGOs/development orgs to undertake the intervention. Or, just as importantly, if we find NO change from our intervention, we will publicize the hell out of it and tell everyone not to waste their money on this type of project, and instead try other interventions.
The other big-picture factor is that financial literacy education is becoming the new hot topic in development economics, but there is VERY little rigorous research supporting its effectiveness, so we're trying to contribute some definite findings (be they positive or negative) to that literature.
Regarding the issue of whether saving in a bank is "good" for someone - that's something we've struggled with. What we decided is that in this curriculum we're not going to encourage any specific behavior. Instead we're just trying to educate about different options and create rational actors, in terms of saving behavior. It very well may be that for a young person, it's more rational to save in box in their home, rather than in a formal bank (maybe the bank's too far away, charges fees that are too high, would cause intra-family conflict, etc). But regardless we want to educate that SAVING is the way to go, as opposed to borrowing (a lot of Ugandans over-borrow due to lack of understanding of the cost of borrowing, and wind up losing a lot of money or, worse, their homes or other important assets), and create individuals who can manage their money effectively (e.g., write a budget) and make educated choices about how best to use their money.
The potential of informal-economy income becoming officially recorded and thus taxable would fall into the category of reasons why a formal bank account may not be the best option for any one individual at any given time in their life. I actually do not know the official rules on the books regarding this, though - definitely something to look into!
There are a pretty wide range of occupations/money-making activities, ranging from basic service, to farming to market-vending to craftsmanship.
A lot of people will report that they just "don't have enough money to save", often because "all the money [they] make goes right back into [their] business", but you'll find that, first of all a lot of times that's not actually true and instead a result of a lack of understanding of cost/revenue/profit, and/or that so much money is passing through their hands that if they just moved that money through a bank account, they would make a pretty considerable amount of money in interest. It boils down to lack of education
Wow, I got a lot more long-winded than I intended to! Sorry! But I hope this clarifies a bit.
Good job! You made it through! As a reward, here are a couple teaser-pictures from last weekend:
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