Innovations for Poverty Action

IPA is a non-profit organization dedicated to creating, evaluating, and replicating innovative solutions to poverty and policy problems worldwide. Combining technical rigor and creative thinking, IPA partners with frontline organizations to create and evaluate context-specific solutions to poverty problems. IPA is driven by the belief that concrete evidence on what works, what does not work, and why, will accelerate the eradication of global poverty.
Jun 15, 2012

An update from Cagayan de Oro

As we explore the markets of the City of Cagayan de Oro as part of our survey effort, we run into the same story over and over again.  We find vendors who borrow from moneylenders to help maintain their businesses or to pay for school fees and medicine at rates as high as 20% per month.  Some spend as much as their monthly income in the course of a year just to pay interest on the loans they take out!

At the same time, we find many of these same vendors are not familiar with saving money in a bank and do not currently have bank accounts.  Our goal is to both relieve the burden of these debts and also introduce vendors to the banking world where they can save their money in a safe place and work hard to stay out of debt.

We thank you for your contributions and remember that even a small contribution can make a big difference to a vendor who finds a debt of $40 to $60 difficult to manage.

Jun 14, 2012

Reducing debt and promoting savings in CDO

Financial training pep talk in Cagayan de Oro
Financial training pep talk in Cagayan de Oro

Since our last update, we have been busy in the field!  Thanks to your support, we were able to locate 468 heavily indebted market vendors in Cagayan de Oro and pay off high-interest rate debt totaling over $25,000. Additionally, we have been able to introduce 234 of these vendors to a local bank offering free savings accounts to encourage the vendors to rely on savings rather than borrowing money in the future.

With all vendors in the study, we were able to administer a baseline survey and two follow-up surveys with three more on the way.  We also gave the vendors a brief "pep-talk" about the importance of saving and how interest payments on debt add up over time and prevent their businesses from growing.  The purpose of our survey effort is to follow the vendors over time to see when or if they borrow money at high interest rates in the future and also to follow their spending, investment, savings and business habits.

We look forward to updating you as the program continues, as it offers not only immediate debt repayment to assist vendors but will ultimately provide the community with useful data on whether this program effectively reduces debt in the long-term by providing access to alternative financial products.

Now debt-free, vendors attend a session on savings
Now debt-free, vendors attend a session on savings
Jun 14, 2012

How We're Learning About Vendor Behavior

First of all, we'd like to thank all of our supporters on GlobalGiving.  We thought you might be interested in knowing what we've been up to since our last update in January!  We are currently in the surveying phase of this project, and conducting follow-up surveys 1 month, 3 month, 6 months and 1 year after we paid off the vendors' debts.  These surveys attempt to capture information about employment within the household, the vendor's business, savings, borrowing, hardships suffered by the vendor's household, and the vendor's level of financial literacy.  So far, the 1-month and 3-month surveys have been completed and the 6-month and 1-year surveys will be completed at the appropriate time.  As a show of appreciation, we give each vendor we interview a small gift.  Although we are still in the process of collecting information, we are still a few months away from preliminary results but we do hope to be able to share these with you by our next update.

These surveys will help policymakers and people in the microfinance industry determine the most effective way to keep micro-entrepreneurs out of debt and the degree to which avoiding moneylenders should be emphasized.  We will also get a much clearer picture of why vendors borrow from moneylenders in the first place and the extent to which vendors rely on personal savings or borrowing from friends to deal with household emergencies.