Using Behavioral Science
29 April 2016
Distilling information into actionable, simple rules of thumb can lower the barrier of adoption and improve behaviors in financial management even in the absence of complete understanding of accounting or business planning.
There has been growing momentum to design financial and nonfinancial services for lower-income populations around the world that would meet the specific needs of these clients. CGAP’s “Clients at the Center Financial Inclusion Research Fund” (Fund) has been playing a catalytic role by supporting research focusing on understanding clients’ needs and delivering services that respond to these needs. CGAP engaged ideas42, a behavioral design firm, to apply its research methodology, which is founded in behavioral science, to conduct a qualitative research on how microentrepreneurs approach, decide, and act on key business and financial management issues. ideas42 will use the insights from the research, summarized in this report, to develop and refine the content and features for the next iteration of its Financial Heuristics financial management training product for microentrepreneurs. This improved product will help microentrepreneurs successfully manage their businesses and, in turn, enhance the financial well-being of their families.
This report provides a comprehensive summary of the objectives of the research, the behavioral methodology used for the qualitative research conducted in India and the Philippines, and key findings on how microentrepreneurs manage their finances. Section 1 provides the conceptual framework for the Financial Heuristics work and outlines the historical development of ideas42’s Financial Heuristics portfolio. Section 2 describes the specific objectives of the client-centric research. Section 3 presents ideas42’s proprietary behavioral mapping methodology that was used to conduct interviews with clients of microfinance institutions (MFIs) in India and the Philippines. Section 4 summarizes the key findings from the client research on microentrepreneurs’ business and financial management practices (in the Philippines) and the client experience with the Financial Heuristics business management training product (in India). Section 5 concludes the report and outlines the key next steps for finalizing the Financial Heuristics scale-up project in August 2017, funded by USAID’s Development Innovation Ventures (DIV) program.