Building Financial Resilience : Do Credit and Finance Schemes Serve or Impoverish Vulnerable People?

This book examines how credit and finance schemes affect the financial lives of vulnerable people around the world. These schemes include payday lending, matched savings, and financial literacy in the Global North, and micro-credit and mobile banking in the Global South. Buckland sets these schemes within the context of financialization and seeks to identify strengths, weaknesses, and ways to enhance the well-being of vulnerable people. This book's coverage of a wide range of financial products and geographic regions makes for a unique and innovative perspective on this topic. It presents a balanced critique of credit and finance schemes under the assumption that reform is the most practical means to improve human well-being.-- Provided by publisher Foreword 6 Acknowledgments 12 Contents 15 List of Figures 19 List of Tables 20 Chapter 1: Introduction 22 General Approach 24 Actors Engaged in Credit and Finance Schemes 27 Bibliography 30 Chapter 2: Financial Inclusion and Building Financial Resilience 32 Financialization 34 Views about Financialization and the Financialization of the Everyday 34 Causes and Effects of Financialization 36 Financialization and Human Motivations 38 Financial Inclusion 40 Indicators of Financialization and Financial Inclusion 44 Poverty, Capability, and Financial Resilience 50 Types of and Views About Poverty 51 Human Capability and Financial Resilience 52 Recent History of Money and Banking 55 The Changing Role of Actors in Credit and Finance Schemes 56 Discussion 61 Bibliography 65 Chapter 3: New Areas of Commercial Banking Directed at Vulnerable People: Payday Lending and Mobile Banking 68 Firm Motivation, Politics, and Ethical Considerations 69 Motives and Markets of Financial Institutions 69 The Political Influence of Financial Institutions 71 Ethical Issues and Usury 72 Information Technologies and Banking 76 Financial Institutions That Offer Services to Poor People 80 Early Roots of Fringe Banks: Pawnshops and Check Cashers 85 Informal Financial Services 88 Traditional Moneylenders and Loan Sharks 89 Traditional Social Finance 91 New Commercial Financial Services Directed at Low-Income People: Payday Lending and Mobile Banking 93 Fringe Banks and Payday Lending 93 Payday Loans and Lenders 94 Other Transactions Services Payday Lenders Offer 96 Other Fringe Banks 97 The “Corporatization” of Payday Lenders and Fringe Banks 98 DFC Global Corporation 102 Mainstream Banks and Mobile Banking 107 Mobile Banking 107 Mobile Banking: Constraints to Adoption and Contribution to Broad-­Based Economic Development 111 M-PESA and bKash 112 Problems Identified with Mobile Banking 113 Pilot Survey Results 116 Discussion 121 Bibliography 125 Chapter 4: Financialization and Consumer Behavior 130 Consumerism 132 Consumer Debt 134 Consumer Debt and Mental Health 137 Consumption and Advertising 140 Unpacking Human Rationality 141 Collective Behavior 141 Structural Barriers 143 Rational Behavior 144 Unpacking Bounded Rationality 149 Measuring Financial Literacy 149 Rules of Thumb That Go Wrong 151 Borrowing Behavior 153 Savings Behavior 155 Scarcity and Tunneling 157 From Bounded Rationality to Deliberate Decision-Making 160 Discussion 161 Bibliography 165 Chapter 5: Credit, Cash, Savings, and Financial Literacy Delivered Through Civil Society 169 Introduction 169 Regional Variations in Socially Oriented Financial Programs 170 Microcredit, Conditional Cash Transfers, and Asset-­Building Programs 172 Microcredit 173 The Concept and History 174 Size and Scope of Microcredit 176 The Diversity of the Model 177 Analysis of Microcredit 185 Impact 188 Cash Transfers 190 Current Scope and Size 191 Impact 192 Asset Building 193 The Concept and History 193 The Current Scope and Size 194 Analysis and Impact 195 Education and Counselling on Household Finances 196 The Concept and History 196 Financial Literacy Content 199 Analysis 200 Financial Empowerment Programs 201 Discussion 203 Bibliography 206 Chapter 6: The State: Regulating, Nudging, and Educating for Financial Inclusion 209 Introduction 209 Financial Sector Regulation 210 Bank Soundness Regulations 212 Soundness and Income–Asset-Poor People 214 Mobile Banking Regulations 216 Regulating Fringe Banks 218 State Support for Financial Inclusion 220 Financial Service Provision in the Global North 221 Financial Inclusion in the Global South: The Alliance for Financial Inclusion 224 Postal Banking 227 The Arguments for and Against Postal Banking 228 Postal Banking in Practice 230 State-Based “Nudging” 231 But Are Policymakers Rational? 233 Rationality as a Process of Engaging with Marginalized People 238 Financial Education 241 Discussion 244 Bibliography 245 Chapter 7: Conclusion 248 Credit and Finance Schemes: Helping or Harming Vulnerable People? 248 Consumer Behavior 250 The Supply Side of Financialization: Microcredit and Payday Lending 251 Can the State Step Up? 255 Bibliography 257 Bibliography 258 Index 278 Front Matter ....Pages i-xxiv Introduction (Jerry Buckland)....Pages 1-10 Financial Inclusion and Building Financial Resilience (Jerry Buckland)....Pages 11-46 New Areas of Commercial Banking Directed at Vulnerable People: Payday Lending and Mobile Banking (Jerry Buckland)....Pages 47-108 Financialization and Consumer Behavior (Jerry Buckland)....Pages 109-147 Credit, Cash, Savings, and Financial Literacy Delivered Through Civil Society (Jerry Buckland)....Pages 149-188 The State: Regulating, Nudging, and Educating for Financial Inclusion (Jerry Buckland)....Pages 189-227 Conclusion (Jerry Buckland)....Pages 229-238 Back Matter ....Pages 239-270