Applying Angrist and Imbens’ research methodologies enable Women’s World Banking to explore the impacts of its products and solutions on women’s financial inclusion and economic empowerment across the globe in the context of real-world conditions

By Sonja Kelly (Director of Research & Advocacy) and Justin Archer (Global Research Lead, Quantitative)

Women’s World Banking was thrilled to see the 2021 Nobel Prize for Economics awarded this week to David Card (University of California, Berkeley) and the duo of Joshua Angrist (Massachusetts Institute of Technology) and Guido Imbens (Stanford University). In the 1990s, Angrist and Imbens were instrumental in pioneering methodologies to solve the challenge of assigning attribution to changes we see in the world. Their work has been foundational in the field of economics in establishing cause and effect, and a cornerstone of our own work to evaluate the women’s economic empowerment effects of financial inclusion.

When we start planning any of our research efforts into the impacts our various financial inclusion efforts across the world have on women and their economic empowerment, the Women’s World Banking research team relies heavily on the techniques these two scholars introduced. Just as Angrist and Imbens asked questions about what the effect of an additional year of school might be on student achievement, we are asking questions about what the effect of a savings account, loan, remittances channel, or insurance product might be on medium-to-long term women’s economic empowerment.

Angrist’s and Imbens’ contributions are critical in surmounting the problem of not being able to control all aspects of an experiment in real-world conditions. By way of example, for the medical community, assigning some sick people a placebo and some sick people the treatment (e.g., a saline solution versus a vaccine) allows for a clear comparison. Those who received the placebo have no way of accessing the treatment, and the scientists can ensure that all who received the treatment got the same dosage at a similar time. They measure these two groups and observe the differences experienced.

Under real-world conditions, like those financial services providers engage in, there is no way of ensuring a person who did not receive a financial service does not get the service elsewhere. If we were to establish a “control” group of people who do not receive a loan (but needed one and would have been eligible) some of them might be able to find an informal or formal loan from another provider in the community. Similarly, we would not be able to keep all conditions for the treatment group the same—some may seek a second loan elsewhere, some may heavily engage in additional products from the institution, and some may default on their loan, removing themselves from the treatment. Real life is complicated.

For us, financial inclusion is not the sole purpose of our work. We are more interested in the changes financial inclusion unlocks for women consumers. To that end, one of Women’s World Banking’s core objectives is to build the evidence base to articulate how women are economically empowered when they choose to access and are able to use financial services that meet their needs. Financial inclusion, when well-designed, should unlock power and resources for women around the world. To this end, the research team is deploying six “quasi-experimental” evaluations by the end of 2022, assessing the relationship between financial inclusion and women’s economic empowerment. For decades, Women’s World Banking has seen anecdotal and situational evidence that well-designed financial products empower women as they actively engage in the formal financial system. Using the research techniques introduced by Angrist and Imbens, we are measuring their impacts, led by partnerships between Women’s World Banking and research and academic institutions around the world.

One of these research efforts currently underway is an impact evaluation in India, where we are comparing women who received a loan before it was coupled with a savings intervention to those who received the loan after the savings intervention was deployed. In this scenario, the intervention was a savings card, a physical reminder to display in borrowers’ homes with space for tracking savings activity. A year later, we are going back to both groups to determine whether and how their financial resilience, confidence, and bargaining power have changed. We can compare the group who received the card to the group who did not receive the card in a design Angrist and Imbens created and call “difference-in-difference.” Our hypothesis is those who received the savings card will show greater women’s economic empowerment in the course of the year. Of course, the timing of this experiment complicates the study—Covid-19 is a systemic economic interruption, limiting business and personal ability to grow. This methodology developed by the Nobel laureates thankfully allows for disruptions like this one and still maintains the integrity of the study.

Another study we have deployed is with a mobile money company in Cambodia. Alongside this financial services provider, we worked with factories to administer manager trainings that delivered financial capability messages and worker trainings on managing wage payments delivered to workers through a mobile money tool. By this time next year, we will be able to compare the one-year difference between factories whose managers received the training against those who have not, and evaluate the effects between the two groups. We have four other studies we are designing with our financial institution partners across various markets including Mexico, Indonesia, India, and Nigeria. We look forward to sharing insights and results along the way.

Our congratulations—and gratitude!—to Angrist and Imbens. Well deserved. We are grateful to have benefitted from their work, and look forward to seeing where this field of research and subsequent learnings take us as we advance our knowledge of our work and its impact.