Jonathan Morduch of the Financial Access Initiative, and Rachel Schneider of CFSI discuss the new report from the U.S. Financial Diaries Project.
Households often use informal tools that are harder to see from outside, like short-term loans from friends or relatives. It’s tempting to think that these informal tools are last resorts, or second-best services, but informal financial mechanisms are often combined with formal tools, and sometimes are preferred. This issue brief explains what informal money management is and how informal savings and borrowing tools are used; some reasons why people use such informal tools; the benefits, costs and limits of informal money management; and the implications of these findings for money services providers and policymakers.
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