Microsaving, not microcredit

Microfinance, where entrepreneurs in developing countries are loaned a few hundred dollars or less to start a business is a well studied and popular policy tool. For those who want to get involve I have discussed Kiva in the past.

But, my dad passed on a new website called matchsavings.org Instead of giving out loans like Kiva you provide money to match the savings of people in developing countries. Like Kiva you can choose the person you watch to provide a match for, although the selection is limited to a few Mexican communities for now.

The website is run by the World Council of Credit Unions, whose home is in Madison Wisconsin. I know of the organization and it has a good reputation and experience in providing financial services in developing countries.

Nudge! Nudge! How to Get Americans to Save.

In the New Yorker there is a good article this week on behavioral economics one of economic's newest fields. What makes the field different is it basically assumes people are irrational. For example even though people say and know they do not save enough in their 401k they don’t change their savings rate, because they keep meaning to go to their benefits office, but do not get around to it. One way to fix this problem is to automatically enroll people in a 401k and have their default option be targeted retirement date index funds. If someone wants to change then they go down to the benefits office and opt out. That might just be the nudge they need.

The Federal Government seems to have figured this outt as my wife’s retirement savings provider said the new default option will be target date retirement funds as opposed to a money market.

Austria has taken this nudge in another direction. Now everyone is assumed to be an organ donor until they state otherwise, greatly increasing the amount of donations.