Association for Public Policy Analysis & Management

Panel: Policies and Interventions to Promote the Financial Inclusion of Low- and Moderate-Income Households: Current Evidence

(Social Equity and Race)

Access to and use of financial services from regulated and insured financial institutions is important for households to manage resources, pay bills, access credit, and save and invest. Though only 7% of US households are unbanked, this is true for 26% and 12% of households with annual incomes of less than $15,000 and $15,000 to $30,000, and only 47% and 60% of these households own savings accounts, respectively (FDIC, 2015). Unbanked households are more likely than banked households to turn to high-cost alternative financial services (FDIC, 2016), have lower credit scores (Brown, Cookson, & Heimer, 2016), and experience material hardship (Lim, Livermore, & Davis, 2010) while bank account ownership is associated with positive financial outcomes such as increased savings (Fitzpatrick, 2015). Thus, financial inclusion is an important public policy objective.

This panel includes three papers that describe the importance of financial inclusion and highlights examples of interventions that have successfully promoted inclusion in the traditional financial sector for segments of the population that historically been excluded.

The first paper focuses on the financial circumstances of households with members who are disabled. Using data from a survey of over 13,000 low- and moderate-income (LMI) households, the authors begin by describing the financial needs of households with members who are disabled. They then describe the lack of familiarity with and take-up of ABLE Accounts, tax-advantaged savings accounts designed to help households with disabled members build savings. They end by making recommendations about improving take-up of this program.

The second paper describes results of an intervention to promote financial inclusion through a partnership between a summer youth employment program in Detroit, and the Consumer Federation of America's America Saves for Young Workers program. This intervention included direct deposit of youth paychecks and saving incentives, resulting in higher rates of bank account ownership and saving compared to youth not exposed to the intervention.

The third paper uses longitudinal data from a randomized, controlled trial to test the efficacy of low-touch messages that promoted saving of the tax refund to LMI online tax-filers. Six months after filing their taxes, those who were randomly assigned to the treatment group were more likely to own savings accounts. This treatment effect was found among early tax season filers, who received higher refunds than later season filers.

These papers highlight the need for financial inclusion and describe outcomes of two different intervention strategies for promoting it. Findings from these papers offer important insights for practitioners and policymakers interested in promoting financial inclusion as a strategy to help disenfranchised segments of the population gain a foothold in today's increasingly financialized economy.