Jonathan Fu

Research

Journal Articles

Banking on Competition: The Spillover Effects of Bank Entry into Microfinance . with Vasso Ionnidou and Mrinal Mishra. (Accepted, forthcoming, In: Journal of Financial and Quantitative Analysis)

Abstract: This paper examines how bank entry transforms microfinance markets, focusing on borrower outcomes and market-wide spillovers. Using detailed credit registry data, we show that competition from banks leads to improved loan terms for both graduating and staying borrowers, generating sustained benefits. Our setting also allows us to document what happens when entry fails and banks retreat following a crisis. Despite increasing defaults, borrowers who graduate to banks experience long-term gains, particularly in borrowing costs. Our findings highlight the broader benefits and risks of fostering competition in microfinance, providing valuable insights for policymakers and financial inclusion initiatives.

Preparing fertile ground: How does the quality of business environments affect MSE growth? with Annette Krauss. In: Small Business Economics

Abstract: We study how the quality of local business environments help explain growth outcomes of micro and small enterprise microfinance clients by drawing on long-term nationwide administrative data and a policy shock in Cambodia. The staggered launch of Special Economic Zones, which we link to positive shocks to the business environment on both the demand side and supply side, leads to significantly increased employment in MSEs located in these SEZs, compared to enterprises in contextually similar districts but that are unexposed to an SEZ. Key channels explaining the improved growth outcomes include expanded access to external markets for the enterprises’ goods and services, more dynamic labour environments, and improved credit terms and conditions. To broaden the relevance of our findings, we combine data from prominent empirical studies on microfinance and demonstrate how related business conditions from the enterprise growth literature help explain differences in client business outcomes found in their results. Policy implications are that a key segment of microfinance borrowers can significantly benefit from opportunities provided by local business environments and that governments and lenders can play active roles in facilitating improved outcomes for their MSEs.

Fintech in the Time of COVID-19: Technological Adoption During Crises with Mishra Mrinal. In: Journal of Financial Intermediation, Vol. 50, April 2022.

Abstract: We document the effects of the COVID-19 pandemic on digital finance and fintech adoption. Drawing on mobile application data from a globally representative sample, we find that the spread of COVID-19 and related government lockdowns led to a sizeable increase in the rate of finance app downloads. We then analyze factors that may have driven this effect on the demand-side and better understand the ``winners'' from this digital acceleration on the supply-side. Our overall results suggest that traditional incumbents saw the largest growth in their digital offerings during the initial period, but that ``BigTech'' companies and newer fintech providers ultimately outperformed them over time. Finally, we drill-down further on the adoption of fintech apps pertaining to both the asset and liability side of the traditional bank balance sheet, to explore the implications that the accelerated trends in digitization may have for the future landscape of financial intermediation.

The Global Impact of COVID-19 on Fintech Adoption. with Mishra Mrinal. In: CEPR COVID Economics Vetted and Real-time Papers, No. 12, May 2020, Center for Economic and Policy Research

Abstract: We draw on mobile application data from 74 countries to document the effects of the COVID-19 pandemic on the adoption of digital finance and fintech. We estimate that the spread of COVID-19 and related government lockdowns have led to between a 24 and 32 percent increase in the relative rate of daily downloads of finance mobile applications in the sample countries. In absolute terms, this equates to an average daily increase of roughly 5.2 to 6.3 million application downloads and an aggregate increase of about 316 million app downloads since the pandemic’s outbreak to the present, taking into account prior trends. Most regions across the world exhibit notable increases in absolute, relative, and per capita terms. Preliminary analysis of country-level characteristics suggest that market size and demographics, rather than level of economic development and ex-ante adoption rates, drive differential trends.

Ability or opportunity to act: What shapes financial well-being? In: World Development, Vol. 128, p. 104843-104843, April 2020

Abstract: This paper draws on nationally representative survey data from 11 emerging and developed economies to measure consumer financial well-being and provide a systematic analysis of its predictors. Whereas the extant literature has been dominated by studies emphasizing the role of individuals’ levels of financial literacy and formal financial inclusion, the paper shifts focus towards contextual-level predictors by exploiting subregional variation in structural and institutional features of financial sectors, both within and across countries. It develops a conceptual framework that categorizes such features into 1) those that enhance or inhibit decision-making when selecting or using formal products and 2) those that provide viable substitutes or complements to formal products. It then provides empirical evidence on several examples. Specifically, it highlights the relative importance of having greater prevalence of independent information resources concerning financial products and services, additional provider choice, and some forms of semi-formal and informal finance. The main policy implications are that current efforts to improve broader welfare outcomes through financial literacy and inclusion interventions may still be too narrowly framed. Structural and institutional features related to financial sectors may hinder or enhance financial well-being, even if individuals have adequate financial literacy or be included in formal financial markets. The financial well-being concept may also serve as a useful indicator for monitoring progress towards SDGs 1, 3, 10, and 16.

Financial inclusion and the 2030 Agenda for Sustainable Development: a missed opportunity. with Jahel Queralt and Michele Romano. In: Enterprise Development and Microfinance, Vol. 28, (3), p. 200-211, September 2017

Abstract: Approximately 2 billion adults, just below half of the world’s adult population, are financially excluded. They lack access to formal or semi-formal savings, credit, and insurance services. The vast majority of these adults live a hand-to-mouth existence in the developing world. The 2030 Agenda for Sustainable Development takes a rather unambitious approach to financial inclusion (FI). It recognizes its importance in advancing several sustainable development goals (SDGs), but it does not include it as a stand-alone goal. This paper criticizes this approach and claims that the new agenda has been a missed opportunity to focus efforts on finding ways of meeting the financial needs of the global poor. We analyse three of the main reasons for not including FI as a sustainable goal: namely, the instrumentality argument, the free market argument, and the veil argument.

Working Papers & Papers in Review Process

The benefits (and limits) of digital financial capability training: Evidence from Cambodian payroll accounts. with Agnes Salyanty. (Submitted, in review)

Abstract: How effective are financial capability trainings at expediting adoption of financial technology in low income settings? What key frictions need to be overcome when financial access has been established but usage is stalled? We provide evidence on these questions using a large-scale and staggered intervention delivered by a leading Cambodian mobile money provider (–turned–commercial bank)to factory workers across its payroll account clientele. We further exploit wage shocks, driven in part by the pandemic, as a mechanism for examining heterogeneous effects of the training under (un)favorable economic conditions. We show that the intervention led to significant and persistent increases in workers’ e-account usage on both the extensive and intensive margin, and further knock on effects complementary to financial deepening and women’s economic empowerment. However, effects are generally conditional on stability of post-intervention wage conditions and muted when other factory-level frictions exist.

Narratives and Business Creation with Mrinal Mishra and Steven Ongena. (Submitted, in review)

Abstract: Do articles on the "American Dream" in local U.S. newspapers spur local entrepreneurship? To answer this question, we assess almost 40,000 such articles from the most recent decade using generative artificial intelligence. We find that one additional American Dream article published in a U.S. county is associated with a one percent increase in local entrepreneurship, an effect lasting for twosubsequent years and which is four times larger when the narrative is “rags-to-riches”. We deploy the narration of “educational-attainment-as-the-pathway-to-riches” to reach a causal interpretation. Our findings imply that regular media narratives can have a sizable impact on important economic outcomes.

Different Shades of Green: Estimating the Green Bond Premium using Natural Language Processing. with Emanuela Benincasa, Mrinal Mishra, and Adityavardhan Paranjape.

Abstract: We document the existence of a premium in the green bond market based on the greenness of green bonds. Using BERT, a natural language processing method for textual analysis, we develop a novel measure for bonds’ greenness and document that a 10 percent increase in the bond’s greenness corresponds to a decrease in annualized yield by between 4.86 to 8.71 basis points. In addition to greener bonds enjoying higher premiums, we find evidence that issuing a green bond has positive spillover effects on the pricing of subsequent conventional bonds’ issuance. Overall, our findings are consistent with firms relying on “green" debt instruments to lower capital costs and raise cheaper financing.

The Effects of Self-regulation on Financial Consumer Protection. with Annette Krauss and Julia Meyer. (Draft coming soon)

Industry Collaborations, Policy Briefs, Blogs, & Media Mentions

"Equitable AI for Inclusive Finance" (Guide and policy brief), in support of Alex Rizzi and Lucciana Alvarez Ruiz. Center for Financial Inclusion. August 2023.
"Check your bias! A field guide for lenders" (Policy brief), with Mehrdad Mirpourian and Sonja Kelly. Women's World Banking. December 2022.
"Combatting fraudulent and predatory fintech apps with machine learning" (Policy brief), with Mrinal Mishra. Innovations for Poverty Action. February 2022.
"Beyond Wage Digitization: Financial Capability and Economic Empowerment of Cambodian Women Migrant Workers" (Policy brief), with Agnes Salyanty. Women's World Banking. January 12, 2022.
"Combating the Rise in Fraudulent Fintech Apps" (Blog) with Mrinal Mishra. Center for Financial Inclusion at Accion. December 21, 2020
"Financial Inclusion Is Going Digital. Can Women Follow?" (Blog) with Sonja Kelly. FinDev Gateway. January 31, 2020
"What's Financial Health Got to Do With It?" Matthew Soursourian. Consultative Group to Assist the Poor (CGAP) at the World Bank. January 3, 2019

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