Rafe Mazer (MIDP ‘09) was serving as an intern for Opportunity International and Habitat for Humanity in Ghana when he had an eye-opening experience about the importance of human behavior on financial decision-making.

Habitat for Humanity was struggling in Ghana due to the fact that its clients were gradually falling off with their mortgage payments.

After researching economic behavior patterns in the country, they made an important discovery: Ghanaians very rarely took out large upfront loans for homes. Instead, they tended to start small and build their homes incrementally, adding a porch here and a bedroom there.

Mazer’s team was tasked with designing a shorter-term housing loan product for home upgrades to match the preferences of Ghanaian families.

Today, as Financial Sector Specialist with the Consultative Group to Assist the Poor (CGAP) within the World Bank, Mazer uses these lessons about human behavior to help governments develop financial products and policies that are more relevant for low-income populations.

“You have to start from the perspective of how people work and act in everyday life,” Mazer said.

Building better financial products

CGAP is a global partnership of 34 leading organizations that seek to improve the lives of poor people by promoting responsible, sustainable, inclusive financial markets. Since 2009, Mazer has been working to advance this mission by conducting field research that measures how consumers understand, select and use financial products.

“We take some of the more recent insights in behavioral economics and try to develop simple methods that governments can use to better understand why people get into financial trouble,” he said. “We also try to find small, ‘nudgelike’ interventions we can apply to get consumers to better manage their finances.”

His work to date includes consumer research in markets such as Ghana, Mexico, Malaysia, Nicaragua and the Philippines.

“A lot of these behaviors translate across different contexts, so if you find an intervention that leads to behavior change, you can scale it up,” Mazer said.

Some of his recent research has focused on addressing a common and distressing problem: If low-income clients have a negative experience with their bank, they are much more likely to stop using financial products altogether rather than filing a complaint.

“You’ll see in many countries the government has a complaints desk in the capital that takes written complaints,” Mazer said. “Well, right away you’re creating barriers of time and literacy for a large sector of your population.”

He suggests making more offices available in rural areas and creating a hotline so clients can lodge their complaints quickly and conveniently.

Another recent study conducted in Mexico found that people tend to get overwhelmed when faced with too many options. People consistently selected better financial products for their needs when they were presented with five choices rather than 10.

“Less may be more,” Mazer said. “There was a thought in the past that more information is the key. Now we’re seeing that, with short attention spans and the high pressure environment of a sales visit, you may want consumers to focus on one or two key options.”

In another study, two groups of “mystery shoppers” went into banks in Mexico requesting information on financial products. The first group was well-dressed, educated and informed, while the second group was dressed much more casually and was less familiar with banking terms.

“In almost all cases, better dressed and experienced shoppers were given more product information, spent a longer time with the sales staff, and received more printed materials [than their less experienced counterparts],” Mazer said.

CGAP’s research has led to significant changes in how governments structure financial policies, as well as the creation of products that can better equip low-income people to start the journey toward financial stability.

Learning experiences in Latin America

Mazer knew he wanted to work in international development from a very young age, growing up in Martha’s Vineyard in Massachusetts.

“There was an interest in getting out there and seeing things,” Mazer said. “When you grow up on a little island that’s freezing in the winter, you want to get out and see as much as you can of the world.”

While earning his bachelor’s degree in international relations from Pomona College in Claremont, Calif., he traveled to Chile for a study abroad program.

After his graduation in 2002, he was awarded the Fulbright Scholarship and traveled to Guatemala to conduct research on why coffee growers were not participating in the fair trade movement. While studying their perceptions of fair trade and organic coffee, he also worked with a local macadamia farm to donate seedlings to help the farmers with crop diversification.

His work in Guatemala gave him a taste of the behavioral patterns he would later study at CGAP.

“I saw that people don’t always act in their long-term financial interest, and it’s not that they’re making the wrong choice,” Mazer said. “It’s just that, when you don’t have a lot of income, the short term is the top priority.”

The MIDP Advantage

Mazer enrolled in the Master of International Development Policy program (MIDP) in 2007, drawn by the flexibility of the curriculum and by the fellows’ diversity in age, background and experience.

“I felt like this would be an environment where discussions centered around actual experiences of the students, and less on theory and opinion,” he said. “I also was drawn to the wide-open choices of curriculum, and I used this freedom to take courses in social enterprise and financial analysis at the business school.”

While at Duke, he also had the opportunity to work for the Duke Microfinance Leadership Initiative, which was started by three graduate students at the Sanford School of Public Policy in 2006. He and his team worked to start an investment fund and support small financial institutions in Uganda and India.

“It was a great opportunity to take an emerging interest in microfinance and get some hands-on experience and exposure,” Mazer said.

Mazer continues to draw on his experience at Duke – including his internship in Ghana – in his day-to-day work at CGAP. The MIDP program, he said, benefits students by helping them think outside the box to come up with better solutions for developing communities.

“It’s about adapting your goals to how people actually behave,” he said, “Not making someone adapt to what you think is best.”

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