New programme seeks to improve the financial resilience of entrepreneurs and workers

If you’ve been thinking more and more about saving money during the past year, you’re not alone. While the pandemic has upended our personal finance habits, small changes in our routine can make a big difference. A new initiative in Latin America supported by Mastercard, Mercado Libre, the IDB’s Retirement Savings Laboratory, and Common Cents Lab, a financial behaviour research lab at Duke University, seeks to use behavioural science to help entrepreneurs and SMEs in the region make better financial decisions.


According to the IDB’s COVID-19 Labour Market Observatory, during the COVID-19 pandemic, more than 31 million people lost their jobs in Latin America, and the United Nations anticipates the worst recession for the region in a century. Small- to medium-sized enterprises (SMEs) and entrepreneurs who are actively working, or those who are deciding to enter the digital economy at this stage, must have sufficient financial resilience to overcome this period and be even better prepared to weather financial shocks. The partners collaborating in this program agree that financial resilience is the ability to prepare for, deal with, and recover later from economic shocks.


Photo: ©IFAD/Santiago Albert Pons

With support from the Mastercard Centre for Inclusive Growth for the next two years, Common Cents Lab team will work with digital platforms including Mercado Libre, the largest e-commerce site in Latin America, to design strategies based on behavioural science, which can be validated and adopted by multiple players in the region. Thus, these strategies will contribute to the growth of digital platforms offering greater financial resilience for the most vulnerable entrepreneurs and workers.


The program will launch first in Mexico and will then be implemented in other countries where the e-commerce platform operates. “This partnership strengthens our commitment to the SMEs in Mexico because it will allow us to better understand them and be a real driver for the country’s economic reconstruction,” added Davido Geisen, Managing Director of Mercado Libre México. “It represents great pride and responsibility for us to be the first technology company in the region to implement a study of this magnitude to improve the impact on thousands of entrepreneurs through behavioural science.”


Behavioural Economics is the study of how people behave and make decisions. Integrating technology with learnings from Behavioural Economics in the financial services space, may help people make financial decisions that are more beneficial to their life in the long run.

“Common Cents Lab has proven the power of applied behavioural science in the United States and a number of other countries around the globe,” said Luz Gomez, director for Latin America and the Caribbean at the Mastercard Centre for Inclusive Growth. “Their expertise and insights will be a powerful counter to the urgent and rapidly growing financial needs of people in this region.”


To improve the financial resilience of thousands of SMEs in Mexico and the Latin America region, the program will use the expertise of its partners, to develop changes and notifications within the Mercado Libre platform and study its impact on profits, short- and long-term savings, or the use of credit products among its sellers. “The experience we have accumulated at the IDB shows us that we can improve the lives of citizens and their financial habits by using technology and facilitating decision-making,” said Oliver Azuara, lead at the IDB’s Retirement Savings Laboratory.


“We are excited to launch this new initiative with the Mastercard Centre for Inclusive Growth and our partners in the region as a way to measurably help those affected by the pandemic recover and better prepare for future financial emergencies,” said Common Cents Lab co-founder Mariel Beasley. “By designing behavioural-informed interventions that exist within these digital platforms, we can produce significant improvements in financial decision-making and resiliency that will serve as a model for best practices in other countries.”


This initiative builds on Mastercard’s ongoing efforts to address the economic challenges facing individuals in the region. Last year, the company united technology leaders in Latin America, including Mercado Libre, to launch the Tech for Good Partnership a first-of-its-kind private sector agreement to accelerate digital and financial inclusion in the region. Together, its partners pledge to use their resources, assets, and expertise to prioritize digital and financial inclusion efforts in the wake of COVID-19.


This article was originally published by IDB.