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 small and medium-sized enterprises (SME) in the region make better financial decisions.

According to the IDB’s COVID-19 Labour Market Observatory, during the novel coronavirus 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.

“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 programme agree that financial resilience is the ability to prepare for, deal with, and recover later from economic shocks,” IDB stated.

With support from the Mastercard Center 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. These strategies will contribute to the growth of digital platforms offering greater financial resilience for the most vulnerable entrepreneurs and workers.

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.

The programme will launch first in Mexico and will then be implemented in other countries where the e-commerce platform operates.

To improve the financial resilience of thousands of SMEs in Mexico and the Latin America region the programme 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.