Header image

Microfinance and Consumer Decision Making: Applying Behavioural Economics to Improve Product Design in Pakistan


Pakistan has one of the lowest financial inclusion figures in South Asia with only 16% of the population formally banked and 23% using formal financial services. These figures contrast significantly with the regional average of 46%. There are many reasons to believe there is a strong unmet demand for these financial services: more than half of the Pakistani population saves (but only 8% in formal financial institutions); one-third of the population borrows (but only 3% using formal credit products). The lack of engagement in formal financial institutions presents an exciting opportunity to understand what are the psychological and behavioural factors that currently obstruct consumers from using these services. These insights can also help inform us to design financial products that best fit the populations they are designed to serve.

There has been a growing body of research highlighting the importance of psychological and behavioural biases that play a role in consumer’s financial decision making. People frequently engage in financial behaviours that run counter to their long-term well-being: they save too little, spend too much, and fail to avoid unnecessary fees.

Gallup Pakistan is collaborating with Joe Gladstone (Assistant Professor of Consumer Behaviour at UCL School of Management) and Umar Taj (Research Fellow in the Behavioural Science Group at Warwick Business School) to measure behavioural biases through a series of choice experiments and observe how certain biases lead people to make sub-optimal decisions. In particular, we will be interested in:

  • Pakistani people’s ability to make optimal investment decisions in very simplified investment tasks
  • How framing of information and complexity in the characteristics of the products affect consumer’s decision making in the Pakistani context?
  • Investigating whether current products on the market would be more attractive if elements of the costs were re-formatted