Financial Engineering for Low Income Households

IIM Ahmedabad recently interviewed Bindu Ananth and Nachiket Mor for their publication ‘The Efficient Frontier’. The publication was recently rebranded to mark the institute’s Golden Jubilee year.

In this interview, Bindu Ananth and Nachiket Mor discuss the applications of financial engineering to low income  households.

Excerpt from the interview

In your experience with low income households, what are some of the risks which you have seen them facing and which you feel could be solved by financial engineering? What are some of the products that can be used to mitigate these risks?

For most low-income households – human capital, in the sense of present value of lifetime net incomes, tends to be the biggest asset in their portfolio. Given fairly low levels of financial capital/wealth, the reliance on human capital is very high in order to successfully meet household goals over a period of time. Anything that impacts this human capital then tends to become very critical for these households….

Click here to download the publication.