USING BEHAVIORAL SCIENCE TO DESIGN A CUSTOMER-CENTRIC FINANCIAL MANAGEMENT TRAINING FOR MICROENTREPRENEURS Section 4: Research Findings from Client Interviews This section describes in detail the key research findings from ideas42’s qualitative research in India and the Philippines. The findings are summarized by country, to reflect the different research questions we pursued in each country. 4.1. Key Research Findings from the Philippines In this section, we have summarized our key research findings based on the two research questions we aimed to answer for the Philippines research: (1) How do microentrepreneurs manage their finances—both personal and business? (2) What heuristics, if any, do microentrepreneurs use to manage their finances? The section is organized by the key business practices we identified for retail loan clients in the Philippines. The following are key business practices we identified: • Many clients operate multiple businesses and tend to mix the income from these businesses. • Clients do not calculate profit for their businesses. • Clients take money from their business for their household as they need it. • Many clients compartmentalize income streams and direct them toward different expenditures. • Clients give credit to customers based on customers’ needs, and do not enforce timely repayment. • Clients use the variety principle to buy stock for their business. • Clients price items not taking into account related costs of purchasing the item. For some businesses practices, we were able to identify specific business and financial management heuristics that microentrepreneurs. 4.1.1. Most Clients Operate Multiple Businesses and Tend to Mix the Income from These Businesses Over two-thirds of the business owners we interviewed own and operate at least one more business in addition to their retail business, such as fish vending, food preparation and catering, or pig breeding. We believe that the decision to own and manage more than one business stems from the desire to expand and diversify one’s income, which is especially important for sari-sari store owners, as these retail shops are ubiquitous in every neighborhood in the Philippines. Women owning more than one business reported that they can expand their client base by cross-selling products from their businesses. The fact that most of NWTF’s clients operate more than one business does affect their financial management practices. With multiple income streams, cash management becomes very complicated. Clients with multiple businesses tend to mix the earnings from their various businesses and are unable to accurately evaluate whether each of the businesses is operating at a profit on its own. Thus, an effective mechanism to practice cash separation between the various businesses and the household becomes even more critical for clients with multiple businesses. The cash separation heuristic that we developed for microentrepreneurs in India and the Dominican Republic could be very useful for clients in the Philippines and could help them implement improved financial management for their businesses. 4.1.2. Clients Do Not Calculate Profit for Their Businesses Qualitative interviews conducted with NWTF clients identified clients’ inability to calculate profits accurately. Not surprisingly, this finding resonates with what we had observed for microentrepreneurs in India and the Dominican Republic. We uncovered different types of misunderstandings and confusion around what NWTF 11