Savings

Information and links about savings

A New Paradigm for Microfinance: Savings and Credit | While they are no magic wand and really only work as part of a holistic approach, there is enormous potential for international development organizations to help communities help themselves through savings and credit groups.

Karlan et al 2016

D. Karlan, R. Mann, J. Kendall, R. Pande, T. Suri, and J. Zinman. Making microfinance more effective. Harvard Business Review, pages 2–6, 2016.

• which financial tools provide durable buffers against such setbacks.

1. Traditional microcredit hasn’t lived up to expectations, but we are learning how to improve it.
2. Savings accounts are effective safety nets—especially if they apply insights from behavioral sciences.
3. Insurance is highly valuable to protect against shocks but is difficult to scale.
4. Digital financial services let people help each other.

Bachas et al 2021

P. Bachas, P. Gertler, S. Higgins, and E. Seira. How debit cards enable the poor to save more. The Journal of Finance, 76(4):1913–1957, 2021.

A remarkably large number of households do not have sufficient savings to cope with relatively small shocks.

• Some hypothesize that this is due to a lack of access to low-cost, convenient savings devices at formal financial institutions (Karlan, Ratan, and Zinman (2014)).

• When households do have access to financial institutions, they experience a number of well-documented causal impacts, including increased entrepreneurial investment, wealth accumulation, and ability to cope with shocks (Bruhn and Love (2014), Célérier and Matray (2019), Stein and Yannelis (2020)).

• Nevertheless, take-up and active use of bank accounts “remain puzzlingly low” (Karlan et al. (2016, p. 2)), even when accounts are offered without fees (Dupas et al. (2018)).

• In fact, 40% of adults worldwide do not have a formal bank or mobile money account (Demirgüç-Kunt et al. (2018)).

• Similarly, cash transfer recipients paid through direct deposit into bank accounts generally withdraw the entire transfer amount in one lump sum each pay period (Muralidharan, Niehaus, and Sukhtankar (2016)).

• a lack of trust in banks to not “steal” their savings—often through hidden and unexpected fees—is frequently listed as a primary reason the poor are hesitant to use banks (Dupas et al. (2016), FDIC (2016))

1. Our main contribution to the literature is to show that a nationwide, at - scale rollout of a low - cost financial technology caused a large and significant increase in the number of active account users in terms of both number of withdrawals and savings.
   Two other studies that also find a large effect on savings are Suri and Jack (2016)¹, who study the impact of mobile money, and Callen et al. (2019)², who study the impact of weekly home visits by a deposit collector equipped with a POS terminal. Like debit cards, these technologies both reduce transaction costs and enable clients to more easily monitor account balances.

2. Our second contribution is to show that the savings effect came — at least in part — from an increase in total savings achieved by reducing current consumption, rather than a substitution from other forms of saving.

3. Our third contribution is to directly investigate two barriers to saving: indirect transaction costs and distrust.

Misc papers

From this link

Ashraf, Nava, Diego Aycinena, Claudia Martínez, and Dean Yang, 2015, Savings in transnational households: A field experiment among migrants from El Salvador, Review of Economics and Statistics 97, 332–351.

Randomized field experiment that tested ways to stimulate migrants’ savings in their origin country. Migrants value opportunities to exert greater control over financial activities in their home countries.

Ashraf, Nava, Dean Karlan, and Wesley Yin, 2006, Deposit collectors, Advances in Economic Analysis & Policy 6, 635–672.

Randomized control trial, the paper investigates the determinants of participation in a deposit collection service and evaluate the impact of offering the service for micro-savers of a rural bank in the Philippines. Take-up is predicted by distance to the bank (a measure of transaction costs of depositing without the service) as well as being married (a suggestion that household bargaining issues are important). Those offered the service saved 188 pesos more (which equates to about a 25% increase in savings stock) and were slightly less likely to borrow from the bank.

E. Breza and A. G. Chandrasekhar. Social networks, reputation, and commitment: evidence from a savings monitors experiment. Econometrica, 87(1):175–216, 2019.

Do individuals save more when information about their progress towards their saving target is shared with the monitor (member of village ). We randomly assign monitors to savers and find that monitors on average increase savings by 36%. More central and proximate monitors lead to larger increases in savings. Information flows through the network, with 63% of monitors telling others about the saver’s progress. 15 months after the experiment ended, villagers have updated their beliefs about the saver’s responsibility in response to the intervention.

Carroll, Christopher D. “Buffer-stock saving and the life cycle/permanent income hypothesis.” The Quarterly journal of economics 112.1 (1997): 1-55.

bufferstock consumers set average consumption growth equal to average labor income growth, regardless of tastes.

Célerier, Claire, and Adrien Matray. “Bank-branch supply, financial inclusion, and wealth accumulation.” The Review of Financial Studies 32.12 (2019): 4767-4809.

We find that an exogenous expansion of bank branches increases low-income household financial inclusion. Relative to their unbanked counterparts, banked households accumulate assets in interest-bearing accounts, invest more in durable assets, such as vehicles, have a better access to debt, and have a lower probability of facing financial strain.

Dupas, Pascaline, et al. “Banking the unbanked? Evidence from three countries.” American Economic Journal: Applied Economics 10.2 (2018): 257-97.

We experimentally test the impact of expanding access to basic bank accounts in Uganda, Malawi, and Chile. Average monthly deposits in treatment accounts were sizable among users. Results suggest that policies merely focused on expanding access to basic accounts are unlikely to improve welfare noticeably on average.

Dupas, Pascaline, and Jonathan Robinson. “Savings constraints and microenterprise development: Evidence from a field experiment in Kenya.” American Economic Journal: Applied Economics 5.1 (2013): 163-92.

Randomized access to non-interest-bearing bank accounts among two types of self-employed individuals in rural Kenya: market vendors (who are mostly women) and men working as bicycle taxi drivers. Despite large withdrawal fees, a substantial share of market women used the accounts, were able to save more, and increased their productive investment and private expenditures. We see no impact for bicycle taxi drivers. Significant barriers to savings and investment for market women.