How Debit Cards Are Helping Low-Income Households Save | KelloggInsight

KelloggInsight recaps new research by CEGA Affiliated professor Paul Gertler and co-authors Pierre Bachas, Sean Higgins and Enrique Seira examinig how debit cards can improve the prospects and quality of life for the poor by helping them finance small businesses or prepare for financial shocks:

“The program that piqued Higgins’s interest is Mexico’s conditional cash-transfer program, Prospera. It provides bimonthly cash payments to female heads of poor households, as long as these families send their children to school and schedule preventative health checkups. Nearly a quarter of Mexican households receive benefits from Prospera. Program participants receive payments via direct deposit into accounts run by Bansefi, Mexico’s government bank.

The researchers used anonymized data on approximately 350,000 urban Prospera beneficiaries, all of whom had been receiving cash transfers from the program into their bank accounts prior to 2009, when Prospera began to introduce debit cards.

In the first investigation, Higgins teamed up with Pierre Bachas, at the World Bank; Paul Gertler, at the University of California, Berkeley; and Enrique Seira, at the Instituto Tecnológico Autónomo de México. They analyzed roughly five years of beneficiaries’ transaction-level bank-account information, from 2007–2011 (spanning before and after the introduction of the debit cards). They also combed through Prospera’s survey data, which included information from a subset of participants on their household consumption and income; feelings of trust toward the bank; and use of debit cards and ATMs.”

Source: How Debit Cards Are Helping Low-Income Households Save—and Benefiting Their Neighbors Too