While aid agencies, research institutions, and empirical economists have devoted many resources to help the urban poor have access to credit, as witnessed by the explosive growth of microfinance institutions in developing countries, they have largely ignored the constraints imposed by lack of appropriate saving instruments. This project, built upon a pilot funded by EASST, the project investigates why micro-entrepreneurs fail to save, how they formulate their savings goals, and how they learn about the goals formed over time. The study will enroll 600 micro-entrepreneurs in Addis Ababa, Ethiopia in a field experiment. Individuals will be randomized to receive a short-term financial literacy training (on the costs and benefits of opening a bank savings account); a series of five-dollar financial incentives for meeting pre-specified savings targets; both the training and the incentive; or nothing (control). A particularly novel fourth treatment group will allow randomly selected participants to re-optimize their original commitment savings account plan. This will allow researchers to test whether small shop owners effectively learn about their self-control and adjust their behavior accordingly. Three main outcomes of interest will be measured: take-up of the various treatments, percentage change in savings account amounts, and probability of meeting the pre-specified goal.
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