Lowering Barriers to Saving

Study Context

For poor microentrepreneurs and farmers, the marginal return to capital is high. Pilot evidence collected by the research team, as well as existing qualitative work, suggests that low income households find it difficult to save as much as they would like (Collins et al. 2009). This suggests that lowering the barriers to savings could both help households improve their resilience to shocks (e.g. from climate), and also potentially enable households to achieve upward mobility. The research team proposes a project to formally assess the potential for savings alone to deliver these benefits.

Study Design

The team proposes introducing a bundle of savings interventions in order to lower the barriers to savings— enabling low-income households reach their desired savings level. They anticipate this bundle having three primary components, each of which has been shown to increase savings in the development literature, as detailed below:

1. Weekly savings deposit collection (as in existing Targeting the Ultra-Poor programs) (Banerjee et al. 2020)
2. A one-time annual planning exercise that has been shown to markedly increase farm investment and yields at very low cost (see Augenblick et al. 2023)
3. A simple labeled lockbox in which households can store savings at home while they wait for the deposit collector’s arrival, which has been shown to increase savings and business investment (see Aggarwal et al. 2023).

The team aims to test the impact of the above bundle via a randomized trial, where all treated households receive the full bundle of savings interventions. They would ideally provide this bundle of savings products to treated households for 3-5 years, and measure impacts on: i) resilience to shocks, ii) savings, assets, productivity, and income and, iii) upward mobility (climbing out of poverty). These interventions should be most impactful for low-income farmers and/or microentrepreneurs with limited access to capital or ability to save. This, together with the promising evidence on savings interventions suggests a potential high return across much of sub-Saharan Africa.

Results and Policy Lessons

Results forthcoming.