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The Effect of Labeling and Modern Depositing Mechanisms on Savings Behavior: A Pilot Study from Ethiopia

Financial Inclusion Ethiopia

Picture Credit: Iman Abdella

Behavioral biases such as problems of self-control, present-biasedness, and inattention can perpetuate households’ inability to save and prepare for financial needs. Challenges associated with saving may be magnified in the developing country context, where financial institutions offer few formal products designed to enable individuals to overcome behavioral biases. This pilot project in Ethiopia tests whether offering multiple purpose-labeled savings accounts alone – or in combination with an automatic deposit mechanism – can help reduce barriers to saving and enable households to meet their savings goals. In the first phase of the project, researchers will conduct a small pilot with up to 150 government employees in Addis Ababa. Goals for the pilot are to develop a better understanding of current savings patterns and barriers to saving among representative households, to test and refine various features of the savings account product and deposit mechanism, and to gain a preliminary sense of take up and account usage. Findings from this pilot will inform the design of a full-scale randomized control trial testing the best way to encourage more effective formal savings behavior.

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Financial Inclusion

DCO Quarterly Newsletter: February 2020


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