Facilitating Savings for Agriculture: Field Experimental Evidence from Malawi

Abstract

We implemented a randomized intervention among Malawian farmers aimed at facilitating formal savings for agricultural inputs. Treated farmers were offered the opportunity to have their cash crop harvest proceeds deposited directly into new bank accounts in their own names, while farmers in the control group were paid harvest proceeds in cash (the status quo). The treatment led to higher savings in the months immediately prior to the next agricultural planting season, and raised agricultural input usage in that season. We also find positive treatment effects on subsequent crop sale proceeds and household expenditures. Because the treatment effect on savings was only a small fraction of the treatment effect on the value of agricultural inputs, mechanisms other than alleviation of savings constraints per se are needed to explain the treatment's impact on input utilization. We discuss other possible mechanisms through which treatment effects may have operated. Keywords

Banking the poor via savings accounts: Evidence from a field experiment

“…On the other hand, liquidity might be an obstacle for accumulating savings. While few randomized experiments have shown that commitment savings products help current or former bank clients and cash crop farmers to save for a specific purpose, exercising their self-control early on (Ashraf et al, 2006b;Brune et al, 2014), this study shows that poor households are able to save even with savings accounts without explicit commitments.…”

“…); whether the account charges opening fees and/or minimum balance fees; whether there are withdrawal fees; whether there are deposit fees; the nominal interest rate and inflation rate; the take-up rate; and the usage rate. 34 Five studies offered an ordinary savings account (Ashraf et al, 2006a;Cole et al, 2011;Dupas and Robinson, 2013a;Dupas et al, forthcoming;Schaner, 2013), one study offered an ordinary savings account with text message reminders (McConnell, 2012), two studies offered ordinary and commitment savings accounts (Brune et al, 2014;Kast and Pomeranz, 2013), and four studies offered commitment accounts (Ashraf et al, 2006b;Karlan and Linden, 2014;Karlan and Zinman, 2013;Karlan et al, 2012).…”

“…Indeed, there are no bank offices in the slums in which the sample population lives, and the vast majority of bank-branches are located in the 2 e.g., Ashraf et al (2006a), Brune et al (2014), Cole et al (2011), Dupas et al (forthcoming), Dupas and Robinson (2013a), Kast and Pomeranz (2014) 4 A ROSCA is a savings group formed by individuals who decide to make regular cyclical contributions to a fund in order to build together a pool of money, which then rotates among group members, being given as a lump sum to one member in each cycle. 5 Going to the bank is a very good proxy of account usage because online banking is almost non-existent in Nepal.…”

“…A comparison of the account features of the savings account considered in this study with those offered in other interventions suggests that poor households appear to value a savings product that is associated with low transaction costs in the form of proximity to a local bank-branch and no fees, and that is offered by a trusted banking institution. Distance from a bank-branch has been proposed as a reason for low usage of a savings account (Brune et al, 2014). Also, as suggested by anecdotal and survey evidence from Banerjee and Duflo (2011) and Dupas et al (forthcoming), high fees may discourage usage.…”

Two Sides of the Same Rupee? Comparing Demand for Microcredit and Microsaving in a Framed Field Experiment in Rural Pakistan

“…Our key empirical resultthat, for a high proportion of microfinance clients, credit and savings can act as substitutesis useful for understanding recent research on microfinance. Growing empirical evidence suggests that savings products can be valuable for generating income and for reducing poverty (Burgess and Pande, 2005;Dupas and Robinson, 2013;Brune et al, 2016). Standard microcredit productswith high interest rates and immediate repaymentsincreasingly seem unable to generate enterprise growth (Karlan and Zinman, 2011;Banerjee et al, 2015).…”