Improving access to savings through mobile money: Experimental evidence from African smallholder farmers

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.Investment in improved agricultural inputs is infrequent for smallholder farmers in Africa. One barrier may be limited access to formal savings. This is the first study to use a randomized controlled trial to evaluate the impact of using mobile money as a tool to promote agricultural investment. For this purpose, we designed and conducted a field experiment with a sample of smallholder farmers in rural Mozambique. This sample included a set of primary farmers and their closest farming friends. We work with two cross-randomized interventions. The first treatment gave access to a remunerated mobile savings account. The second treatment targeted closest farming friends and gave them access to the exact same interventions as their primary farmer counterparts. We find that the remunerated mobile savings account raised mobile savings, but only while interest was being paid. It also increased agricultural investment in fertilizer, although there was no change in investment in other complementary inputs that were not directly targeted by the intervention, unlike fertilizer. These results suggest that fertilizer salience in the remunerated savings treatment may have been important to focus farmers' (limited) attention on saving some of their harvest proceeds, rather than farmers being financially constrained by a lack of alternative ways to save. Our results also suggest that the network intervention where farming friends had access to non-remunerated mobile money accounts decreased incentives to save and invest in agricultural inputs, likely due to network free-riding because of lower transfer costs within the network. Overall this research shows that tailored mobile money products can be used effectively to improve modern agricultural technology adoption in countries with very low agricultural productivity like Mozambique. JEL Classification:D14, D85, Q12, Q14Nova SBE for useful comments. We are particularly grateful to Carteira Móvel, Mcel, and the International Growth Centre for fruitful collaboration in Mozambique. Nadean Szafman and his team, and Mindy Hernandez offered important inputs to this project for which we are most thankful. Finally, we would like to extend an appreciative word to the group of enumerators with whom we worked. IRB approval was secured from Innovations for Poverty Action. We wish to acknowledge financial support from ATAI at MIT, and USAID. All errors are our responsibility.

Can Mobile-Linked Bank Accounts Bolster Savings? Evidence from a Randomized Controlled Trial in Sri Lanka

“…The handful of studies examining mobile-linked savings generally find results consistent with ours, despite being in settings where mobile money is more popular. Both Batista and Vicente (2017) and Bastian et al (2018) measure the marginal effect of connecting formal saving options to mobile platforms in contexts of existing mobile money users. In both cases, they observe savings being directed to the savings product, but also reductions in alternate saving devices, leading to no significant increase in total savings.…”

Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan

“…First, most of the existing evidence on default savings is from rich countries. 1 Less is known about the potential for defaults to affect savings in poor countries, where most of the world's population resides and where the economic benefits of increasing savings may be higher. Related, in developed countries, it is frequently the poorest and least financially sophisticated who respond most strongly to defaults (Madrian and Shea 2001;Choi et al 2004;Beshears et al 2010); this suggests defaults might be particularly effective in poor countries.…”

M-PESA and Financial Inclusion in Kenya: Of Paying Comes Saving?

“…(To be clear, this LSA was only added to the suite of M-PESA services in June 2014, and was thus not yet available at the time of collection of the data that we use.) The results of the Batista and Vicente [61] experiment in Mozambique mentioned earlier are more promising, in that the 'savings' treatment increased savings in mKesh by 38-44 per cent in the first year. The savings treatment allowed individuals to receive a bonus of 20 per cent interest, paid in fertiliser, on the average balance on their mKesh account over a pre-specified period.…”

“…The findings of Kiconco et al [59] on the importance of mobile phone skills suggest that education campaigns should also help. Note in this respect that in Batista and Vicente's [61] field experiment in rural Mozambique participating farmers were all given a mobile money 'information module', comprising a simple phone, a verbal introduction to the mKesh service, registration on mKesh by the enumerators, and seed money equivalent to USD 2 for a first, assisted deposit into the mKesh account.…”

“…In our view, this points to a crucial issue for future research: are the money transfers that result from the well-documented social links and obligations in developing economies negative or positive? If one takes a negative view, one can argue with Batista and Vicente [61] (p. 2; emphasis added) that mobile money may "by itself de-incentiviz[e] savings by facilitating transfers to other people, making them more vulnerable to social pressure within their social networks". This could then be an explanation for the low incidence of saving on MFS observed in step 3 above and would seem to indicate that access to a commitment device, as in the Batista and Vicente experiment, might be needed to guard savers from the pressure of social claimants.…”