Leveraging the Lottery for Financial Inclusion: Lotto-Linked Savings Accounts in Haiti

Abstract

Most Haitians are more familiar with lottery wagers than any other financial transaction and lack access to savings products. Using a lab-in-field experiment in Portau-Prince, we asked 306 participants to allocate a fixed budget across consumption, a real-world lotto product, a real-time traditional savings product, and a lotto-linked savings (LLS) product that returned 60-100% of the principal with lotto credit in lieu of interest. We find that the introduction of an LLS product increased total upfront savings by 22%, an increase roughly equivalent to that induced by raising the traditional interest rate from 5 to 20%. This savings response increased to 30% when the LLS product returned more principal and less lotto credit. An LLS product with a lower expected return was equally effective at increasing savings as one that had the same expected return as the savings product, suggesting it is the presence, not the extent, of the lotto component that drives the savings response. The LLS-induced increase in savings was financed by large reductions in lotto spending, slightly smaller reductions in traditional savings, and yet smaller reductions in consumption, which increased subjects' overall expected returns in the experiment. Individuals who allocated more to the lottery pre-LLS and who overweight small probabilities increased savings most in response to the LLS. JEL Classification: O12, D14, G21

Prize-linked savings games: Theory and experiment

“…6 This variation of PLS is called lotto-linked savings (LLS). Dizon & Lybbert (2017) conducted a lab-in-field experiment to evaluate LLS in Haiti. 7 For example, the Emirates NBD Bank in the United Arab Emirates offered a chance to win an Aston Martin DB9 (approx.…”

“…Furthermore, the results are stronger among male and self-reported lottery-ticket buyers. Dizon and Lybbert (2017) adopt Atalay et al (2014)'s setting, but replace PLS with lottolinked savings (LLS) in a lab-in-field experiment in Port-au-Prince, Haiti. Their LLS account may not preserve the entire principal but guarantees a minimum return ranging from 60%-100%.…”

Essays in Development Economics

“…Our experiment is the first to combine a contest and savings mechanism in the real world, where deposits directly affect your probability of winning a prize. The effects of prize-linked savings accounts have been studied in laboratory settings, where studies explore preferences for prize-linked product design (Dizon and Lybbert, 2019) and how accounts affect wealth generation (Filiz-Ozbay et al, 2015). Two other field experiments have designed and implemented prize-linked savings accounts, but each design constrains the competitive environment, as a participant's probability of winning is based on either a monthly savings balance (Linardi and Tanaka, (2013) or a fixed deposit amount (Cole, Iverson, and Tufano, 2016;Gertler et al, 2018)).…”