Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya

Abstract

To what extent does the lack of access to formal …nancial services impede business growth in low-income countries? While most research on this issue has so far focused on credit market failures, this paper focuses on the role of access to formal saving services. We conducted a …eld experiment in which a randomly selected sample of self-employed individuals in rural Kenya got access to an interest-free bank account. As the bank charged substantial withdrawal fees, the de facto interest rate on the account was negative. Despite this, take-up and usage of the account was high among our sample of market vendors, primarily composed of women. Access to an account had a substantial, positive impact on levels of productive investments among market women, and, within 6 months, led to higher income levels, as proxied by expenditures. These results imply that a substantial fraction of women entrepreneurs have di¢ culty saving and investing as much as they would like, and have a demand for formal saving devices -even those that o¤er negative interest rates. Our results also imply a relatively high upper bound on the rate of return to capital for the women in our sample, estimated at 5.5% per month at the median. Note that these results do not necessarily imply gender di¤erences: our sample of male entrepreneurs is too small to generate results for that group.JEL Codes: O12, G21, L26

Inclusión Financiera de Pequeños Productores Rurales

“…Por ejemplo, Karlan, Lakshmi y Zinman (2014) describen una barrera que restringe el acceso: los altos costos de transacción. Frente a los bajos y erráticos montos de ahorro que mantienen dichas poblaciones, los costos de entrada y de operación de estas entidades financieras son altos y ello desincentiva la presencia en algunas localidades (Dupas y Robinson, 2013). A este respecto, no es casual que en algunos países se hayan introducido medidas legislativas conducentes a obligar a los bancos comerciales a crear cuentas básicas que tienen como características esenciales que no se cobra por la apertura de la cuenta ni tampoco por el número de transacciones, pero tienen un tope respecto del saldo que se mantiene.…”

Banking the Unbanked? Evidence from Three Countries

“…The two closest papers conducted in East Africa are Dupas and Robinson (2013a) in which only 35% of people ever used the account, and Dupas, Keats and Robinson (2015) in which only 28% did. As here, the people who used the accounts saved fairly large sums, however, and so the positive treatment effects were driven by a minority of users who benefited greatly.…”

“…Consequently, many studies simply do not ask about home savings (i.e. Dupas and Robinson 2013a). In this study, however, we extensively pre-tested modules aimed in part to measure home savings.…”

Combining Expert and Stakeholder Knowledge to Define Water Management Priorities in the Mékrou River Basin

“…It could also be that stakeholders have biased perceptions of environmental issues. Indeed, while our proposed priorities for the environment typically focus on the long-term outlook, some recent studies, including Dupas [24], have shown that households in Africa tend to exhibit present-biased preferences. As a result, local stakeholders may be tempted to under-invest in long-term assets such as the environment.…”