Oct 17 When Banks Are Not an Option: Helping People Save Money in Sub-Saharan Africa

When Banks Are Not an Option: Helping People Save Money in Sub-Saharan Africa  

Jason Kerwin
Department of Applied Economics
University of Minnesota

Wednesday, October 17, 2018
3:30–5:00 pm • 710 Social Sciences

organized by the ASI and co-sponsored by the ASI and Institute for Global Studies
co-Authors: Lasse Brune, Eric Chyn, Jason Kerwin

Workers in sub-Saharan Africa often lack access to formal banks, while informal savings options have important risks and downsides. We study a no-frills employer-based savings technology that piggybacks on existing payroll infrastructure to provide a safe and convenient method to save up for lumpy expenditures. The research team partnered with an agricultural employer in Malawi; we randomized offers to workers to defer part of their wages for three months, at zero interest, to receive a lump sum payout at the end of the main season. We find that the savings scheme has initial high take-up, high usage, and high repeat take-up. Take-up of the product changes behavior and outcomes: total savings in the treatment group increase over the implementation period; treatment workers work harder, make more large purchases, and own more assets three months after the end of the intervention. We show that the seasonal timing is not crucial for take-up. Similarly, restrictions of access to accumulated funds have limited impact on take-up at the margin. In contrast, the disbursements of savings in a lump sum and the automatic regular deductions are key ingredients for the success of the scheme. Our results suggest that deferred wage payments could be a useful tool to help workers across sub-Saharan Africa save money, and by doing so accumulate more wealth—which could help people escape from poverty.

Jason Kerwin is Assistant Professor in the Department of Applied Economics in the College of Food, Agricultural, and Natural Resource Sciences at the University of Minnesota.

Jason Kerwin web profile
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