A Penny Saved: How Do Savings Accounts Help the Poor?

Abstract

Many studies have looked at the experiences of poor savers and there is plenty of anecdotal evidence that savings accounts have resulted in greater asset accumulation, better risk mitigation, and other benefits for poor households. But, to what extend does a hard look at the evidence support a claim that savings accounts actually improve welfare?

This paper reviews the experimental evidence (both RCTs and natural experiments) regarding the impact of improved access to savings. While there are precious few pieces of evidence documenting the development benefits of formal savings services for poor households, the few rigorous studies that exist show savings accounts enhance the ability to save up for productivity enhancing investments and weather unexpected bad times. They may even empower women to make financial decisions within the household.

Keywords: savings, poverty, development, financial inclusion, financial access