Saving for a (Not so) Rainy Day: A Randomized Evaluation of Savings Groups in Mali

43 Pages Posted: 22 Oct 2014 Last revised: 28 Nov 2014

See all articles by Lori A. Beaman

Lori A. Beaman

Northwestern University - Department of Economics

Dean S. Karlan

Yale University; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Bram Thuysbaert

University of Ghent; Innovations for Poverty Action

Multiple version iconThere are 3 versions of this paper

Date Written: October 2014

Abstract

High transaction and contracting costs are often thought to create credit and savings market failures in developing countries. The microfinance movement grew largely out of business process innovations and subsidies that reduced these costs. We examine an alternative approach, one that infuses no external capital and introduces no change to formal contracts: an improved "technology" for managing informal, collaborative village-based savings groups. Such groups allow, in theory, for more efficient and lower- cost loans and informal savings, and in practice have been scaled up by international non-profit organizations to millions of members. Individuals save together and then lend the accumulated funds back out to themselves. In a randomized evaluation in Mali, we find improvements in food security, consumption smoothing, and buffer stock savings. Although we do find suggestive evidence of higher agricultural output, we do not find overall higher income or expenditure. We also do not find downstream impacts on health, education, social capital, and female decision-making power. Could this have happened before, without any external intervention? Yes. That is what makes the result striking, that indeed there were no resources provided nor legal institutional changes, yet the NGO-guided, improved informal processes led to important changes for households.

Suggested Citation

Beaman, Lori A. and Karlan, Dean S. and Thuysbaert, Bram, Saving for a (Not so) Rainy Day: A Randomized Evaluation of Savings Groups in Mali (October 2014). NBER Working Paper No. w20600. Available at SSRN: https://ssrn.com/abstract=2513160

Lori A. Beaman (Contact Author)

Northwestern University - Department of Economics ( email )

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Dean S. Karlan

Yale University ( email )

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Innovations for Poverty Action ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR) ( email )

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Bram Thuysbaert

University of Ghent ( email )

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Innovations for Poverty Action ( email )

1731 Connecticut Ave, 4th floor
New Haven, CT 20009
United States

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