Banking the Poor: Evidence from a Savings Field Experiment in Malawi

45 Pages Posted: 15 Oct 2016

See all articles by Jeffrey Flory

Jeffrey Flory

Claremont McKenna College - Robert Day School of Economics and Finance

Date Written: October 14, 2016

Abstract

The poor often save through informal methods outside of the financial systems of developing countries, restricting the extent to which their savings can help fuel growth. Moreover, a growing number of studies show large positive effects on outcomes among the poor from possessing a savings account. However, the vast majority of adults in the developing world do not have even a basic account. This paper uses a randomized field experiment in Malawi with over 2,000 households to examine an innovative approach to spur financial inclusion. The results show that periodic informational visits to a village can sharply increase take-up and use of savings accounts. The impact on adoption probability depends on a few key household characteristics, its effect the strongest for households in middle wealth categories, with educated heads, living outside the immediate vicinity of the bank. Results show account usage is robust among induced adopters. The randomly assigned information intervention is then used to identify sharp causal impacts of savings adoption on agricultural production inputs, crop income, and food consumption among farming households in poor rural areas. These results help extend a fast-growing literature on formal savings by examining a novel and effective method to encourage uptake and better understand the impact of savings accounts among poor farmers – the largest occupational group among the poor.

Keywords: Savings accounts, financial access, investment, farm production, poverty alleviation

JEL Classification: D14, G21, I30, O12, O16

Suggested Citation

Flory, Jeffrey, Banking the Poor: Evidence from a Savings Field Experiment in Malawi (October 14, 2016). Claremont McKenna College Robert Day School of Economics and Finance Research Paper No. 2852330. Available at SSRN: https://ssrn.com/abstract=2852330 or http://dx.doi.org/10.2139/ssrn.2852330

Jeffrey Flory (Contact Author)

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States

HOME PAGE: http://https://sites.google.com/site/jfloryeconomics/

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