Trust and Saving in Financial Institutions

24 Pages Posted: 18 Mar 2020 Last revised: 4 Jun 2020

See all articles by Sebastian Galiani

Sebastian Galiani

University of Maryland - Department of Economics

Paul J. Gertler

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Camila Navajas Ahumada

University of California, San Diego (UCSD) - UC San Diego

Multiple version iconThere are 2 versions of this paper

Date Written: February 23, 2020

Abstract

We examine the role of trust in financial institutions as a necessary condition for the wider use of formal financial services by the poor. We randomly assigned beneficiaries of a conditional cash transfer program in 130 villages in Peru to attend a 3.5 hour training session designed to build their trust in financial institutions. Using household survey data combined with high-frequency administrative data, we find that the intervention: (a) significantly increased the level of trust in the financial system, but had no effect on knowledge of the banking system or financial literacy; and (b) resulted in the treatment group saving 13 Peruvian Soles more than he control group over a ten month period and (c) had no effect of the use of bank accounts for transactions. The increase in savings is close to double the savings of the treatment over the 10 month period prior to the intervention, 7 times the savings of the control group over the same period, and a 1.6 percentage point increase in the savings rate out of the cash transfer depostis.

Keywords: Trust, savings and poverty

JEL Classification: G20, D14, I30

Suggested Citation

Galiani, Sebastian and Gertler, Paul J. and Navajas Ahumada, Camila, Trust and Saving in Financial Institutions (February 23, 2020). Available at SSRN: https://ssrn.com/abstract=3542953 or http://dx.doi.org/10.2139/ssrn.3542953

Sebastian Galiani (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Paul J. Gertler

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-1418 (Phone)
510-642-4700 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Camila Navajas Ahumada

University of California, San Diego (UCSD) - UC San Diego ( email )

9500 Gilman Dr., 0519
La Jolla, CA 92093-0519
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
19
Abstract Views
215
PlumX Metrics