Access to Banking, Savings and Consumption Smoothing in Rural India

57 Pages Posted: 14 Jul 2022

See all articles by Vincent Somville

Vincent Somville

NHH Norwegian School of Economics

Lore Vandewalle

Graduate Institute of International and Development Studies (IHEID) - Department of Economics; University of Oslo

Abstract

To what extent does access to banking help poor households to save and smooth consumption? To answer this fundamental question, we combine a field experiment that randomly provides access to a bank account with weekly interviews on household finances. Access to banking does not change average consumption, but it improves consumption smoothing by alleviating savings constraints. The control's expenditures follow income closely, a pattern we do not observe in treated households. The latter handle variations in income by engaging in pro-cyclical saving in their account. These results provide an important new insight into the role of banking in low- and middle-income countries.

Keywords: Financial inclusion, Savings, banking, Field experiment, India

Suggested Citation

Somville, Vincent and Vandewalle, Lore, Access to Banking, Savings and Consumption Smoothing in Rural India. Available at SSRN: https://ssrn.com/abstract=4162439 or http://dx.doi.org/10.2139/ssrn.4162439

Vincent Somville

NHH Norwegian School of Economics ( email )

Helleveien 30
Bergen, NO-5045
Norway

Lore Vandewalle (Contact Author)

Graduate Institute of International and Development Studies (IHEID) - Department of Economics ( email )

Geneva Avenue de la Paix 11A
Geneva, 1202
Switzerland

University of Oslo ( email )

PO Box 6706 St Olavs plass
Oslo, N-0317
Norway

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