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Formal finance and informal safety nets of the poor: Evidence from a savings field experiment

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  • Flory, Jeffrey A.

Abstract

Using a field experiment on financial service information delivery in over 320 villages in Malawi, I find that formal savings increases agricultural investments and crop income, and raises private transfers to other households during the hungry season. Households with higher education adopt accounts and experience rises in savings and income, while low education households do not. However, the benefits to adopters are used to help insure the rest of the village – in contrast to suggestions elsewhere in the literature that savings may negatively impact sharing through networks. Non-savers experience large rises in transfer receipts, improved food consumption, and better health. The worst-off households experience particularly strong increases in informal aid. Findings show financial markets expansion has immediate effects beyond service-users, with large and surprising impacts on informal support systems. Results also support the effectiveness of a novel method to spur service uptake and accelerate financial deepening.

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  • Flory, Jeffrey A., 2018. "Formal finance and informal safety nets of the poor: Evidence from a savings field experiment," Journal of Development Economics, Elsevier, vol. 135(C), pages 517-533.
  • Handle: RePEc:eee:deveco:v:135:y:2018:i:c:p:517-533
    DOI: 10.1016/j.jdeveco.2018.07.015
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    2. Granda, Catalina & Hamann, Franz & Tamayo, Cesar E., 2019. "Credit and saving constraints in general equilibrium: A quantitative exploration," Journal of Development Economics, Elsevier, vol. 140(C), pages 302-319.
    3. Shilpa Aggarwal & Valentina Brailovskaya & Jonathan Robinson, 2020. "Saving for Multiple Financial Needs: Evidence from Lockboxes and Mobile Money in Malawi," NBER Working Papers 27035, National Bureau of Economic Research, Inc.
    4. Zhongming Tan & Krobea Asante Emmanuel & Guoping Ding, 2019. "Assessing Factors Affecting Formal Finance to Farmers in Ghana: Empirical Evidence of Sunyani West District," Business and Economic Research, Macrothink Institute, vol. 9(2), pages 169-181, June.
    5. Mostak Ahamed & Roxana Guti'errez-Romero, 2020. "COVID-19 response needs to broaden financial inclusion to curb the rise in poverty," Papers 2006.10706, arXiv.org.

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