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Fostering savings by commitment: Evidence from a quasi-natural experiment at The Small Enterprise Foundation in South Africa

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  • Dalla Pellegrina, Lucia
  • De Michele, Angela
  • Di Maio, Giorgio
  • Landoni, Paolo

Abstract

We studied the effects of a pilot project that strengthened savings incentive mechanisms. The project was established by The Small Enterprise Foundation (SEF), a leading microfinance institution based in South Africa. The program introduced a savings stimulus in the form of a Goal Card: clients subscribing to this (non-coercive) tool were required to identify a savings goal and to commit to regular payments to reach it. The experiment had a quasi-natural approach as it was implemented by SEF in non-randomly selected locations. Difference-in-differences estimates show improved savings habits among those of the foundation’s customers who were involved in the program, compared to the counterfactual that are identified using propensity score matching. The effect of the program manifested in its second semester, suggesting a persistent change of habits but a slow accumulation of savings. We conclude that asking microcredit customers to identify a savings goal and commit to a regular savings amount to achieve it is a promising savings incentive mechanism.

Suggested Citation

  • Dalla Pellegrina, Lucia & De Michele, Angela & Di Maio, Giorgio & Landoni, Paolo, 2021. "Fostering savings by commitment: Evidence from a quasi-natural experiment at The Small Enterprise Foundation in South Africa," World Development, Elsevier, vol. 148(C).
  • Handle: RePEc:eee:wdevel:v:148:y:2021:i:c:s0305750x21002758
    DOI: 10.1016/j.worlddev.2021.105660
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    More about this item

    Keywords

    Microfinance; Quasi-natural experiment; Savings;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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