Increasing trust in the bank to enhance savings: Experimental evidence from India
Recent evidence highlights the importance of trust in explaining bank account savings. According to economic theory, repeated interactions can play a crucial role in shaping trust. We designed the first field experiment that tests whether increased interactions between clients and bankers influence a client's trust in bankers. We promoted interactions by randomly (i) opening accounts for the unbanked and (ii) making weekly payments on their accounts. At the end of these interventions, we measured trust by playing trust games between clients on the one hand, and their own local banker as well as an anonymous other banker on the other hand. The only intervention that has a signicant impact on the number of interactions is opening a bank account. It also greatly increases trust in the anonymous banker, but not in their own banker. Next, we investigate the importance of trust for account savings. We find a strong positive correlation between the clients' trust in their own banker and savings in the account, but their trust in another banker does not correlate with savings. From the decomposition of trust in its different determinants, we learn that expected trustworthiness matters most in explaining savings, while there is a minor role for social preferences and no role for risk attitudes. We conclude that the personalized client-banker relationships are crucial, but not malleable. Strategies which can deal with the expected trustworthiness - such as providing access to an ATM, or to a denser network of local bankers - might promote bank account savings.
|Date of creation:||2016|
|Contact details of provider:|| Postal: P.O. Box 6033, N-5020 Bergen|
Phone: +47 55 57 40 00
Fax: +47 55 57 41 66
Web page: https://www.cmi.no
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:chm:wpaper:wp2016-01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Robert Sjursen)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.