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Saving for a (not so) Rainy Day: A Randomized Evaluation of Savings Groups in Mali

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  • Beaman, Lori
  • Karlan, Dean S.
  • Thuysbaert, Bram

Abstract

High transaction and contracting costs are often thought to create credit and savings market failures in developing countries. The microfinance movement grew largely out of business process innovations and subsidies that reduced these costs. We examine an alternative approach, one that infuses no external capital and introduces no change to formal contracts: an improved “technology” for managing informal, collaborative village-based savings groups. Such groups allow, in theory, for more efficient and lower-cost loans and informal savings, and in practice have been scaled up by international non-profit organizations to millions of members. Individuals save together and then lend the accumulated funds back out to themselves. In a randomized evaluation in Mali, we find improvements in food security, consumption smoothing, and buffer stock savings. Although we do find suggestive evidence of higher agricultural output, we do not find overall higher income or expenditure. We also do not find downstream impacts on health, education, social capital, and female decision-making power. Could this have happened before, without any external intervention? Yes. That is what makes the result striking, that indeed there were no resources provided nor legal institutional changes, yet the NGO-guided, improved informal processes led to important changes for households.

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  • Beaman, Lori & Karlan, Dean S. & Thuysbaert, Bram, 2014. "Saving for a (not so) Rainy Day: A Randomized Evaluation of Savings Groups in Mali," CEPR Discussion Papers 10206, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10206
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    Cited by:

    1. Tristan Le Cotty & Elodie Maître d'Hôtel & Subervie Julie, 2019. "Inventory credit to enhance food security in Africa," CIRED Working Papers hal-02018715, HAL.
    2. Ksoll, Christopher & Lilleør, Helene Bie & Lønborg, Jonas Helth & Rasmussen, Ole Dahl, 2016. "Impact of Village Savings and Loan Associations: Evidence from a cluster randomized trial," Journal of Development Economics, Elsevier, vol. 120(C), pages 70-85.
    3. 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.
    4. Trivelli, C. & Clausen, J. & Vargas, S., 2017. "IFAD RESEARCH SERIES 9 - Social protection and inclusive rural transformation," IFAD Research Series 280047, International Fund for Agricultural Development (IFAD).
    5. Pierre Bachas & Paul Gertler & Sean Higgins & Enrique Seira, 2021. "How Debit Cards Enable the Poor to Save More," Journal of Finance, American Finance Association, vol. 76(4), pages 1913-1957, August.
    6. Janina Isabel Steinert & Ani Movsisyan & Juliane Zenker & Ute Filipiak & Yulia Shenderovich, 2016. "Protocol for a Systematic Review: Saving Promotion Interventions for Improving Saving Behaviour and Reducing Poverty in Low‐ and Middle‐Income Countries: A Systematic Review and Meta‐Analysis," Campbell Systematic Reviews, John Wiley & Sons, vol. 12(1), pages 1-58.
    7. Alfredo Burlando & Andrea Canidio & Rebekah Selby, 2021. "The Economics Of Savings Groups," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(4), pages 1569-1598, November.
    8. Basu, Karna & Wong, Maisy, 2015. "Evaluating seasonal food storage and credit programs in east Indonesia," Journal of Development Economics, Elsevier, vol. 115(C), pages 200-216.
    9. Aggarwal, Shilpa & Francis, Eilin & Robinson, Jonathan, 2018. "Grain today, gain tomorrow: Evidence from a storage experiment with savings clubs in Kenya," Journal of Development Economics, Elsevier, vol. 134(C), pages 1-15.
    10. Steinert, Janina I. & Zenker, Juliane & Filipiak, Ute & Movsisyan, Ani & Cluver, Lucie D. & Shenderovich, Yulia, 2018. "Do saving promotion interventions increase household savings, consumption, and investments in Sub-Saharan Africa? A systematic review and meta-analysis," World Development, Elsevier, vol. 104(C), pages 238-256.
    11. Timothée Demont, 2020. "Coping with shocks: the impact of Self-Help Groups on migration and food security," Working Papers halshs-02571730, HAL.
    12. Elinor Benami & Michael R. Carter, 2021. "Can digital technologies reshape rural microfinance? Implications for savings, credit, & insurance," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(4), pages 1196-1220, December.
    13. Horn, Samantha & Jamison, Julian C. & Zinman, Jonathan, 2020. "Does lasting behavior change require knowledge change? Evidence from savings interventions for young adults," CEPR Discussion Papers 15392, C.E.P.R. Discussion Papers.
    14. Ban, Radu & Gilligan, Michael J. & Rieger, Matthias, 2020. "Self-help groups, savings and social capital: Evidence from a field experiment in Cambodia," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 174-200.
    15. Delavallade, Clara & Dizon, Felipe & Hill, Ruth Vargas & Petraud, Jean Paul, 2015. "Managing risk with insurance and savings: Experimental evidence for male and female farm managers in West Africa:," IFPRI discussion papers 1426, International Food Policy Research Institute (IFPRI).
    16. Panman, Alexandra & Madison, Ian & Kimacha, Nyambiri Nanai & Falisse, Jean Benoît, 2021. "Saving up for a rainy day? Savings groups and resilience to flooding in Dar es Salaam, Tanzania," LSE Research Online Documents on Economics 114610, London School of Economics and Political Science, LSE Library.
    17. Rachel Cassidy & Marcel Fafchamps, 2015. "Can community-based microfinance groups match savers with borrowers? Evidence from rural Malawi," CSAE Working Paper Series 2015-13, Centre for the Study of African Economies, University of Oxford.
    18. Cassidy, Rachel & Fafchamps, Marcel, 2020. "Banker my neighbour: Matching and financial intermediation in savings groups," Journal of Development Economics, Elsevier, vol. 145(C).
    19. Tristan Le Cotty & Elodie Maitre d'Hotel & Subervie Julie, 2019. "Inventory credit to enhance food security in Africa," CEE-M Working Papers hal-02018715, CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro.
    20. Delavallade, Clara & Dizon, Felipe & Hill, Ruth & Petraud, Jean Paul, 2015. "Managing Risk with Insurance and Savings: Experimental Evidence for Male and Female Farm Managers in the Sahel," SALDRU Working Papers 142, Southern Africa Labour and Development Research Unit, University of Cape Town.
    21. Fumagalli, Laura & Martin, Thomas, 2023. "Child labor among farm households in Mozambique and the role of reciprocal adult labor," World Development, Elsevier, vol. 161(C).
    22. Burlando, Alfredo & Canidio, Andrea, 2017. "Does group inclusion hurt financial inclusion? Evidence from ultra-poor members of Ugandan savings groups," Journal of Development Economics, Elsevier, vol. 128(C), pages 24-48.
    23. Etienne Lwamba & Shannon Shisler & Will Ridlehoover & Meital Kupfer & Nkululeko Tshabalala & Promise Nduku & Laurenz Langer & Sean Grant & Ada Sonnenfeld & Daniela Anda & John Eyers & Birte Snilstveit, 2022. "Strengthening women's empowerment and gender equality in fragile contexts towards peaceful and inclusive societies: A systematic review and meta‐analysis," Campbell Systematic Reviews, John Wiley & Sons, vol. 18(1), March.
    24. Emily Breza & Arun G. Chandrasekhar, 2015. "Social Networks, Reputation and Commitment: Evidence from a Savings Monitors Experiment," NBER Working Papers 21169, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    micro-savings; savings groups impact;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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