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Can Mobile-Linked Bank Accounts Bolster Savings? Evidence from a Randomized Controlled Trial in Sri Lanka

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Listed:
  • Suresh De Mel
  • Craig McIntosh
  • Ketki Sheth
  • Christopher Woodruff

Abstract

In developing economies, mobile-linked services have the potential to significantly reduce transaction costs and provide a truly new conduit that could be used to facilitate the flow of savings into banks. We test this premise by introducing a product that permits Sri Lankan households to deposit mobile airtime balances into a formal bank using a new mobile money interface. Using high frequency panel survey data and randomizing access and prices at the individual level, we find that there are moderate percentage increases in savings deposits with the partner institution and formal banks more generally, but no change in overall savings deposits. When the transaction costs are completely removed, only 26 percent of those offered the service use it, and 7 percent use it frequently. Overall, our results imply that transaction costs may not be a significant barrier to increasing deposits, limiting the potential gains of mobile-linked savings products for financial inclusion.

Suggested Citation

  • Suresh De Mel & Craig McIntosh & Ketki Sheth & Christopher Woodruff, 2018. "Can Mobile-Linked Bank Accounts Bolster Savings? Evidence from a Randomized Controlled Trial in Sri Lanka," NBER Working Papers 25354, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25354
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    References listed on IDEAS

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    1. Michael Callen & Suresh de Mel & Craig McIntosh & Christopher Woodruff, 2019. "What Are the Headwaters of Formal Savings? Experimental Evidence from Sri Lanka," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(6), pages 2491-2529.
    2. Michael Callen & Suresh De Mel & Craig McIntosh & Christopher Woodruff, 2014. "What are the Headwaters of Formal Savings? Experimental Evidence from Sri Lanka," NBER Working Papers 20736, National Bureau of Economic Research, Inc.
    3. Shawn Cole & Thomas Sampson & Bilal Zia, 2011. "Prices or Knowledge? What Drives Demand for Financial Services in Emerging Markets?," Journal of Finance, American Finance Association, vol. 66(6), pages 1933-1967, December.
    4. Cátia Batista & Pedro Vicente, 2017. "Improving access to savings through mobile money: Experimental evidence from smallholder farmers in Mozambique," FEUNL Working Paper Series novaf:wp1705, Universidade Nova de Lisboa, Faculdade de Economia.
    5. Pascaline Dupas & Jonathan Robinson, 2013. "Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 163-192, January.
    6. Flory, Jeffrey A., 2011. "Micro-Savings & Informal Insurance in Villages: A Field Experiment on Indirect Effects of Financial Deepening on Safety Nets of the Poor," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103905, Agricultural and Applied Economics Association.
    7. Prina, Silvia, 2015. "Banking the poor via savings accounts: Evidence from a field experiment," Journal of Development Economics, Elsevier, vol. 115(C), pages 16-31.
    8. Nava Ashraf, 2009. "Spousal Control and Intra-household Decision Making: An Experimental Study in the Philippines," American Economic Review, American Economic Association, vol. 99(4), pages 1245-1277, September.
    9. Catia Batista & Pedro C. Vicente, 2013. "Introducing mobile money in rural Mozambique: Evidence from a field experiment," NOVAFRICA Working Paper Series wp1301, Universidade Nova de Lisboa, Nova School of Business and Economics, NOVAFRICA.
    10. William Jack & Tavneet Suri, 2014. "Risk Sharing and Transactions Costs: Evidence from Kenya's Mobile Money Revolution," American Economic Review, American Economic Association, vol. 104(1), pages 183-223, January.
    11. Jeffrey A. Flory, 2011. "Micro-Savings & Informal Insurance in Villages: How Financial Deepening Affects Safety Nets of the Poor, A Natural Field Experiment," Working Papers 2011-008, Becker Friedman Institute for Research In Economics.
    12. Catia Batista & Pedro Vicente, 2017. "Improving access to savings through mobile money: Experimental evidence from smallholder farmers in Mozambique," NOVAFRICA Working Paper Series wp1705, Universidade Nova de Lisboa, Nova School of Business and Economics, NOVAFRICA.
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    Cited by:

    1. Catia Batista & Pedro C. Vicente, 2018. "Is mobile money changing rural Africa? Evidence from a field experiment," NOVAFRICA Working Paper Series wp1805, Universidade Nova de Lisboa, Nova School of Business and Economics, NOVAFRICA.
    2. Batista, Catia & Vicente, Pedro C., 2020. "Improving access to savings through mobile money: Experimental evidence from African smallholder farmers," World Development, Elsevier, vol. 129(C).
    3. d'Adda, Giovanna & Mahmud, Mahreen & Said, Farah & Bonan, Jacopo, 2020. "The Role of Flexibility and Planning in Repayment Discipline: Evidence from a Field Experiment on Pay-as-You-Go Off-Grid Electricity," RFF Working Paper Series 20-14, Resources for the Future.
    4. Emma Riley, 2022. "Resisting Social Pressure in the Household Using Mobile Money: Experimental Evidence on Microenterprise Investment in Uganda," CSAE Working Paper Series 2022-04, Centre for the Study of African Economies, University of Oxford.
    5. Shilpa Aggarwal & Valentina Brailovskaya & Jonathan Robinson, 2023. "Saving for Multiple Financial Needs: Evidence from Lockboxes and Mobile Money in Malawi," The Review of Economics and Statistics, MIT Press, vol. 105(4), pages 833-851, July.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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