This study builds upon three earlier studies we conducted related to finance among poor populations. In the earlier evaluation of the commitment savings product with Green Bank of Caraga in the Philippines, we found a significant impact of the savings product on overall savings as well as household decision-making power. Another earlier study about the psychology of finance, in which we partnered with a credit organization in South Africa to examine how design and content of letters offering credit can affect loan uptake, indicated that design characteristics such as presentation of loan options or photos in the promotion letter could affect take-up decision as much as the interest rate of the loan itself.

Given the success of the commitment savings product in Green Bank and the evidence from South Africa of the psychological impact on financial decision-makings, we designed the evaluation in which we examine various methods, beyond the financial incentive and benefit, of encouraging clients to complete their savings commitment with our partner banks in the Philippines. We partner with First Isabela Coop Bank (FICO) (Northern Luzon) and 1st Valley Bank (Western Mindanao) to test the impact of the commitment savings product which allows clients to set their own goals for the savings amount and purpose. We randomly assign different encouragement features for the savings product; offering different upfront interest rates; offering reward interest rate for reaching the goal; giving a piece of the puzzles with an image of the savings goal at every deposit; and sending text message minders. We examine the impact of different product features on takeup decision as well as the savings behavior. The study aims to build an understanding of why the poor save and how to prime those goals to encourage savings.

Project Ongoing.

Dean Karlan, Sendhil Mullainathan, Jonathan Zinman.

Papers Forthcoming.

First Valley Bank, First Isabela Coop Bank

The Philippines

Savings, Finance, Microfinance and Entrepeneurship