Yale University, December 2005, Center Discussion Paper 930. Available From:Link to Source
Using a randomised control (RCT) methodology, the authors evaluate the impact of a deposit collection service for micro-savers of a rural bank in the Philippines on savings balances and borrowing behaviour. They also investigate the determinants of participation in the service amongst those who were offered the chance to participate. The cost of the deposit collection service was 4 pesos per pickup, and clients chose either a monthly or biweekly pickup schedule. Ten cluster units, or ‘barangays’, were identified as good candidates for the deposit collection service by the bank and grouped into five pairs, each of which was similar in terms of depth of outreach, population density, distance to the bank branch and number of clients enrolled in a savings account with a commitment mechanism called SEED (Save, Earn, Enjoy, Deposit) that was part of another study. One barangay in each pair was randomly selected to the offer for the deposit collection service, which was to be an ‘add-on’ to the clients’ savings accounts. The bank sent marketing representatives to offer the deposit collection service to the treatment neighbourhoods 6 months after a baseline survey of 1,777 existing clients was conducted. The authors used ordinary least squares regression (OLS) to evaluate take-up of the service amongst the treatment group, including 196 existing clients of the bank, and to evaluate the impact of the service on savings amongst 640 individuals for whom administrative data were available from the bank (399 in the five treatment barangays and 241 in the control barangay). A probit regression was used to estimate the impact on borrowing. The authors estimated these impacts using clustered standard errors and fixed effects for each pair of matched barangays.
The results show that of the 196 existing bank clients for which survey data were available, 137 were located and offered the deposit collection service. In all, 38 (28 per cent) agreed to take up the service. These clients made an average of 3.85 deposits over 10 months, with an average of 497 pesos per deposit. Over 15 months, the average total savings for those who used the deposit collection service was 1,910 pesos. Take-up was predicted by distance to the bank, with each additional 10 km increasing take-up by 6 percentage points. Take-up decreased with education. Married women were 12.9 per cent more likely to take up than single women, with no difference between married men and single men. Time-preference variables did not predict take-up of the collection service. No impact on savings was seen after 6 months, but an impact was evident after 10 and 15 months. The average impact of the service on savings was equivalent to about 198 pesos over 15 months, about a 25 per cent increase in savings. Use of the service amongst those who took up the service varied widely: 7 per cent of clients saved over 3,000 pesos, whilst 40 per cent never used it. Those offered the service were slightly less likely to borrow from the bank. Individuals less likely to borrow after being offered the service include married individuals, prior savers and individuals with hyperbolic time preferences (i.e., those who would take a lesser reward today rather than wait for tomorrow but choose the greater reward in 1 year plus 1 day instead of the lesser reward in 1 year). Overall, the authors conclude that the deposit collection service had an economically and statistically significant impact on increasing savings as well as a statistically significant, albeit small, impact on reduced borrowing from the bank.