Microfinance institutions in developing countries increasingly offer a variety of savings products. Yet few studies have investigated the impact that savings product designs have on client savings levels. Since savings levels are generally considered to be low—from both client and institutional perspectives—this relationship must be better understood. With this in mind, we undertook an experimental “action research” project to study how the design of a savings product influences both the type of client attracted to the product and the impact the product has on financial savings. We first designed a prototype savings account with novel commitment features. We then observed its effects using an experimental evaluation design. We were especially interested in gathering evidence to answer the following questions: 1. Would those who chose to open this account share certain characteristics? More specifically, would this product help people who expressed a desire to save but had a difficult time doing so due to lack of self-control (i.e., difficulty avoiding temptation to spend cash in pocket) or spousal-control issues (i.e., difficulty keeping funds in the household away from their spouse)? 2. Does opening this new type of account cause an increase in the total financial savings of the client? That is, do the features we have included in the account actually work to help households increase their savings? The findings of this study have implications beyond the effect the product had on the lives of these particular individuals. Because we employed a rigorous experimental research design with random assignment of participants to treatment and control groups, we know that any increase in savings is a direct result of the product. We find a strong effect on savings that we can attribute to the product: after twelve months, average bank account balances increased by 80 percent on average for all who were assigned to the treatment group compared to those assigned to the control group. Those in the treatment group who actually opened the commitment savings product increased savings after twelve months by 337 percent.
Microfinance institutions in developing countries increasingly offer a variety of savings products. Yet few studies have investigated the impact that savings product designs have on client savings levels. Since savings levels are generally considered to be low—from both client and institutional perspectives—this relationship must be better understood. With this in mind, we undertook an experimental “action research” project to study how the design of a savings product influences both the type of client attracted to the product and the impact the product has on financial savings. We first designed a prototype savings account with novel commitment features. We then observed its effects using an experimental evaluation design. We were especially interested in gathering evidence to answer the following questions: 1. Would those who chose to open this account share certain characteristics? More specifically, would this product help people who expressed a desire to save but had a difficult time doing so due to lack of self-control (i.e., difficulty avoiding temptation to spend cash in pocket) or spousal-control issues (i.e., difficulty keeping funds in the household away from their spouse)? 2. Does opening this new type of account cause an increase in the total financial savings of the client? That is, do the features we have included in the account actually work to help households increase their savings? The findings of this study have implications beyond the effect the product had on the lives of these particular individuals. Because we employed a rigorous experimental research design with random assignment of participants to treatment and control groups, we know that any increase in savings is a direct result of the product. We find a strong effect on savings that we can attribute to the product: after twelve months, average bank account balances increased by 80 percent on average for all who were assigned to the treatment group compared to those assigned to the control group. Those in the treatment group who actually opened the commitment savings product increased savings after twelve months by 337 percent.