Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines

Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines

7 July, 2020  •  

We designed a commitment savings product for a Philippine bank and implemented it using a randomized control methodology. The savings product was intended for individuals who want to commit now to restrict access to their savings, and who were sophisticated enough to engage in such a mechanism. We conducted a baseline survey on 1777 existing or former clients of a bank. One month later, we offered the commitment product to a randomly chosen subset of 710 clients; 202 (28.4 percent) accepted the offer and opened the account. In the baseline survey, we asked hypothetical time discounting questions. Women who exhibited a lower discount rate for future relative to current trade-offs, and hence potentially have a preference for commitment, were indeed significantly more likely to open the commitment savings account. After twelve months, average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group. We conclude that the savings response represents a lasting change in savings, and not merely a short-term response to a new product.

Similar Articles
Paying in pieces: A natural experiment on consumer demand under different payment schemes
We exploit a large-scale natural experiment to estimate the causal impact of a switch in payment modality on demand for a popular life insurance pr...
Financial Education and Savings Behavior: Evidence from a Randomized Experiment among Low-Income Clients of Branchless Banking in India
Financial literacy programs are popular, despite limited evidence that they lead to significant changes in savings behavior. We experimentally test...
Social capital and savings behavior of the poor: evidence from the field
Two thousand and fifty six Senegalese clients of a Microfinance Institution (MFI) participated in the experiment during four months. They wer...