Working Paper: CEPR ID: DP10206
Authors: Lori Beaman; Dean S. Karlan; Bram Thuysbaert
Abstract: High transaction and contracting costs are often thought to create credit and savings market failures in developing countries. The microfinance movement grew largely out of business process innovations and subsidies that reduced these costs. We examine an alternative approach, one that infuses no external capital and introduces no change to formal contracts: an improved ?technology? for managing informal, collaborative village-based savings groups. Such groups allow, in theory, for more efficient and lower-cost loans and informal savings, and in practice have been scaled up by international non-profit organizations to millions of members. Individuals save together and then lend the accumulated funds back out to themselves. In a randomized evaluation in Mali, we find improvements in food security, consumption smoothing, and buffer stock savings. Although we do find suggestive evidence of higher agricultural output, we do not find overall higher income or expenditure. We also do not find downstream impacts on health, education, social capital, and female decision-making power. Could this have happened before, without any external intervention? Yes. That is what makes the result striking, that indeed there were no resources provided nor legal institutional changes, yet the NGO-guided, improved informal processes led to important changes for households.
Keywords: microsavings; savings groups; impact
JEL Codes: D12; D91; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| access to savings groups (O16) | total savings (D14) |
| access to savings groups (O16) | likelihood of receiving a loan (G21) |
| access to savings groups (O16) | agricultural output (Q11) |
| access to savings groups (O16) | income (E25) |
| access to savings groups (O16) | expenditure (H72) |
| access to savings groups (O16) | health outcomes (I14) |
| access to savings groups (O16) | education outcomes (I24) |
| access to savings groups (O16) | women's decision-making power (J16) |