In this project, we study the impact of being introduced to mobile banking on attitudes towards other financial services. Our hypothesis is that being introduced to a new financial product can act as a "gateway" that lowers barriers (such as a lack of trust) that have previously slowed adoption of formal financial products. We therefore conduct an RCT in which people are randomly assigned to receive a cash grant, a transfer to a mobile banking account (which they will have to create) or a transfer to a mobile banking account and incentives to save using the account. We then survey these people regularly to track their attitudes towards and use of other financial products, such as loans, formal non-mobile banking and informal savings groups.
Our hypothesis, based on pre-interviews with target groups, is that active usage of mobile banking would encourage using of other formal financial products. While everyone in our sample has a physical bank account by design, these tend to be perceived as having limited utility other than a secure store of money and way to pay tuition fees. Being encouraged to use a low-cost and convenient bank account (that pays interest) which also enables easier access to borrowing could plausibly affect attitudes towards use of these products.
The prior literature has documented that being exposed to a new financial product changes people's attitudes towards that product. For instance, Bachas et al (2021) find that being introduced to debit cards leads to higher trust in the bank that issued the card and Mehrotra, Somville and Vandevalle (2021) find that repeat interactions with a banker increase trust in the banker and other bankers. There is also some evidence that being introduced to a simple bank account (and a financial literacy training program) can increase trust in banks (Horn et al. 2021) and that being introduced to a new fintech product increases stock market participation (Hong, Lu and Pan, 2021). However, Herrerias and Alvarez (2022) do not find any association between having financial product (introduced by a third party) and financial behavior.
Note: Earlier versions of this proposal involved introducing people to mobile money instead of mobile banking. After pre-interviews, we concluded that the government of Rwanda's efforts to promote mobile money during the COVID-19 pandemic and associated lockdowns had lifted usage rates among our sample so high that we would be unable to shift attitudes towards them. However, mobile money is still (based on our pre-interviews) seen as a mainly transactional device / short-term medium for holding cash. We hope that introducing a bank account that pays interest and unlocks access to loans will be perceived as sufficiently different.