AEA RCT Registry

Limited access to formal financial institutions is considered a constraint on the ability of poor households to pursue various socio-economic goals and manage negative income and health shocks.

The current study will evaluate the impact of rural bank branch expansion at both the household and village level, using a randomized controlled trial. Researchers will evaluate a financial service delivery model that uses bank branches in villages to provide a full range of credit, savings, and insurance services to low and medium-income households. The study will assess the impact of financial access in this form on household and community economic outcomes, health, agricultural behavior and social networks.

Together with partner organization IFMR Rural Channels, a rural financial services provider with presence in Tamil Nadu, Orissa and Uttarakhand, researchers aim to gain an in-depth understanding of the impact of provision of financial services, as delivered through the KGFS model, in rural Tamil Nadu. Their services provision model, developed and supported by IFMR Rural Finance, focuses on high quality origination through geographically-focused community financial institutions. It provides access to a broad range of products including (but not limited to) loans, savings, insurance and investment options to households using a customized wealth management approach focused on ensuring the suitability of products sold to each household’s unique financial situation.

The results of such a study could help shape the development of financial instruments targeted at rural households and inform policy on financial inclusion in India and abroad.

External Link(s)

Registration Citation

Citation

Berkman, Lisa et al. 2016. "The Impact of Improved Access to Formal Financial Institutions in Rural Tamil Nadu: Evidence from a Randomized Control Trial." AEA RCT Registry. May 13. https://doi.org/10.1257/rct.116-5.0.

Former Citation

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

Intervention Start Date

2010-06-01

Intervention End Date

2017-06-01

Primary Outcomes

Primary Outcomes (end points)

Income, assets, consumption, savings, formal financial access, stress, anemia, social networks, agricultural behavior, community trust

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

Researchers use a randomized controlled trial (RCT) approach that is built upon a delayed rollout of bank branch openings across rural service areas in Tamil Nadu. Study sites are identified along with the partner service provider, who commits to opening a bank branch in that service area in accordance with the study schedule. Out of 160 proposed study sites, half will be assigned to treatment and half will be assigned to control. The branches and banking activity will be withheld from villages in the control group for a minimum of twenty-four months, in order to provide researchers adequate opportunity to observe measurable effects of the rural banking intervention in the treatment areas. The baseline survey covers approximately 6,800 households in the experimental area; 3,400 of which are households in the treatment group and the remainder 3,400 households in the control group.

The assignment to treatment has been done such that each treatment branch has been matched with a control branch based on a variety of geographic and demographic characteristics. This matching for treatment and control allows the study to guard against effects that may result from seasonality or geography rather than the introduction of banking services. Randomized rollout allows researchers to estimate the causal impact of financial services since the presence of a branch will be uncorrelated with village and household characteristics.

Experimental Design Details

Randomization Method

Done in office by a computer.

Randomization Unit

Community-level

Was the treatment clustered?

Yes

Experiment Characteristics

Sample size: planned number of clusters

160

Sample size: planned number of observations

6700 households