Commitment Savings Products in the Philippines

The Green Bank of Caraga, along with researchers, designed and implemented a commitment savings product called a SEED (Save, Earn, Enjoy Deposits) account. The SEED account provided individuals with a commitment to restrict access to their savings, thus potentially helping with either self-control or family-control issues. Each individual defined either a goal date or amount, and was subsequently unable to withdraw from the account until the goal was reached. Other than providing a possible commitment savings device, no further benefit accrued to individuals with this account: the interest rate paid on the SEED account was identical to the interest paid on a normal savings account (4 percent per annum).

Researchers trained a team of marketers hired by the partnering bank to visit the homes or businesses of existing bank clients in the commitment-treatment group, to stress the importance of savings to them. This process included eliciting the clients’ motivations for savings, and emphasizing to the client that even small amounts of saving make a difference; marketers then offered them the SEED product. Another group of individuals (the marketing-treatment group) received the exact same marketing script, but were not expressly offered the SEED product.

2003-08-01

2004-08-01

savings balances, household decisionmaking power, household expenditures (see two papers from the project, in QJE and World Development)

for the main paper, see: http://karlan.yale.edu/p/SEED.pdf

for women empowerment: see World Development paper, or working paper here: http://karlan.yale.edu/p/Female_Empowerment_v15.pdf

The sample for the field experiment consisted of 4001 adult Green Bank clients who had a savings account in one of two bank branches in the great Butuan City area, and who had identifiable addresses. These individuals were randomly assigned to three groups: commitment-treatment (T), marketing-treatment (M), and control (C) group. One-half of the sample was randomly assigned to T, and a quarter of the same each were randomly assigned to groups M and C.

A second randomization was conducted to select clients to interview for the baseline household survey.

randomization done in office by a computer

individual

No

1771 individuals

1777 individuals

1777 individuals, split into commitment savings treatment, marketing treatment and control group

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. Mter 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.

Ashraf, Nava, Dean Karlan, and Wesley Yin. 2006. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines." The Quarterly Journal of Economics 121(2): 635-72.

http://qje.oxfordjournals.org/content/121/2/635.short