In the remote areas of sub-Saharan Africa, less than 20 percent of the population has access to any type of formal financial institution. Yet access to financial services is a key aspect of development, as credit and savings allow households to invest, save and respond to shocks. Households typically deal with limited access to financial services by using “at home savings” (i.e., under a mattress), saving with collectors (i.e., susu) or forming “rotating savings clubs” that allow each member to save a set amount on a weekly basis. Each of these strategies plays an important role in terms of promoting savings and helping households to meet different savings goals. Although savings groups provide a commitment to save and are often more secure, the savings can only be accessed when the group “shares out”, which might not coincide with the household’s needs. While savings “under the mattress” provide household with ready access to its savings, such savings is generally riskier (theft, loss and fire) and is more susceptible to “temptation” or “ceremonial” spending. Ceremonial spending is particularly important in countries where the entire village is expected to contribute to weddings, baptisms or funerals, or when a particular religious festival – such as the Muslim festival of Tabaski – requires purchasing livestock for household consumption and is a lumpy expenditure. In addition to spending on ceremonial festivals, most rural households report that spending on unforeseen health expenses is their greatest financial challenge.
Since the early 2000s, mobile phone coverage and services have grown rapidly in sub-Saharan Africa. As of 2012, over 376 million people had mobile phones, thereby allowing households to communicate more quickly and more cheaply over long distances. Mobile communication provides new potential to increase the financial inclusion of the world’s poor. In particular, m-money could be used to create a secure electronic savings account, where individuals can deposit their savings (interest free). In addition, by combining m-money with text message reminders, these dual technologies could encourage individuals to save for particular objectives, particularly addressing the issue of limited attention (Karlan, McConnell, Mullainathan and Zinman 2012, McConnell 2013) in savings. In particular, if individuals in Niger are more likely to forget future lumpy expenditures, such as spending on goats for religious expenditures, as compared with future income, then this can lead to present bias towards consumption (Karlan et al 2012).
This research seeks to understand how mobile phone technology can be used to promote savings in sub-Saharan Africa, focusing on the case of rural Niger. In particular, the purpose of this research is provide insights into whether: 1) SMS reminders about savings goals increase individuals’ ability to save, particularly in the face of pressures for ceremonial expenditures; and 2) whether access to a simple savings technology (a savings box) can facilitate savings goals, either by allowing individual members of savings groups to save, promoting particular savings objectives or providing a secure place to safe.