Women’s financial inclusion: The role of information versus peer pressure

The main objective of this project is to investigate the role of information dissemination as well as social networks or peer effects as important channels to promote savings via financial inclusion at the formal institutions. Further, since most of the families have someone with a bank account due to PMJDY (Pradhan Mantri Jan Dhan Yojana is a financial inclusion program of the Government of India open to Indian citizens), this gives us an opportunity to carry out an investigation into the use of social networks in the context of formal savings. To the best of our knowledge, there is no pre-existing research on this specific area, particularly in the context of financial inclusion. The proposed study will attempt to bridge this gap by focusing on rural households from the state of Uttar Pradesh.

To be specific, in this project, we examine the adoption of new instruments of savings offered by formal financial institutions. Of particular interest is to understand the role of peer effects. Indeed, given the very large population living in the rural regions of India, it is indeed impossible for the government or NGOs to reach all households through extension services. We attempt to understand where the gap between opening an account and operating one by using it for regular savings to secure the future arises from and will try to find ways to close the gap in the most-cost effective ways possible. Some form of peer-to-peer (P2P) diffusion among households is needed. In order to harness P2P diffusion more effectively, we wish to test whether peer effects work via information diffusion or some other means, such as peer pressure. To this effect, we propose to compare the extent of savings between households rewarded with monetary incentives, and households exposed uniquely to peer pressure. According to Roger (2003), innovation passes through a set of stages before it is adopted. Households might resist switching over from traditional or informal methods of savings to formal means unless they are convinced that the change can be more beneficial. What is unclear is where conviction comes from: does it come from the provision of accurate information from a reliable source; or does it arise from what peers do and think?

2022-09-01

2023-03-01

Individual outcomes are:
- Total savings (calculated from passbooks),
- Frequency of visits to Bank,
- Frequency of use of financial products;
- Income,
- Entrepreneur investment,
- Assets,
- Debt,
- Subjective happiness/life satisfaction,
- Sense of financial security.

1) To investigate if existing social networks encourage uptake of different savings schemes offered by formal financial institutions and how;
2) To investigate just the role of information dissemination via campaigns, radios, television, etc;
3) To draw new insights from the field experiment to further advance understanding of the process of diffusion of modern technology or the uptake of new; technology or acceptance of other behavioural changes promoted by the governments;
4) To understand in detail the factors that facilitate or deter any change in the rural or village communities.

The proposed Randomized Controlled Trial will cover roughly 200 villages in total, 40 villages per treatment arm (4 treatment groups and 1 control), 30 women per village in total. So, this study will cover about 6,000 women from rural households in Uttar Pradesh, India.

We are introducing a subsidized commitment savings product called SAVE&GAIN (ref. S&G). This product is available to all A+B households in each of the 4 treatment villages if they ask for it. The experiment is to see how we can foster adoption of this product.

- For each village selected, we choose N = A + B households.
- In each household, we survey 1 woman who satisfies the following selection criteria:
1. Aged 18-40;
2. Has already a Bank account;
3. Is willing to show us her passbooks.
4. The passbook must be up to date.
- Villages are allocated to 5 groups. These are labelled:
C: no info nor peer pressure nor S&G
C$: no info or peer pressure but S&G is available to A+B if they ask for it
IA$: info to A about S&G
[=marketing campaign]
P$: peer pressure to A to induce B to apply for S&G (but no marketing campaign)
[= get paid for recommending a friend]
IAP$: info to A about S&G + peer pressure on A to induce B to apply for S&G
[both]

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More details about the treatment groups IA$, P$ and IAP$

- IA$ group: In information villages, we have a team of marketer-enumerators who visit A households at their home and spend 30 minutes or more explaining the way S&G works, giving examples, explaining sign-up, and promoting the (expected) benefits of the product.

About the B households in IA$ villages. They appear on the list held by the stall enumerators and can thus approach the stall to sign up (including on their own if they wish to do so, e.g., if information circulates widely). However, they do not receive a treatment directly from us.

- P$ group: In recommender villages, we have a team of enumerators who visit A households in their homes and spend 5 minutes explaining that if they bring one of 3 listed women (a random subset of the B households) to sign up for S&G at our visit, we will give them 50Rs. The recommender has to be present at the sign-up of the recommendee to get the reward. If the person they bring is not qualified (e.g., has not deposited at least 100Rs in last month), then the recommender gets no reward. The recommender is not obliged to sign up. Any B household can sign up on their own, i.e., unaccompanied. In this case no A household receives a reward for their signing up.

- IAP$ group: In information + recommender villages, we have a team of marketer-enumerators who visit A households at their home, spend 30 min explaining S&G, as above, and an extra 5 minutes explaining the recommendation scheme. The rest is similar to the P$ group treatment described above.

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To evaluate the effectiveness of S&G, we collect 1 baseline and 1 endline socio-economic data as well as detailed adoption and output data from all sampled women in the five villages listed above. The baseline survey on women will start on June 2022. The endline survey is expected to be administered 6 months later, from around January 2023.

For each tranche of 100 Rs (up to 500Rs) that are kept on the account for 3 months, we pay 20Rs, and we do this once, for the largest amount kept for 3 months over a pre-determined window of 6 months. All interest payments due are calculated at the end of the 6 months period.

- Example 1: someone deposits 100 on day 1 of month 1, another 200 on day 1 of month 2, and withdraws the lot on day 1 of month 5; so, 3 months later. In this case, she receives 3 x 20 = 60Rs.

- Example 2: someone deposits 100 on day 1 of month 1, another 500 Rs on day 1 of month 2, and withdraws the lot on day 1 of month 5; so, 4 and 3 months later, respectively. In this case, she receives 5 x 20 = 100Rs [the amount of savings eligible is capped at 500; so, in this case, even if she saved 600, we consider 500].

- Example 3: someone deposits 100 on day 1 of month 4, and withdraws the lot on day 1 of month 7; so, 3 months later. In this case, she receives 1 x 20 = 20Rs [the first day of month 4 is 90 days away from the first day of month 7, which is the last day available of the 6 months window, so she is still eligible].

- Example 4: someone deposits 100 on day 1 of month 5, and withdraws the lot on day 1 of month 8; so, 3 months later. In this case, she receives 0 x 20 = 0Rs [the first day of month 8 is outside the 6 months window].

Randomization will be done in office by a computer.

At the village level.

Yes

200 villages.

6,000 women.

200 villages in total, 40 each in 4 treatments and 1 control group.

0.30 standard deviation