Using Lotteries to Encourage Savings

We implemented our mobile-phone based savings program over Safaricom’s Sambaza airtime sharing service. Using Sambaza, Safaricom users can send airtime to each other free of charge. Subjects saved into our program by sending airtime to a designated project phone that held the airtime in an account for each user. We chose to run our savings program via airtime rather than M-Pesa to avoid the fees involved with conversion to and from M-Pesa.
Subjects received two SMS messages every morning after the first morning of the project period. The first message was an end-of-day message that reported how much the subject saved the previous day, how much the subject earned through interest or winnings, and their total balance. An hour later, subjects received a beginning-of-day message encouraging them to save that day. Subjects were allowed to send in savings at any time but any savings sent in after the end-of-day message would be counted towards the next day’s total. We used a custom-developed administrative system to manage the savings program. This system logged airtime sent to our project phone, maintained an internal ledger of balances, sent automated SMS confirmations after every transaction, and conducted the daily lottery game.
Subjects were enrolled in the savings program for a total of 60 days, split into consecutive 30-day periods. After the first 30 days, subjects were allowed to withdraw any amount of their savings up to the total balance. Outside of this opportunity, regular withdrawals were not allowed. If a subject wished to withdraw their balance, they were required to withdraw from the entire experiment.
At the end of our experiment, we returned subjects’ savings and accumulated interest or winnings via an M-Pesa transfer. This M-Pesa transfer included the extra withdrawal fees needed to cash out an amount equal to the subject’s full account balance. Therefore, subjects paid no explicit fees to participate in our program.
2.1 Treatment groups
Subjects were randomized into one of three treatment groups and had the chance to earn either daily interest (in the form of matching) or play a daily lottery depending on assign- ment.
2.1.1 Interest (control group)
Subjects in the control group participated in a standard, interest-bearing savings program. Subjects earned a 5% matching contribution on any amount that they saved in a particular day.
2.1.2 Lottery
After saving a non-zero amount, subjects earned a lottery ticket - transmitted via text message, which could win a cash prize in proportion to the amount they saved. A lottery ticket was a random sequence of four numbers between 1 and 9, inclusive. Each day, our administrative system randomly generated a winning sequence of four numbers. Prizes were awarded according to how well a subject’s lottery numbers matched the winning numbers. If the first or second numbers matched, a 10% match of savings was awarded. If both the first and second numbers matched, a 100% match of savings was awarded. Finally if all numbers matched, a prize of 200 times daily savings was awarded. The earnings on this
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lottery ticket were equal in expectation to the 5% match earned in the control group. Our system processed the matching of lottery numbers and entered winnings into the internal ledger. Subjects could only earn one lottery ticket per day.

2014-05-01

2014-08-01

We estimate treatment effects on measured savings behavior. The main outcome variables we are interested in are:
1. Average savings over the entire study period.
2. Average savings over the first and second 30-day period.
3. Average number of active days and average number of transactions.
4. Average length of the streaks, i.e. the highest number of consecutive days with a positive balance for each person.
Aside from the overall savings behavior, we additionally estimate the effect of the program on:
1. Monthly self-reported savings balance
2. Savings engagement (whether you currently save, engagment with ROSCA)
3. Displacement of other saving mechanisms
4. How often subject discussed savings program with family and friends
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5. Trust in the savings program
6. Satisfaction with saving behavior in the program 7. Continuation with the savings program
8. Self-perception as a saver
9. Self-reported gambling behavior
10. Trust in the savings program

This study was conducted in conjunction with the Busara Center for Behavioral Economics in Nairobi, Kenya. We recruited 311 subjects through Busara’s subject pool. Participants were first invited to the lab at Busara where they completed a computerized questionnaire and played various behavioral games. The following outlines the schedule of tasks during the lab portion of the study:
1. Risk preference elicitation 2. Time preference elicitation 3. Lottery task
4. Locus of control
5. Baseline questionnaire
Following the lab session, subjects were randomly assigned to one of the three treatment groups. Subjects were then taught about their assigned savings program. Each subject was given KSH 20 airtime credit and asked to practice saving using the Sambaza mechanism. Subjects were then sent home with business-card sized handouts which described their sav- ings program. We provided subjects simple instructions for saving and listed the number to our project phone. This was the number through which the savings program operated that also functioned as a help line for subjects.
Lab sessions took place over five weeks in May and June of 2014. Subjects were enrolled in the our savings program for two consecutive periods of 30 days starting from the day of a subject’s lab session. On a subject’s 30th day, a field officer called them and asked if they wished to withdraw any amount of their balance. Subjects who requested withdrawals
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were sent M-Pesa tranfers equal to their request plus the M-Pesa withdrawal fee. These withdrawals were recorded in our system’s ledger.
Following this, subjects moved on to their second 30-day savings period. Subjects were called and notified a few days before the end of their second 30-day period that the program would be ending soon. After receiving the end-of-day message on their 60th day, subject were unenrolled from the program and were no longer allowed to save. Field officers called subjects to confirm final balances and sent M-Pesa transfers equal to total balance plus withdrawal fee shortly after. All subjects had completed the program by August 2014. In September 2014, we called subjects and conducted an endline survey. We obtained endline surveys for all but 27 of the 311 subjects.

computer

individual

No

311

311

~100 for each of the three treatment groups

Using Lotteries to Encourage Saving: A Pre-Analysis Plan