Impact of digitally enabled flexible pay on consumption smoothing & women's economic empowerment: A randomized control trial

The garment manufacturing industry in many low-income countries, though characterized by minimum living wages, provides the means for enhancing personal and/or household economic prospects for the overwhelming majority of women employed in its factories (Kabeer and Mahmud, 2004). However, despite a stable and predictable income stream, many struggle to make their incomes stretch until the next payday (Breza et al., 2017). The ability of households to smooth consumption between paychecks, and make time-consistent budgeting and cope with emergencies and budget shortfalls has been extensively studied in the literature. In this context, financial interventions aimed at women in particular, such as microfinance loans, have received widespread attention in developing countries given they offer households ways to smooth consumption while simultaneously empowering women (Mahmud 2003).

In the present study, we study whether one such financial intervention, i.e., provision of access to liquidity between pay-checks through an employer salary advance at zero interest rate aid women workers and their households to improve their financial well-being and specifically empowers women by improving their bargaining outcomes as reflected in their household decision-making power. Through smoothening household consumption over the month, the salary advance intervention has the potential to reduce financial stress and thereby improve workers’ attendance and productivity and reduce attrition among them. Thus, this study also aims to provide a business case for the adoption of such financial interventions by businesses at large.