Two Sides of the Same Rupee? Comparing Demand for Microcredit and Microsaving in a Framed Field Experiment in Rural Pakistan

Afzal, Uzma; d’Adda, Giovanna; Fafchamps, Marcel; Quinn, Simon; Said, Farah

doi:10.1111/ecoj.12512

Cited by 28 publications

(28 citation statements)

References 49 publications

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“…From a policy angle, the demand for infrequent payments may thus have implications for cash transfer design in both poor and rich countries alike (Banerjee, 2016 There is by now abundant evidence that individual preferences are time-inconsistent and that commitment devices help in choices as diverse as saving, effort provision, and smoking 1 Rutherford (2000) documents the importance of lump sums for the poor. Bauer et al (2012) argues that demand for lump sums may drive a correlation between present-biased preferences and demand for microcredit while Afzal et al (2017) argues that it may explain simultaneous demand for saving and credit contracts. Our experimental evidence is consistent with poor households receiving negative interest rates on savings, for instance on deposits to money collectors (Collins et al, 2009).…”

Section: Introductionmentioning

confidence: 99%

Demand and Supply of Infrequent Payments as a Commitment Device: Evidence from Kenya

Casaburi¹,

Macchiavello

2019

American Economic Review

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Despite extensive evidence that preferences are often time-inconsistent, there is only scarce evidence of willingness to pay for commitment. Infrequent payments for frequently provided goods and services are a common feature of many markets and they may naturally provide commitment to save for lumpy expenses. Multiple experiments in the Kenyan dairy sector show that: (i) farmers are willing to incur sizable costs to receive infrequent payments as a commitment device, (ii) poor contract enforcement, however, limits competition among buyers in the supply of infrequent payments. We then present a model of demand and supply of infrequent payments and test its additional predictions. (JEL K12, L66, O13, O17, Q12, Q13)

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Section: Introductionmentioning

confidence: 99%

Demand and Supply of Infrequent Payments as a Commitment Device: Evidence from Kenya

Casaburi¹,

Macchiavello

2019

American Economic Review

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“…While the link from entrepreneurship toward savings and wealth concentration has been found in developed countries (Gentry & Hubbard, 2004; Quadrini, 1999), it was now suggested that, inversely, savings may boost entrepreneurship among the poor since it is their principal source of entrepreneurial finance (Gunu, 2010; Lianos & Pseiridis, 2009). Others consider that both microcredit and microsavings are complementary, and a balanced approach is required (Adams & Vogel, 2016) or that they essentially achieve the same purpose since the poor need to make lump sum payments (Afzal, d'Adda, Fafchamps, Quinn, & Said, 2018). In any case, it seems there is considerable demand for microsavings products among the poor (Dupas & Robinson, 2013).…”

Section: Academic Literature On Microsavingsmentioning

confidence: 99%

Can microsavings work without microcredit? A case study of India Post Payments Bank

Ashta

Pillarisetti

2020

Strategic Change

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Microsavings institutions that cannot provide microcredit are unlikely to be self-sustaining. Payments banks are Indian microfinance institutions that can collect microsavings, but cannot give microcredit. They have been mainly unsuccessful owing to low spreads between interest given to savers and interest received from the reserve bank or commercial banks on interbank deposits. The commission income from transfer payments is too low to pay the high overheads of rural outreach. Payments banks would like to transform themselves into small savings banks that can provide microcredit. K E Y W O R D S microcredit, microinsurance, micropayments, microsavings, postal services, remittances 1 | INTRODUCTION One of the destructive impacts of information and communication technologies is on the post. People no longer need to send letters or postcards to each other since they send emails. As a result, many postal workers risk being unemployed. On the other hand, owing to economic development and online mail order, the post is increasingly delivering parcels. At the same time, international parcel delivery costs go up because of controls of counterfeit goods, leading to delays and increased working capital requirements. Post offices all over the world, therefore, needed to make a complete SWOT analysis to understand what they could do to remain profitable. Their main strength was an extremely high-quality service team, found all over the country, visiting rural areas of low population density where no other official ventured, and the strong trust that people had in postal officers. Their foremost opportunity was that poor persons could not afford to travel to obtain services while governments had a universal service obligation toward their citizens. This gap caused the government to use the depth and reach of the posts. The experiments of postal offices have been varied: for example, in Finland, postal workers will cut grass for their clients in return for a monthly subscription. In France, the post officers will talk to old lonely people and spend time with them. On the other hand, with parcel deliveries through drones in large low-density countries such as Australia, Canada, and certain regions of China, again, the employment of postal workers could take a hit. In 2017, Germany was already using drones to supply medicines.With the growth in microfinance, postal offices recognized an opportunity to take a more significant part in financial and economic development.Microfinance is often limited to urban and high-density areas. Nevertheless, there was a social need to supply financial inclusion to rural areas. This social need translated into votes, especially crucial in countries where a substantial part of the population was still living in rural areas. As a result, there was political pressure to provide financial services to rural areas. However, banks were not geared to doing this. The postal banks had always had, since the nineteenth century, a small business for money transfers through postal orders and had offered post...

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“…Finance is a source and process of funding. Funding is essential for starting or developing a commercial entity 1 . Money, on the other hand is an instrument of exchange and a store of value in a country.…”

Section: The Idea Of Savings For the Poormentioning

confidence: 99%

SHG Bank Linkage Programme in India and Its Impact on Rural Saving: Literature Review

Srivastava

Rao

2018

IJERMT

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Two Sides of the Same Rupee? Comparing Demand for Microcredit and Microsaving in a Framed Field Experiment in Rural Pakistan

Cited by 28 publications

References 49 publications

Demand and Supply of Infrequent Payments as a Commitment Device: Evidence from Kenya

Demand and Supply of Infrequent Payments as a Commitment Device: Evidence from Kenya

Can microsavings work without microcredit? A case study of India Post Payments Bank

SHG Bank Linkage Programme in India and Its Impact on Rural Saving: Literature Review

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