Why Poor People Don’t Use Savings Accounts

Recently a colleague shared results of the follow-on (forthcoming) study that Dupas and Robinson did on their landmark 2009 RCT study on savings in Western Kenya. This is the one that found such impressive benefits to women informal-sector traders from access to savings accounts. The follow-on study probed two important questions that the original study could not fully answer: 1) what happens if you make it easy and virtually free to open an account? and 2) why will some people still not use the account?

In the original study only 57% of market women in the treatment group made at least one deposit within the first 6 months of opening. For the follow-up study the researchers enlisted two local deposit-taking institutions (a major commercial bank and a well-established but unregulated local “financial services association”) to make their account opening procedures as simple as possible. Then they went one step further and arranged to pay the account opening fees, so any study participant could join at no cost and with minimum hassle. With these enhancements, 62% of participants opened accounts. But only 18% of the overall study sample used them.

The study uncovered lots of reasons for this behavior, but the researchers pointed to “quality” as the main factor. In a nutshell: “Many of those who did not use the account report that this is because they do not fully trust the bank or because withdrawal fees are prohibitive. Available credit options are also unattractive to the great majority of individuals in our sample.”

The researchers summed up the bottom line: “. . . [W]hile simply expanding access to banking services (by, for instance, lowering financial barriers to ownership) will benefit a minority, broader success may be unobtainable unless the quality of services is simultaneously improved.” I doubt this is surprising for researchers steeped in the nuances of why and how poor people save. But one had the sense it was an eye-opener for these highly-respected researchers known for exploring the mysteries of finance through RCTs.

This got me thinking about two things. The first is the absolutely central role that trust plays in the decision by poorer people to move some of their hard-earned cash into test out formal financial assets and institutions. (That’s the subject of a future blog post.) The second is that when the RCT researchers write up their findings, we need to know whether, when and how they themselves are using qualitative techniques to help make sense of RCT findings. And then it would be even better if they teamed up with the really good qualitative researchers to generate insights on consumer behavior. Until this starts happening on a more regular basis, we’re losing out on chances to advance both knowledge and practice. There’s been way too much airtime for “RCT vs. qualitative methods” and not nearly enough on “RCT + qualitative methods.”

Take for example the case of the Morocco RCT. I have heard one of the lead researchers describe this case, and there seemed to be little information on the actual structure of the rural economy, the real options households faced for income-earning and asset-building (and the trade-offs that might exist between the two, e.g., spending the loan on an animal vs. a microenterprise activity), the powerful gender dimensions, etc.

We need well-designed qualitative research before, during, and after RCT techniques. At the front end, it helps frame the research questions (what barriers/benefits are we trying to test and hopefully remove/enhance?), particularly how the “treatment” is framed to study participants and hypotheses about why people are doing what they’re currently doing. And at the back end, follow-up research like the deep dive that Dupas and Robinson did is just as important to understand the underlying behavior revealed by the RCT findings. Everyone is on the same team — there is great value in having the brilliant RCT researchers pulling together with the equally brilliant qualitative researchers to drive to a deeper understanding of what is going on and why.

For more information, go to the 2011 study, Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya.