Savings Monitor: Deploying Local Social Networks to Mobilize Savings

In the developing world, increasing an entrepreneur’s capacity to save can have large effects on asset accumulation and other business outcomes. Moreover, cash savings can provide a buffer, so that business assets need not be liquidated during adverse shocks. Households in rural India have ubiquitous access to bank branches. Nevertheless, a huge segment of the population remains unbanked. Moreover, when they do maintain a savings account, individuals are very bad at meeting their own savings goals — a consequence of time inconsistency and other behavioral biases. Putting off savings for tomorrow always seems desirable. We explore two interventions to help to individuals potentially overcome these behavioral biases and increase their savings balances. To do this, we design a financial product based on a business correspondents model, which will harness peer monitoring to help encourage entrepreneurs to meet their savings targets over a half-year horizon. Specifically, some savers in our experiment are assigned (or choose) monitors from their community who are made aware on a regular basis of the saver’s progress towards his/her goal. We ask whether having a monitor substitutes for a formal commitment device and, moreover, whether some community members are better than the other at encouraging responsible financial behavior. Ultimately, we hypothesize that individuals who are given monitors will better reach their targets and accumulate more business assets. To implement the core experiment, we obtained funding from numerous sources. SEED funding is needed to complete the final stages of the core experiment and to support the final endline collection of business data.