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Mobilizing Savings through Products and Persuasion

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Mobilizing Savings. through. Products and Persuasion. Nava Ashraf. Harvard Business School ... Products need persuasion to sell them ... – PowerPoint PPT presentation

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Title: Mobilizing Savings through Products and Persuasion


1
Mobilizing Savings through Products and
Persuasion
  • Nava Ashraf
  • Harvard Business School
  • Oct. 17, 2005

2
  • Based on evidence and experience from
  • Ashraf, Karlan and Yin
  • Tying Odysseus to the Mast Evidence from a
    Commitment Savings Product in the Philippines
    (Quarterly Journal of Economics, May 2006 volume)
    and
  • Deposit Collectors (2005 working paper)
  • Available at
  • http//www.people.hbs.edu/nashraf/papers.html

3
Why Actions Dont Accord with Intentions
Psychological Barriers to Savings
  • Self-Control Problems Time Inconsistency
  • Commitment Devices
  • Bounded Cognition (ie, numbers/info overload)
  • Mental Accounting
  • Inability to follow through on plans the role of
    memory and habits
  • Reminders and Collectors

4
Overcoming Barriers to Savings Designing the
SEED Commitment Savings Product
  • Withdrawal restriction
  • Either time-based (140) or amount-based (62)
  • Decided entirely by client
  • Deposit incentive
  • Ganansiya box 167 out of 202 tookup ?
  • Automatic transfer 2 tookup ?
  • Same interest rate as regular savings account
  • Hence, loss of liquidity is uncompensated

5
Experimental Design
  • Sample frame 1777 existing (or former) bank
    clients of a Philippine small, semi-rural,
    for-profit bank
  • Participants randomized individually into
  • Treatment (Offered SEED), 50
  • Marketing(Encouraged to Save), 25
  • Control (Nothing), 25
  • Marketing team from Bank visited one-on-one with
    T M groups
  • Marketing Control groups not allowed to take-up
    product

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10
Findings
  • 28 of those offered signed up for the SEED
    product
  • Time Inconsistent individuals, particularly
    women, were much more likely to take up
  • Significant Savings increase for those offered
    SEED compared to the Control group
  • Average bank account savings increase for those
    assigned to treatment (ITT) after 6 months46
    after 12 months80 increase
  • Scaling up estimate by those who actually opened
    the account increase in average savings (TOT)
    after 6 months 192 after 12 months 337
    increase
  • Marketing Group shows some increases, but not
    statistically different from Control group

11
Deposit Collectors
  • Offered Deposit Collection service for fee
  • Much smaller scale experiment 5 treatment, 5
    control villages
  • Find significant impact on increasing saving and
    lowering borrowing
  • Takeup variation were able to explain suggests
    that married women much more likely to take this
    up, but large part of take up is unexplained
  • Anecdotal evidence suggests deposit collection
    helps with planning follow-through

12
Conclusion
  • Products designed with psychology in mind
    increase savings
  • Products need persuasion to sell them
  • Persuasion alone may not be as effective as
    combining persuasion with innovative products --
    ways to act on the momentum that comes from being
    persuaded.

13
Additional Tables
14
Measuring Impact
15
Measuring Impact
16
significant at 10, significant at 5,
significant at 1
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