Savings Groups Reduce Vulberability but have Mixed Effect on Financial Inclusion

Veronica Frisancho and Martín Valdivia

No 1678, Research Department working papers from CAF Development Bank Of Latinamerica

Abstract: This paper evaluates the impact of the introduction of savings groups on poverty, vulnerability, and financial inclusion outcomes in rural Peru. Using a cluster randomized control trial and relying on both survey and administrative records, we investigate the impact of savings groups over a two year period. We find that savings groups channel expensive investments such as housing improvements and reduce households’ vulnerability to idiosyncratic shocks, particularly among households in poorer districts. The treatment also induces changes in households’ labor allocation choices: access to savings groups increases female labor market participation and, in poorer areas, it fosters greater specialization in agricultural activities. Access to savings groups also leads to a four-percentage point increase in access to credit among women, mainly driven by access to the group’s loans. However, the introduction of savings groups has no impact on the likelihood to use formal financial services. On the contrary, it discourages access to loans from formal financial institutions and microfinance lenders among the unbanked.

Keywords: Banca de desarrollo; Economía; Familia; Finanzas; Investigación socioeconómica; Pobreza; Sector financiero; Inclusión Financiera (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-dev, nep-fle, nep-hme and nep-mfd
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Persistent link: https://EconPapers.repec.org/RePEc:dbl:dblwop:1678

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