Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya

Pascaline Dupas and Jonathan Robinson

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

Abstract: To what extent does the lack of access to formal financial services impede business growth in low-income countries? While most research on this issue has so far focused on credit market failures, this paper focuses on the role of access to formalsavingservices. We conducted a field experiment in which a randomly selected sample of self-employed individuals in rural Kenya got access to an interest-free bank account. As the bank charged substantial withdrawal fees, the de facto interest rate on the account was negative. Despite this, take-up and usage of the account was high among our sample of market vendors, primarily composed of women. Access to an account had a substantial, positive impact on levels of productive investments among market women, and, within 6 months, led to higher income levels, as proxied by expenditures. These results imply that a substantial fraction of women entrepreneurs have difficulty saving and investing as much as they would like, and have a demand for formal saving devices - even those that offer negative interest rates. Our results also imply a relatively high upper bound on the rate of return to capital for the women in our sample, estimated at 5.5% per month at the median. Note that these results do not necessarily imply gender differences: our sample of male entrepreneurs is too small to generate results for that group.

Keywords: Social and Behavioral Sciences; Business; Financial Services; Investment; Poverty Alleviation; Microeconomic Analyses of Economic Development; Banks; Depository Institutions; Micro Finance Institutions; Entrepreneurship (search for similar items in EconPapers)
Date: 2012-10-25
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.escholarship.org/uc/item/1rg2d9mm.pdf;origin=repeccitec (application/pdf)

Related works:
Journal Article: Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya (2013)
Working Paper: Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya (2009)
Working Paper: Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya (2009)
Working Paper: Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucscec:qt1rg2d9mm

Access Statistics for this paper

More papers in Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().