This pilot study tests the uptake and usage of possible variations of a “contract-free” (soft) commitment savings product, by microfinance clients.
Many poor individuals are not able to save enough to insure against small financial shocks or to afford the purchase of important goods. Lower savings may be due to a lack of self-control, or “present bias,” where today’s intentions and tomorrow’s actions deviate. The most commonly suggested solution comes in the form of “commitment savings products”. While several studies have found that such commitment devices can be effective when used, a common problem is that take-up is often low. For example, a commitment savings device introduced to microfinance clients in the Philippines increased savings by 81 percentage points when used, but only 28% of those offered the commitment device accepted (Ashraf, Karlan and Yin 2006). Poor households may be particularly reluctant to restrict access to their already scarce funds. It is important to find products that both help poor individuals increase savings and have higher take-up rates. The pilot study aims to test all the possible variations of a “contract-free” (soft) commitment savings product, its uptake and usage. Results of this pilot will then be used to design an RCT.