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

Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya
Jan 2009, Dupas, P. & Robinson, J.

Do savings constraints prevent the self-employed from expanding their business?

This paper presents results from a field experiment designed to test whether savings constraints prevent the self-employed from increasing business size.

The study team opened interest-free savings accounts in a local village bank in rural Kenya for a randomly selected sample of poor daily income earners. They then collected data from self-reported logbooks that respondents filled on a daily basis. This was supplemented with administrative data from the bank. Despite the fact that the savings accounts paid no interest and featured substantial withdrawal fees, take-up and usage was high among women.

The study found that savings accounts had a substantial and positive impact on productive investment levels and expenditure for women, but had no effect for men. These results indicate that:

Microentrepreneurs in rural Kenya face important savings constraints and need formal saving devices;
Accounts helped women save up for lumpy business investments;
Female entrepreneurs draw down their working capital in response to health shocks;
Savings accounts enable women to cope with shocks without having to liquidate their inventories.

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Journal Volume/Pages:
48

Publisher(s):
National Bureau of Economic Research (NBER)