Nabila Tabassum Chowdhury > Recent Status Updates

"The poor have access to none of these props: Even the savings accounts that are supposed to make it easier for them to commit to a goal still require an active step of depositing money. To be able to save every week or every month, they have to surmount self-control problems over and over again."

"This perverse logic of temptations operates in the same way for the poor as it does for the rich, but there are good reasons that the consequences may be much more serious for the poor than for the rich."

"Because self-control is hard to buy, self-aware decisionmakers take other defensive actions against the possibility of being tempted in the future. An obvious strategy is not to save as much, because we know that we will just waste the money tomorrow: We might as well give in to the temptation today, if all we are going to do is give in to it tomorrow."

"Awareness of our problems thus does not necessarily mean that they get solved. It may just mean that we are able to perfectly anticipate where we will fail."

"Giving people a health box did help them to spend more on preventive health. But giving them a locked health box, to Dupas and Robinson’s surprise, did not: They simply did not put much money in it. People reported not using it, or using it only for very small amounts, for fear that they would need the money for something else and would not be able to access it."

"This highlights an interesting paradox: There are ways to get around self-control problems, but to make use of them usually requires an initial act of self-control."

"This highlights an interesting paradox: There are ways to get around self-control problems, but to make use of them usually requires an initial act of self-control."

"Designing financial products that share the commitment features of the microfinance contracts, without the interest that comes with them, could clearly be of great help to many people."

"Given this self-awareness, it is no surprise that many of the ways the poor save seem to be not only intended to keep the money safe from others, but also to guard it from themselves."

"Brains that work like this would produce a lot of failed good intentions."

"They found that the parts of the brain corresponding to the limbic system (thought to respond only to more visceral, immediate rewards) were activated only when the decision involved comparing a reward today with one in the future. In contrast, the lateral prefrontal cortex (a more “calculating” part of the brain) responded with a similar intensity to all decisions, regardless of the timing of the options.

"This suggests that barriers to savings are not all externally imposed. Part of the problem comes from human psychology."

"It was this small inconvenience of keeping an eye out for fertilizer delivery (asking a friend to check, calling the store) that was holding back their savings and productivity. All our intervention really did was to remove this minor bottleneck."

"Their answer was that the fertilizer shops did not always have fertilizer available immediately after harvest—they only got it later, just before planting. As Michael Modimba said: “When we have money, they don’t have fertilizer. When they have fertilizer, we don’t have money.”"

"The program increased the fraction of farmers who used fertilizer by at least 50 percent. To put this in perspective, the effect of this program was greater than the effect of a 50 percent reduction in the price of fertilizer."

"So to help people like the Modimbas, Esther, Kremer, and Robinson designed the Savings and Fertilizer Initiative (SAFI) program. Right after the harvest—when farmers have money in hand—they are given the opportunity to purchase a voucher entitling them to fertilizer at sowing time."

"He explained to us that he always bought the fertilizer in advance, because, like the Modimbas, he knew that money kept in the house would not be saved: When there is money in the house, things always happen, he said, and the money disappears."

"In fact, Esther, Kremer, and Robinson found that the farmers who were given free fertilizer one season were 10 percentage points more likely on average to use fertilizer in the very next season after the study, but that still meant that a majority had gone back to not using fertilizer."

"For $1 paid in fertilizer, the average farmer would get $1.70 worth of extra maize. Not quite the returns the fruit vendors could make, but seemingly well worth the effort of saving a little. Why were they not doing it more?"

"Savings accounts clearly help some people. However, their absence is not the only thing that stops the poor from saving."

"Instead, the bank could use a local shopkeeper to take deposits. As long as the local shopkeeper issues the depositor a receipt for the money that the bank is legally obligated to honor, the depositor is protected. Then it is the bank’s problem to make sure that the shopkeeper doesn’t run away with the saver’s money."

"Technology can also play a role. In Kenya, M-PESA allows users to deposit money into an account linked to their cell phones and then use the cell phone to send money to other people’s accounts and to make payments."

"The fact that the poor have to substitute for lack of access to proper bank accounts by adopting complicated and costly alternative strategies to save might also mean that they save less than they would if they had a bank account."

"Yet all the ingenuity the poor employ to save may simply be a symptom of the fact that they don’t have access to the more conventional and simpler alternatives. Banks don’t like managing small accounts, largely because of the administrative costs of running them."

"As a market vendor married to a farmer, Jennifer Auma probably lived on much less than $2 a day. Yet she had an array of finely tuned financial instruments. We see this kind of financial ingenuity time and time again."

"In Africa, the most popular instruments are rotating savings and credit associations (ROSCAs)—more commonly known as “merry-go-rounds” in English-speaking Africa and as tontines in Francophone countries. ROSCA members meet at regular intervals, and all deposit the same amount of money into a common pot at every meeting. Each time, on a rotating basis, one member gets the whole pot."

"They form savings “clubs” with other savers, in which each member is supposed to make sure that the others achieve their savings goals. Self-help groups (SHGs), popular in parts of India and found in many other countries as well, are savings clubs that also give loans to their members out of the accumulated savings of the group."

"One of their main findings is that the poor find many ingenious ways to save."

"Given that the poor have little access to credit to finance their ventures, and limited insurance to cope with risks, shouldn’t they try to save as much as they can? Saving would give them a buffer against a bad year in the field or an illness. It could also hold the key to starting a business."

"If the poor still save brick by brick, it must be because they have no better way to save. Is it because banks have not found a way to collect the savings of the poor, and there is a “microsaving revolution” waiting to happen?"