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September 6, 2013

FAI Video: Timothy Ogden in Conversation with Nava Ashraf

By Timothy Ogden

Part of our series, In Conversation with FAI

FAI Managing Director Timothy Ogden and Harvard Business School Associate Professor Nava Ashraf discuss her commitment savings research.  They also talk about what we currently know about commitment savings and why it works.

Timothy Ogden (T):  So, Nava, you were involved in this study that really sort of set the groundwork for commitment savings.  It has inspired a lot of follow-on research.  How do you think about commitment savings now, based on that original work and what was found and these variations that have been tried. What do we really know about commitment savings and why it works?

Nava Ashraf (N):  So you know, that original study for me was very much motivated, even in the design of the product itself, was very much motivated by what I was seeing in the field in West Africa and East Africa. So what I had seen was, and I’d been living there for some time and realized that farmers who go through many cycles, they were doing some – having tremendous difficulty being able to save for what they call the hungry season.  So they’d have a ton of money in January and be starving actually in June, unfortunately.  And some of them had been really remarkable at finding techniques to help themselves be able to save the money when they had it.  I remember one woman who timed the planting of her sweet potato crops, compared to all her other crops, so that the sweet potato crops came up when the school fees were due.  And when I asked her why, I mean, it seems more efficient to crop them all at the same time and have them come up at the same time, and she said,  “Oh no no, then I would spend the money. Or maybe someone else in my household will spend the money.” She talked about herself, but we can talk later about how that also is worrisome in terms of the household.   But regardless, for her, the kind of mental accounting and then really serious commitment of not having the sweet potatoes be able to come up until that particular moment was really, really important. Then I met another woman who had a lockbox in her house and she even told me where it was.  It a thatched roof and it was underneath the thing and it was locked, and there was a key, and I said, “Who has the key?” and she said “My neighbor. And I have to go and ask my neighbor anytime I want, and she knows what I’m trying to save for, and so she really grills me.” 

T:  Right.

N:  Right.  And so, I was really stunned once I started to study, you know, I was in my first and second year of graduate school when I came back from the field and I realized that our basic models of lifetime theories of income, savings, and consumption really didn’t take into account these types of strategies that people were using...Read the complete transcript.

http://www.financialaccess.org/sites/default/files/blog_files/Nava_Ashraf_Interview_Part1.pdf

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