Getting cash out from under the mattress and into the bank

Cash under your mattress?  These days it’s easy to feel like keeping our money at home—literally—may be the safest place for it. The Bill & Melinda Gates Foundation, though, is making a global push to get money into savings accounts, and Pascaline Dupas and Jonathan Robinson have just finished a paper that makes the cleanest case yet for getting money out from under the mattress.

Their study focuses on a bank operating along the highway that connects Nairobi, Kenya to Kampala, Uganda. High fees, though, kept most people away. In 2006 and 2007, a research team offered to open accounts for a randomized sample of 122 men and women, paying all opening fees. The treatment group was compared to a randomly-selected control group of 81 men and women who did not get accounts. Dupas and Robinson (2008) find that access to the accounts had substantial positive impacts on investment for women, increasing average daily productive investment by about 40 percent. Average daily food expenditures rose by 13 to 28 percent, an increase consistent with the notion that higher investment levels led to higher income levels.  Women with access to savings accounts also appeared better able to cope with health shocks.  The positive findings emerge despite the fact that hefty fees for making withdrawals meant that the bank in accounts had de facto negative interest rates on savings.  The evidence does not say that saving is more important than borrowing, but it does say that being able to save can matter substantially. No significant effects were found for men, though. Next study?