UC Davis Agricultural and Resource Economics

Felipe Dizon, University of California, Davis

Does Financial Inclusion Exclude? The Effect of Access to Savings on Informal Risk-Sharing in Kenya

Date and Location

Monday, October 19, 2015, 4:10 PM - 5:30 PM
ARE Library, 4101 Social Sciences and Humanities


In the absence of formal markets to manage risk and cope with shocks, individuals often rely on mutual interpersonal transfers, otherwise known as informal risk-sharing arrangements (IRSAs). Theoretically, it is unclear whether access to a microsavings program complements or substitutes existing IRSAs. We estimate the effect of access to savings on bilateral IRSAs using data from Kisumu, Kenya. Among a sample of 627 vulnerable women, we randomly assign a savings intervention that included setting saving goals, weekly SMS reminders, and a labeled mobile money savings account. We find that the savings intervention has a negative effect on informal risk-sharing, consistent with a model wherein access to savings exacerbates limited commitment in IRSAs. Moreover, the negative effect is smaller for pairs where both receive treatment, as opposed to only one, and for individuals who have a larger risk-sharing network, who seem to be increasing risk-sharing with other connections. Overall, our results suggest that we should carefully consider the negative spillovers of microsavings programs on risk-sharing connections when evaluating welfare effects.

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