Mobile Commitment Savings in Rwanda

Saving money is difficult. Often, for example, individuals may put off saving until a future date. Once that date arrives, however, they may delay saving again in favor of more immediate expenses. For many, such time-inconsistent behavior, along with other factors like forgetfulness and social pressures, present an obstacle to savings.

 

Commitment savings accounts are a simple and effective way to help users overcome many of these behavioral and social barriers and stick to their savings plans. By allowing users to restrict access to their funds until they reach a pre-determined savings target, commitment accounts can help individuals save towards life goals and large, lump sum purchases. Can this type of account structure be adapted to a mobile money platform? If so, what is the best way to promote its use? What are the main savings goals of those who use the new product?

 

In Sub-Saharan Africa, where 24 percent of individuals don’t have formal bank accounts , mobile money is beginning to provide previously under-banked individuals with access to financial services.¹ Mobile money allows users to send, receive, and store money via password-protected accounts on their mobile phones, making it a potentially safe and convenient alternative to many informal financial services. In Rwanda, Millicom, which operates the Tigo mobile network, recently developed a commitment savings product for its mobile money service. The product, called “Cash Bloqué,” allows users to restrict access to a portion of their funds until a user-specified date in the future. Researchers are working with Millicom to develop an SMS marketing campaign and bonus scheme to promote the product in Kigali, where Tigo mobile money agents are especially concentrated.

 

In partnership with Millicom, researchers are testing if the Cash Bloqué product can help users meet their savings goals. Using a randomized evaluation, this study will also help map demand for the product and determine if SMS marketing messages are effective at promoting use of the product. A random subset of active Tigo mobile money subscribers in Kigali will be randomly assigned to one of four marketing categories, each designed to appeal to a different saving motive, or a comparison group:

 

1. Saving for investment: Users in this group will receive SMS reminders to save for capital to either start or grow their business, or buy land.

2. Savings for durable goods: Users in this group will receive SMS reminders to save for home improvement, home repair, or buying furniture.

3. Savings for shocks: Users in this group will receive SMS reminders to save for financial emergencies.

4. Savings for regular expenses: Users in this group will receive SMS reminders to save for regular expenses, such as mandatory health insurance, school fees, rent, and foreseeable events like Christmas.

5. Comparison group: Users in this group will not receive any SMS messages.

 

Immediately after the marketing messages are sent to eligible customers, a subset will be randomly chosen to receive a bonus payment related to their Cash Bloqué savings. For half of the bonus recipients, the payment will be added to their account balance when they deposit money into the account. For the other half of recipients, the bonus will be framed as an added return on their savings and will be paid out on top of the customers’ account balances when they receive their money.

 

Administrative data on the number, frequency, and size of Cash Bloqué transactions will be combined with data from household surveys to measure participants’ savings and consumption patterns, as well as their ability to meet savings goals. Together, this data will allow researchers to assess which marketing messages and bonus schemes are effective at promoting the use of the Cash Bloqué product and how the product affects savings behavior.

 

Results forthcoming.

 

 

¹The World Bank Group. 2011. "Global Financial Inclusion (Global Findex) Database." Available at: http://datatopics.worldbank.org/financialinclusion.