Abstract

Access to formal banking is spreading across the world and may transform how people manage their finances. We report from a field experiment that randomly provides access to a bank account to a representative sample of villagers in rural India. The treated respondents save actively into the account, and their individual savings increase. There is no significant impact on mean household savings, and on average expenditures, income, loans and transfers. Using weekly data from financial diaries, we however show that the treatment has an important impact on consumption (and nutrition) smoothing, which is driven by pro-cyclical saving on the new account. The latter results provide a new insight on the importance of banking in low and middle-income countries.

Practical information