aikyam school

Market Saturation and Non-Binding Constraints in Formal Savings Products

Financial inclusion initiatives frequently operate on the assumption that low-income and migrant households lack access to formal bank savings accounts. Establishing whether low take-up stems from access barriers or market saturation is vital to avoid redundant banking intervention.

Picture this

Imagine opening a new shoe store in a neighborhood where everyone already buys shoes from a preferred local market. If almost nobody walks into the new store, the issue is not that residents cannot buy shoes, but that their shoe needs are already met elsewhere.

What the evidence says

Only 9 out of 857 offered households (1.0–1.1 percentage point impact, p < 0.05) opened the savings account, with 46.9% of non-adopters citing pre-existing preferences for other financial establishments as the main reason.

Who
N = 1,808 transnational household heads in Cabanatuan City and surrounding areas, Philippines.
How
Randomized controlled trial offering low-barrier BPI BPinoy savings accounts (PHP 100 deposit, no maintaining balance with 4 remittances/year) paired with follow-up non-take-up survey diagnostics.

What to do

Conduct pre-intervention baseline diagnostics on local product saturation and institutional preferences before deploying subsidized formal savings accounts.

From the source

"The dominant response by far (given by 46.9% of respondents) was that they preferred other establishments instead of BPI for savings products... That households felt that they had better products to avail of in the market also helps support the conclusion that households are not constrained in their access to savings products."

Financial Education and Financial Access for Transnational Households: Field Experimental Evidence from the Philippines

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