Tying Odysseus to the Mast: Evidence From a Commitment Savings Product in the Philippines

TLDR

The study designed and tested a commitment savings product for a Philippine bank using a randomized controlled trial. The authors surveyed 1,777 bank clients, then randomly assigned 710 to receive the commitment product, using baseline time‑discounting questions to characterize participants. Among the 710 clients offered the product, 28.4% opened an account; women with lower discount rates were more likely to enroll, and after 12 months treated clients had 81 % higher average balances, indicating a lasting savings effect.

Abstract

We designed a commitment savings product for a Philippine bank and implemented it using a randomized control methodology. The savings product was intended for individuals who want to commit now to restrict access to their savings, and who were sophisticated enough to engage in such a mechanism. We conducted a baseline survey on 1777 existing or former clients of a bank. One month later, we offered the commitment product to a randomly chosen subset of 710 clients; 202 (28.4 percent) accepted the offer and opened the account. In the baseline survey, we asked hypothetical time discounting questions. Women who exhibited a lower discount rate for future relative to current trade-offs, and hence potentially have a preference for commitment, were indeed significantly more likely to open the commitment savings account. Mter twelve months, average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group. We conclude that the savings response represents a lasting change in savings, and not merely a short-term response to a new product.