Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya

TLDR

The study asks whether limited access to formal savings services hinders business growth in poor countries. Researchers randomized noninterest‑bearing bank accounts to market vendors and bicycle taxi drivers in rural Kenya to test savings access effects. Market women who used the accounts saved more and increased productive investment and private spending, while bicycle taxi drivers showed no effect, indicating substantial savings barriers for women. JEL codes: D14, G21, J16, J23, O12, O14, O16.

Abstract

Does limited access to formal savings services impede business growth in poor countries? To shed light on this question, we randomized access to noninterest-bearing bank accounts among two types of self-employed individuals in rural Kenya: market vendors (who are mostly women) and men working as bicycle taxi drivers. Despite large withdrawal fees, a substantial share of market women used the accounts, were able to save more, and increased their productive investment and private expenditures. We see no impact for bicycle-taxi drivers. These results imply significant barriers to savings and investment for market women in our study context. (JEL D14, G21, J16, J23, O12, O14, O16)