1. Home
  2. Can financial products reduce poverty and vulnerability? Experimental evidence from Benin on the impact of access to saving accounts and microcredit.
DEPARTMENT FOR BUSINESS, ENERGY & INDUSTRIAL STRATEGY

Can financial products reduce poverty and vulnerability? Experimental evidence from Benin on the impact of access to saving accounts and microcredit.

IATI Identifier: GB-GOV-13-OODA-ESRC-JZQR3SF-R5GJUJ3-Z93J8MY
Project disclaimer
Disclaimer: The data for this page has been produced from IATI data published by DEPARTMENT FOR BUSINESS, ENERGY & INDUSTRIAL STRATEGY. Please contact them (Show Email Address) if you have any questions about their data.

Description

Microcredit and microsavings are of great interest given that the vast majority of populations in LDCs have little if no access to formal finance. Most individuals in Benin use informal saving or lending mechanisms; informal due to the lack of any binding legal arrangement. In the absence of formal finance many Beninese resort to rotating savings and credit associations (ROSCAs). Participation in ROSCAs is costly and no interest is earned. Their members also bear the risk of default by other members, which frequently leads to financial loss and the breakdown of groups. ROSCA members have less flexibility in saving than they would on their own, since the group-determined contribution level is likely to differ from their individual optimal saving rate. Despite these constraints, ROSCAs enjoy popularity and are pervasive in LDCs. One can speculate that access to more secure and reliable formal financial products could lead to significant improvement in people's ability to save and invest and would reduce the impact associated with shocks the poor face on a near daily basis. To carry out our comparative analysis, we will offer access to microcredit and microsavings to different samples of individuals. This will allow to: 1) Analyse what drives the demand for these financial devices and enhance our understanding of the poor's motivations for saving and investing. 2) Compare the effectiveness of microcredit vs. microsavings and examine whether formal financial services are more effective in helping individuals to escape poverty than ROSCAs. Our proposal thus directly addresses the Overarching Question 1 of the present Call. 3) Investigate subsidiary effects of formal finance on consumption patterns and the use of informal finance. Does formal finance help in reducing expenditures on luxury/frivolous items? Do the poor manage better to avoid falling into a debt trap with or without formal finance? Is formal finance driving people out of ROSCAs? 4) Analyse the resulting investments and their sustainability in two crucial dimensions: education and health. These are known to crucially impact long-term poverty.

Objectives

Research and development activity contributing to the UK’s strategy to address key development challenges.


Location

The country, countries or regions that benefit from this Programme.
Benin

Status Post-completion

The current stage of the Programme, consistent with the International Aid Transparency Initiative's (IATI) classifications.

Programme Spend

Programme budget and spend to date, as per the amounts loaded in financial system(s), and for which procurement has been finalised.

Participating Organisation(s)

Help with participating organisations

Accountable:Organisation responsible for oversight of the activity

Extending: Organisation that manages the budget on behalf of the funding organisation.

Funding: Organisation which provides funds.

Implementing: Organisations implementing the activity.

Sectors

Sector groups as a percentage of total Programme budget according to the OECD Development Assistance Committee (DAC) classifications.

Budget

A comparison across financial years of forecast budget and spend to date on the Programme.

Download IATI Data for GB-GOV-13-OODA-ESRC-JZQR3SF-R5GJUJ3-Z93J8MY