Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device

We test the effectiveness of self-help peer groups as a commitment device for pre- cautionary savings, through two randomized field experiments among 2,687 micro- entrepreneurs in Chile. The first experiment finds that self-help peer groups are a powerful tool to increase savings (number of deposits grows 3.5-fold and average savings balance almost doubles). Conversely, a substantially higher interest rate has no effect on most participants. A second experiment tests an alternative delivery mechanism and shows that effects of a similar size can be achieved by holding people accountable through feedback text messages, without any meetings or peer pressure.

Kast, Meier and Pomeranz (2012)N/A (location unspecified).RCT.Peer group pressure versus increase in the real interest rate. Text message reminders one year after accounts offered.Individuals in the peer group pressure treatment group saved 3.5 times more often and had more than twice the level of accumulated savings after one year. In contrast, a higher interest rate had almost no effect on savings. The text messages alone had almost as large an effect as peer group pressure. No gender specific effects are reported.http://www.hbs.edu/faculty/Publication%20Files/12-060_4073be1c-88ba-4d5e-9fca-d5...Low-income micro-enterprise owners in 196 micro-finance groups with savings accounts in the participating bank.