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The article attempts to estimate the demand and utility that providing banking institutions to poor households in Nepal brings to Nepal citizens and the country. The study employs a randomized field experiment by creating simple, fee-free, locally placed banking institutions in a variety of Nepal towns and assigning 50% of interested household to be given an account via lottery. The article finds that poor households have a high demand for banking services and that being given access to a savings account increasing overall saving behavior and monetary assets for poor citizens and that the effect is stronger as the income decreases. The study also finds that the savings significantly increased investments in human capital, and allowed households to guard against shocks without having to use costly credit.
This article can be used in attempting to increase upward mobility and stability of those in lower income brackets. The study was done with the poor in Nepal, however similar effects could potentially happen in the United States as well. Placing low cost financial institutions in poor communities could have significant benefits both for the individuals in the towns, and the community at large due to an increase in human capital and economic productivity. More research should be done on the subject moving forward.
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