The experiment described in this paper provides strong evidence that a large fraction of female micro-entrepreneurs in rural Kenya face major savings constraints. These constraints are so strong that around 40% of market women decided to take up savings accounts which offered a negative real interest rate. This result suggests that the alternative savings opportunities that market women face offer an expected return even more negative.
Market women use these accounts to save up to increase the size of their business and, in turn, increase their income and expenditures. We estimate potentially very large returns to capital for the businesses these women run, on the order of 5.5% a month. Market women also use the accounts to help cope with unexpected household health shocks, and are better able to maintain inventory levels over shocks than are market women without accounts.
That is from the conclusion of a study by American Economic Journal: Applied Economics (January 2013). A draft is here (2010).published in
The authors conclude:
Overall, our findings suggest that extending basic banking services could have large effects at relatively small cost, especially relative to credit alone.