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

Access to a formalized savings account substantially improves female small-business owners’ overall savings and investment in business operations in Kenya.


Small-scale entrepreneurship, a way of life for hundreds of millions of people in developing countries, is seen as a path to poverty alleviation. Access to financial services like micro-credit loans and savings mechanisms that can help move people out of poverty is still limited, however. With recent studies showing mixed results on the effectiveness of micro-credit efforts for the poorest of the poor, organizations are now focusing on how to improve the savings among rural poor who have little or no access to formal banking infrastructure. Prior to this 2010 study in Kenya, only 2.2% of people surveyed had a commercial savings account. Instead, many chose to save in the form of animals, cash kept at home, or through Rotating Savings and Credit Associations (ROSCAs). This study examines the effect of providing formal savings accounts to small business owners in rural Kenya.


Having a bank account increased total savings among females, despite a negative interest rate, but not savings among males.

  • Out of 156 participants who had the opportunity to open a savings account, 13% of respondents refused to open an account while 40% opened an account but never made a deposit. Overall, 41% of the treatment group actively used the account. Mean deposits are almost twice as high for women compared to men, as they are Ksh 2,840 (US$40.57) for women and Ksh 1,290 (US$18.42) for men.
  • Respondents in the treatment group increased investment by 60%, and this increase is representative mainly of market women. The average daily investment of female vendors in the treatment group is Ksh 90 (US$1.28) higher than that of female vendors in the control group, which represents a 37.5% increase in investment, but no increase in investment for men.
  • Across the entire sample, daily food expenditures and private expenditures (e.g. meals outside the home, alcohol, cigarettes, and entertainment expenses) of women vendors who gained access to an account increased by 13% and 38% respectively. There is no effect of the accounts on men’s expenditures.

The fact that women voluntarily saved in their accounts at negative interest rates suggests that women vendors face negative private returns on the money they save informally, that is, saving money informally may mean that women have a more difficult time putting those funds to their own personal expenditures. Savings mechanisms have financial benefits to female entrepreneurs.


Researchers gave a random sample of 392 self-employed individuals -- both male and female -- a formal savings account in a community-owned and operated village bank. Sampled individuals were randomly divided into treatment and control groups, stratified by gender and occupation. Those sampled for treatment were offered the option to open a bank account at the village bank at no cost. The researchers paid the account opening fee and provided each individual with the minimum balance of 100Ksh (US$1.50), which they were not allowed to withdraw. Their bank accounts were interest-free but had significant withdrawal fees, making the real interest rate negative. Individuals in the control group were not provided with an account, but were not prevented from opening one. To assess how each group used their savings accounts, researchers looked at bank account information and participants’ logs, which kept track of business expenditures, investments, and health shocks. Due to higher attrition rates among male participants, the majority of findings focus on women.

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