High Hopes - Saving for High School with a Mobile-Money Lock-Box

Saving for long-term goals can be difficult. Many individuals have a tendency to focus their attention and income on immediate demands and temptations while postponing, or simply forgetting, long-term savings goals. This problem may be especially acute for low-income individuals in developing countries, who often lack access to easy-to-use and low-cost banking services. However, recent evidence suggests commitment savings accounts can be designed with product features that help the poor commit to their savings plans and overcome these barriers. This project builds on this body of evidence and tests whether a commitment savings account can also help clients meet savings goals when offered via a mobile money platform. The study will evaluate if long-term savings can be encouraged by including both a waiting period for early withdrawals and an interest rate bonus on funds saved until the goal date.

 

The transition from primary school to high school can be costly for students and their parents in Kenya even when tuition costs are low. Starting high school may require new school supplies, books, uniforms, and even mattresses and other personal items if they are moving to boarding school. However, saving for these expenses can be difficult for parents who have competing demands on their income. Long-term savings goals can often fade from parents’ attention in favor of more immediate spending decisions. 

 

At the same time, the introduction of mobile money now allows users to conduct financial transactions and basic banking services on simple cell phones. This technology has greatly expanded access to financial services for the majority of Kenyans and provided an opportunity to create financial products tailored to specific needs. This project leverages a mobile money platform to offer a savings account designed to help individuals save for long-term goals like the transition from primary school to high school.

 

Researchers are partnering with a telecom operator in Kenya to evaluate a commitment savings account called the “High Hopes” Lock-Savings Account.  The account can be accessed by any customer of the mobile operator, but for this project it is being specifically promoted to parents wishing to save for their children’s high school expenses. It is offered through the telecom provider’s mobile money platform and can be opened directly from a client’s cell phone. To incentivize clients to meet their educational savings goals, the account features an interest rate bonus on savings held until a goal date set by the client. The account also features a 48 hour waiting period before savings are released for withdrawals before the goal date. This waiting period is designed to provide an additional barrier to help reduce spending on temptations. 

 

The product will be marketed to parents with children in the last year of primary school. 340 primary schools across three districts in Kenya will be randomly assigned to three groups:

 

1)  Commitment Savings group: Parents from schools in this group will be encouraged to open a High-Hopes Lock-Savings Account.

2)  Regular Savings group: Parents from schools in this group will be encouraged to open a standard mobile phone-based savings account.

3)  Comparison: Parents from schools in this group will not be encouraged to open either savings product.

 

As parents save over the course of the study, half of the participants in all three groups will also be randomly assigned to receive SMS-based messages reminding them to save for their children’s transition to high school. 

 

Researchers will survey participants before they are offered an account and again after six months to evaluate if the High-Hopes account helps parents save for their children’s transition to high school compared to a regular mobile-based savings account or traditional savings methods. The surveys will help determine if regular reminders to save can help clients meet their savings goals. Researchers will also collect transaction data from the partnering telecom provider to measure account use, as well as administrative data from the School and Ministry of Educations to track high school enrollment rates.

 

Results forthcoming.