Commitment Savings Accounts for Remittance Receivers in Mexico

In Mexico, the financial intermediary “Caja Nacional del Sureste,” observed that it was transferring a large amount of remittances to their clients but that very little savings was captured from this flow of money. IPA has collaborated with Caja Nacional del Sureste (CNS) to develop and evaluate a strategy to increase savings among remittance receivers.

Study participants were those who received remittances at the Caja Nacional del Sureste from people living and working in the United States. Many of these remittance clients relied on these fund transfers to at least partially sustain their families. The use of formal saving accounts was low among those who collect remittances at the Caja Nacional del Sureste. Only 38% of these remittance receivers had a savings account at the Caja, and only about one half of these clients with an account saved any portion of their remittance.

Description of Intervention:

During the project, CNS offered a saving account called “Tu Futuro Seguro” (TFS) or “Your Secure Future” to associates, stake-holders of the cooperative, or non-associates remittance receivers in its four branches. The account paid 7% annually, compounded every month, with no restrictions on withdrawals or deposits. Tu Futuro Seguro (TFS) had no starting fees but required the client to sign a non-binding agreement to save a predetermined amount of money for every remittance received. The client decided that amount, although CNS suggests the amounts $20, $50, and $100. The client could also deposit from any other source of income. As the name suggests, the account was marketed to clients as an account to save for emergencies, future economic shocks, and future illnesses. Upon opening TFS, clients give a principal reason for saving. When clients returned for a new remittance, the TFS account holder was reminded of their savings goal and main reason for saving. Though clients could withdraw funds, they were encouraged to only use the money for an emergency purpose.  

This savings product was designed to serve the emergency needs of the target population and incorporated two principles from behavioral economics: mental accounting, and stickiness of the status quo. Mental accounting suggests that individuals may behave differently if funds are labeled and separated, even if in arbitrary ways, and that such separation may increase savings and alter consumption patterns. The status-quo theory suggests that individuals are likely to adhere to prior decisions and this pre-determined commitment may promote a habit of saving, even if this was not a binding agreement. Therefore, the expected effect was to observe higher level of savings for the treatment group than those in the comparison group.

When remittance receivers arrived in the branch, a computer software, ControlTFS, randomly assigned them to either treatment or comparison group. Total sample consisted of 783 remittance receivers with 386 in the treatment group and 397 in the comparison group. For clients assigned to the treatment group, the system automatically informed CNS staff to offer TFS product. During their subsequent visits, CNS staff continued to offer the product until clients opened the account. For those who were assigned to the comparison group, CNS staff followed routine process, and did not offer the TFS product.

There were two sources of data to inform the study. The baseline survey was administered by CNS staff to both treatment and comparison groups when clients first arrived in the branch and included questions on poverty, children’s attendance in school and information about remittances (who makes decision about remittances, relationship with the sender, and savings level). We also gathered administrative data from the CNS information system including account information such as daily transaction amount, monthly balance, basic demographic information, date to join as a member, purpose of the transaction, remittance amounts, committed saving amount, etc.

Results and Policy Lessons:

Among the 386 remittance beneficiaries who were randomly assigned to receive the TFS offer, 101 (26.17%) opened a savings account.  Take-up of TFS was higher among those who live below poverty line. Typically, these people were more likely to be female, with fewer years of education and speaking indigenous language. During the study period of two years and a half, TFS clients received an average of 10 remittances and people who did not take-up the product received an average of 5 remittances. We did not find a significant positive impact on product on savings, measured by monthly deposits, monthly withdrawals, and monthly net deposits. Indeed, the point estimate on total deposits and net deposits is negative (but not statistically significantly different than zero).

The failure to find significant treatment effects may be partly because of the difficulties encountered during the implementation. Ideally the self-commitment is built in as the status quo decision, i.e., upon going to the bank to receive one’s remittance, a proportion is by default set aside unless the client asks otherwise. This is not what happened in this implementation, however. Also, the total sample frame was lower than expected, thus lowering the precision (and removing our ability to argue that the null effect is precisely estimated). The sample frame was determined by approaching individuals as they came to the caja to receive a remittance, but fewer individuals came forward than was expected in the study intake time period. Usage of the savings account was lower than expected.