For agricultural workers without access to bank accounts, saving during the main farming season to be able to afford durable goods or buy necessities in the off-season is difficult, but important. Without the option to save their wages, workers may even choose to work less, feeling that working will not help them reach important goals. Researchers, in collaboration with a tea firm in Malawi, are introducing mobile savings accounts with an option for workers to defer receiving a part of their wages until the end of the tea harvesting season to evaluate whether these programs help workers save and work more.

Policy Issue 

Saving money is hard for many people, because it is difficult to postpone purchasing something now in favor of longer-term goals. When people lack access to bank accounts, putting aside money for later can be even harder. Yet, not saving causes problems for households that are then unable to make important investments (maintaining their homes or paying school fees, for example). For agricultural workers, saving income earned during the peak farming season is an important way to reach savings goals that include purchases of durable goods and having funds for necessities in the off-season. Not being able to save can also discourage people from working. If they cannot save their earnings for leaner times or for important future purchases, working during the agricultural season loses some of its value for laborers.

To solve this problem, people defer their wages, opting to collect part of their wages at a later date rather than with their regular paycheck. For example, recent focus groups among workers in Malawi revealed that a great majority would like a deferred payment option for their wages during the main season. While demand for this option appears high, little is known about its potential effects on workers’ welfare as well as their decision to work.

Context of the Evaluation 

In Malawi, workers who pick tea (“pluckers”) are paid piece-rate wages during the main season which lasts four to five months. Wages in the off-season are substantially lower, and many workers only rehired for the next main season. The Lujeri Tea Estates in the Mulanje district of southern Malawi is partnering with researchers to offer its workers mobile savings accounts and an option to defer part of their wages for the end of the season. The firm employs about 8,000 workers during the main season. Around 40 percent of these workers are women.

Around half of Lujeri workers participate in informal rotating savings groups during the main agricultural season. Members of the group take turns at receiving the regular contributions of all other members. Among non-participating workers lack of trust is cited as a major reason for not participating. Offering direct deposit into mobile money accounts, with and without a deferral option, could make it easier for workers to save during the main season, since mobile money accounts ease the problem of trust while also helping workers put money aside. This may encourage workers to work more during the main season, if it helps them reach their financial goals.

Details of the Intervention 

Researchers are implementing a randomized evaluation to study the effects of deferred wages and mobile savings accounts both on workers’ investments, consumption, and wellbeing, as well as on the labor supply.

Researchers will randomly assign 2,000 workers into one of three groups. Workers in all groups will receive a basic mobile money account startup package containing a SIM card and instructions on using mobile money. The first group will have the option to choose how much of their wages to receive via mobile money at the time of their two-weekly paycheck. The second group will have the option to defer receipt of part of their wages into mobile money wallets until the end of the season, rather than on paydays. Comparing the savings, spending, and working patterns between these two groups will help researchers see whether the “harder” commitment of the deferred wages group helps workers save more and encourages them to work more than the “softer” commitment of putting money in a mobile account. Workers in a third group will serve as the comparison group and will have access to the mobile money accounts, but without direct deposit or deferred wages.

Researchers will use survey data, data from the mobile money accounts and administrative data from the tea firm to measure whether workers in the first and second group save more during the agricultural season, spend more on larger purchases at the end of the season, consume more during the off season and work more during the off-season.