Can employers help unbanked individuals enter the formal financial sector by offering their employees electronic wage payments? Researchers are working with a bank, a mobile money operator, and garment manufacturers to help answer this question. This study will randomly assign employees at select factories to either continue collecting their wages in cash, receive them as a mobile money payment, or as a direct deposit payment into a no-frills bank account. The research team will observe the effects of the new payment channels on the financial behavior of the employees. The researchers will also work with the employers to understand how best to transition to electronic wage payments and determine whether the new electronic payroll systems are a worthwhile investment in terms of cost and productivity.
Around the word, half of the adult population does not have a bank account at a formal financial institution.1 Most of these people are poor and must rely on cash to manage their day-to-day finances and plan for the future. Even as countries aggressively expand their banking infrastructure, poor households often still choose to save informally and many formal accounts remain dormant, preventing their potential welfare benefits from being realized. Electronic payment and savings systems, which reduce the cost and increase the convenience of formal financial services, are one tool with the potential to boost financial inclusion and encourage formal savings in poor households. This study measures the impact of providing workers in Bangladesh with no-frills bank accounts or mobile money accounts and examines if automatically depositing their wages into these accounts can encourage workers to save.
The study takes place in urban Dhaka, Bangladesh, with garment workers in four factories. Few of the factory workers who work on the production line have bank or mobile money accounts, and the use of high cost moneylenders is common. While the workers are currently paid in cash, many do use mobile money platforms for purposes such as transferring money to family members in home villages. However, most workers use vendors’ or other people’s accounts to conduct these transactions, paying high transaction fees in the process.