Unlocking the Benefits of Credit through Saving
Working Paper 29542
DOI 10.3386/w29542
Issue Date
Access to microcredit has been shown to generate only modest average benefits for recipient households. We study whether other financial market frictions—in particular, lack of access to a safe place to save—might limit credit's benefits. Working with Kenyan farmers, we cross-randomize access to a simple savings product with a harvest-time loan. Among farmers offered a loan, the additional offer of a savings lockbox increased farm investment by 11% and household consumption by 7%. Results suggest that financial market frictions can interact in important ways and that multifaceted financial access programs might unlock dynamic household gains.