It is tempting to assume that the poor cannot save because they only have enough resources to meet their immediate needs. But many in fact use a variety of informal means to save, including savings clubs, investing in livestock, and purchasing inventory for their businesses. Most, however, underutilize formal savings accounts when they could benefit from the added security of holding their money in a bank. Removing savings from the household makes it easier for people to resist the temptation to spend the money compulsively and to give into the demands of family, friends, and neighbors. Many poor do not save with banks because they do not know how, feel intimidated by banks, or find it inconvenient to go to a branch and wait in a line to make a deposit or withdrawal.

IPA is working with an association of street vendors in La Paz, Bolivia to evaluate strategies to help them accumulate lump sums of money and to connect them to formal savings accounts. Street vendors in Bolivia are often organized into associations of like vendors. One objective of this study is to develop a way to leverage the organizational structure of these associations to reduce the barriers to take up of formal savings. This is done by facilitating the opening of accounts for association members, organizing deposit collections among the members to reduce the transaction costs of making deposits, providing convenient reminders to save, and by providing social proof that others are saving. IPA is also testing lock boxes as an intermediate commitment device to help members accumulate lump sums of money between deposits into their bank accounts.

This study is conducted with an association of approximately 70 small-scale booksellers. Two thirds of the members chosen at random receive a lockable savings box (similar to a piggy bank). Half of them retain access to the keys to open the boxes while the other half allow a chosen official of the association to guard their keys, limiting their access to their savings. The final third do not receive a box and serve as the control. Association members decide on a financial institution and open individual savings accounts. Each month two representatives of the association collect members’ savings, providing the keys to open boxes for those who need them, and take them to the bank for deposit. The association shares the data on monthly savings with IPA.