Can the Poor Save More? Evidence from Bangladesh

Microsavings contribute to smooth consumption, face emergencies and increase welfare of poor households and to empower and foster investment opportunities for poor women. We take advantage of an original survey submitted to 98 Bangladeshi women member of Hitaishi, a small Dhaka-based microfinance institution (MFI), to analyze the determinants and the effects of voluntary microsavings for poor households. The analysis of saving strategies confirms that the poor are financially sophisticated and use several different (formal and informal) savings devices. Different econometric exercises show that time inconsistency play a key role in women's attitude to voluntary save, which increases also with MFI membership. Distinctive patterns emerge in the choice of formal and informal savings institutions. We also find that the capacity to cover unexpected expenditures and over-indebtedness are less likely to occur among voluntary savers.