How Cutting the Cost of Using a Bank Affects Household’s Behavior of Remittance Transfers: Evidence From a Field Experiment in Rural Malawi

• Main Author: Lu, Chuyuan
• Format: Others
• Published: Scholarship @ Claremont 2016
• Subjects: Remittance; Mobile bank buses; Savings accounts; Bank distance; Malawi; Econometrics; Growth and Development
• Online Access: http://scholarship.claremont.edu/cmc_theses/1372; http://scholarship.claremont.edu/cgi/viewcontent.cgi?article=2431&context=cmc_theses

Using a randomized experiment in rural Malawi, this paper finds that providing information on mobile bank buses’ services leads to a higher probability of adopting savings accounts in the treatment group. Households in the treated villages are 3.06 percentage points more likely to adopt savings accounts than households in the control group. Second, the information treatment leads to an increase of in the probability of households receiving remittances in the treated villages, as well as an increase in the amount of remittances received. In particular, the effect is strongest for households that lived at least three kilometers away from the trade centers, which suggests that the main cost of transferring remittance is the cost of traveling to a bank. Third, the 2SLS regression provides suggestive evidence that adopting savings accounts leads to an increase in households’ remittance activities. The 63.3 percentage points increase in the possibility of households receiving remittances after adopting savings accounts suggests that there previously exist high costs associated with the informal channels of transferring remittances.