Commitment devices and farmer saving habits

Hyperbolic Discounting and Financial Products
Intervention Financial Products

Can restrictions be a good thing?

Intervention Description

Committment devices can be instrumental in changing saving and spending behavior. A World Bank study in Malawi offered farmers two different types of saving accounts – one of which restricted their ability to access their money. Those who used the ‘commitment account’ bought more agricultural tools than those offered an ordinary account. However, very few farmers who were offered actually used the account. The difference may have been a result of social pressure or other psychological factors.