Mobile-izing Savings with Automatic Contributions

Project Description

Experimental Evidence on Dynamic Inconsistency and the Default Effect in Afghanistan

Through a field experiment in Afghanistan, we show that default enrollment in payroll deductions increases rates of savings by 40 percentage points, and that this increase is driven by present-biased preferences. Working with Afghanistan’s primary mobile phone operator, we designed and deployed a new mobile phone-based automatic payroll deduction system. Each of 967 employees at the country’s largest rm was randomly assigned a default contribution rate (either 0% or 5%) as well as a matching incentive rate (0%, 25%, or 50%). We find that employees initially assigned a default contribution rate of 5% are 40 percentage points more likely to contribute to the account 6 months later than individuals assigned to a default contribution rate of zero; to achieve this effect through financial incentives alone would require a 50% match from the employer. We also find evidence of habit formation: default enrollment increases the likelihood that employees continue to save after the trial ended, and increases employees’ self-reported interest in saving and sense of financial security.

Joshua Blumenstock, Michael Callen, Tarek Ghani

Focus Areas
Financial services for the poor, Technology for development


Blumenstock, JE, Callen, MC, Ghani, T, Koepke, L (2015). Promises and Pitfalls of Mobile Money in Afghanistan: Evidence from a Randomized Control Trial
Blumenstock, JE, Callen, MC, Ghani (2016). “Mobile-izing Savings with Automatic Contributions: Experimental Evidence on Dynamic Inconsistency and the Default Effect in Afghanistan.”

Innovations for Poverty Action
Bill and Melinda Gates Foundation