Two-Sides of the Same Rupee? Comparing Demand for Microcredit and Microsaving in a Framed Field Experiment in Rural Pakistan

This paper assesses whether saving and borrowing among microfinance clients are substitutes, satisfying the same underlying demand for a regular schedule of deposits and a lump-sum withdrawal. It is based on a field experiment among women participating in group lending arrangements in rural Pakistan. The experiment involved randomly offering credit and savings products to a subject pool. The paper finds that the demand for both credit products and savings product were high, with the same individuals often accepting both a credit product and a savings product over three rounds of the experiment. It also suggest that the distinction between microlending and microsaving may be largely illusory as participants value a mechanism for regular deposits and lump-sum payments, irrespective of whether that is structured in the credit or the debt domain. The paper covers the following sections in detail:

• Discussion on the scope of the study and review of relevant literature;
• Conceptual framework, experimental design and implementation;
• Regression results with a focus on stylized facts about take-up relationships between product take-up and contract terms, experiment waves, and heterogeneous effects;
• Construction of a structural model and a discussion on structural results;
• Conclusion and implications of the study.