Financial products and transfer schemes are typically designed to improve welfare by helping individuals follow through on their intertemporal plans. We implement an artefactual ﬁeld experiment in Malawi to test the ability of households to manage a cash windfall by varying whether 474 households receive a payment in cash or through direct deposit into pre-established accounts at a local bank. Payments are made immediately, with one day delay, or with eight days delay. Defaulting the payments into savings accounts leads to higher net deposits into bank accounts, an eﬀect that persists for a number of weeks afterwards. However, neither savings defaults nor payment delays aﬀect the amount or composition of spending, suggesting that households manage cash eﬀectively without the use of formal ﬁnancial products.
∗The authors gratefully acknowledge the ﬁnancial support of the Yale Savings and Payments Research Fund at Innovations for Poverty Action, sponsored by a grant from the Bill & Melinda Gates Foundation. We thank Stacy Pancratz for her excellent oversight of ﬁeld work, and we appreciate helpful comments from Joshua Blumenstock, Tarek Ghani, Susan Godlonton, Margaret McConnell, and Lore Vandevalle. The views expressed in this paper are those of the authors and should not be attributed to the World Bank, its executive directors, or the countries they represent. All errors and omissions are our own. †Yale University, lasse.brune@yale.edu ‡World Bank, xgine@worldbank.org §University of Maryland, goldberg@econ.umd.edu ¶University of Michigan, deanyang@umich.edu
