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Innovations for Poverty Action (2014)

Dairy Market Responses to Saving Constraints in Kenya

Dairy Market Savings Kenya

Innovations for Poverty Action

Titre : Dairy Market Responses to Saving Constraints in Kenya

Région /Pays : Kenya

Date : 2014

To meet their saving goals, farmers often rely on informal saving mechanisms and commitment devices. But how much do farmers value these saving services ? In partnership with a local dairy cooperative, researchers utilized a combination of evaluations and surveys to measure dairy farmers’ responses to various price and timing incentives. They found that farmers willingly declined daily payments at higher milk prices in favor of monthly payments at lower prices, a practice that allowed them to save and acted as a commitment device to meet their saving goals. However, farmers only trusted more established co-op buyers to uphold monthly payment commitments, and preferred to receive daily payments from more mobile, less-established traders.

Lack of access to saving presents an economic barrier to low-income populations. With limited savings and access to credit, households cannot maintain their consumption levels when their income fluctuates, and they may be unable to make costlier (and more productive) investments that would benefit them in the long run.1 In the absence of formal saving products, such as bank accounts, individuals often seek out alternative, informal means to achieve their saving goals. For example, farmers might rely on deferred payments from the buyers of their products, in the form of monthly lump-sum payments that require them to save, instead of opting for daily payments. As evidence from both low- and high-income contexts suggests, are farmers willing to forego higher prices for their goods to access informal saving mechanisms ?

Taille de l’échantillon  : 398 dairy farmers

Innovation for Poverty Action (IPA)

Page publiée le 9 septembre 2023