The SEED experiment tested a counterintuitive proposition: that people would voluntarily choose a savings product that restricted their own access to money — and that this restriction would help them save more. Both hypotheses proved correct. Twenty-eight percent of those offered the account opened one — a high take-up rate for a product that explicitly reduced financial flexibility. Those who opened accounts showed substantial increases in savings balances. The mechanism was the commitment device itself: people who knew they had self-control problems with saving (measured by a prior hyperbolic discounting elicitation) were significantly more likely to take up the SEED account. The experiment was among the first to test the behavioral economics prediction that people will sometimes prefer to constrain their own future choices — 'tying themselves to the mast' — when they recognize that future-self will make decisions they will regret.
Research question
"Do commitment savings accounts — which restrict access to funds until a self-set goal is reached — increase savings and economic outcomes for low-income households?"
Methodology
Intervention
Clients of Green Bank of Caraga in rural Mindanao were randomly offered a SEED (Save, Earn, Enjoy Deposits) account — a savings product with a self-imposed restriction on withdrawals until either a target date or a target dollar amount was reached. Clients who opened the account chose their own goal; the bank enforced the restriction.
Assignment
Individual-level randomized controlled trial; 1,777 bank clients randomly assigned to receive an offer of the SEED account or not
Sample size
1,777 existing bank clients
Primary outcome
Savings balances at Green Bank at 6 and 12 months; household investment in productive assets
Effect estimate
28% of those offered SEED accounts opened one; savings balances increased by 82 pesos per week (approximately 81% of control mean) for account openers; no significant spillover to those offered but who declined
Decision
Study established the commitment device as a viable savings product and launched a large literature on behavioral finance in low-income settings; commitment savings products subsequently evaluated in Kenya, Malawi, and Ghana with similar results; findings contributed to financial product design across microfinance institutions globally
28% of those offered SEED accounts opened one; savings balances increased by 82 pesos per week (approximately 81% of control mean) for account openers; no significant spillover to those offered but who declined
Evidence strength
Strong
Randomized trial, replicated across multiple sites or studies.