How moving money to the bank helps the poor
There is enormous latent demand for formal financial services among the poor
Ever since the high-denomination currency was withdrawn from circulation, there has been a spotlight on the possible impact of this move on the economic lives of the poor. Many economists have pointed out correctly that at least in the short run, disruption of the informal economy could impose costs on the poor. Those who support the move point out the long-term benefits to the poor which could result if the additional revenue that the government is likely to earn is transferred to them directly or indirectly. However, the first-order impact of nudging the poor to shift their savings from home to a bank account has not received much attention. This article reviews careful research published in top economic and finance journals on the subject. A key finding is that moving money from home to a bank may have enormous first-order benefits for the poor: The benefits would include increase in income, business investment and health spending, among other things.
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