Enforcement Problems in ROSCAs: Evidence from Benin

Kyle McNabb (), Philippe LeMay-Boucher () and Jacopo Bonan
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Kyle McNabb: UNU-WIDER
Philippe LeMay-Boucher: Heriot-Watt University

The European Journal of Development Research, 2019, vol. 31, issue 5, No 9, 1389-1415

Abstract: Abstract Using data from a unique field survey in urban Benin, we investigate the sustainability of Rotating Savings and Credit Associations (ROSCAs) over time. We test the theories from the relevant literature that suggest that ROSCAs can be designed in a manner that minimizes the likelihood of enforcement problems occurring. The data paint a picture of inherent instability: over a 2-year period, one in three groups experienced enforcement problems; two-thirds of which collapsed. The results highlight the importance of the order of pot allocation, ruling structure, and social connectedness in minimizing the risk of enforcement problems occurring. Repeated interactions among members can also enhance sustainability over time.

Keywords: Economics; ROSCAs; Informal finance; Benin; Africa; Social capital (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1057/s41287-019-00215-5

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