The Allocation of Capital in Rural Credit Markets

Alfredo Burlando and Andrea Canidio

Journal of International Development, 2016, vol. 28, issue 8, 1381-1395

Abstract: Understanding how capital flows within rural communities in sub‐Saharan Africa can provide important insights on the nature of poverty and the effectiveness of financial intermediation. We use unique individual‐level savings and borrowing data to study the flow of funds within a sample of 104 Ugandan savings groups. We show that poor households borrow from wealthier households, which implies that the marginal benefit of money is decreasing in wealth. Other individual characteristics do not predict the flow of funds within the group. We also fail to detect evidence that members are using savings groups to smooth out occupation‐specific income shocks. Copyright © 2016 John Wiley & Sons, Ltd.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:28:y:2016:i:8:p:1381-1395

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