Sustainability and organizational design in informal groups, with some evidence from Kenyan Roscas
Jean-Marie Baland () and
Karl Ove Moene ()
No 17/2003, Memorandum from Oslo University, Department of Economics
Informal groups cannot rely on external enforcement to insure that members abide by their obligations. It is generally assumed that these problems are solved by "social sanctions" and reputational effects. The present paper focuses on roscas, one of the most commonly found informal financial institutions in the developing world. We first show that, in the absence of an external (social) sanctioning mechanism, roscas are never sustainable, even if the defecting member is excluded from all future roscas. We then argue that the organizational structure of the rosca itself can be designed so as to reduce the severity of enforcement issues. The implications of our analysis are tested against first-hand evidence from rosca groups in a Kenyan slum.
Keywords: Roscas; informal financial institutions; developing world (search for similar items in EconPapers)
JEL-codes: G20 (search for similar items in EconPapers)
Pages: 49 pages
New Economics Papers: this item is included in nep-dev, nep-mfd and nep-soc
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://www.sv.uio.no/econ/english/research/unpubli ... 003/Memo-17-2003.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hhs:osloec:2003_017
Access Statistics for this paper
More papers in Memorandum from Oslo University, Department of Economics Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by Mari Strønstad Øverås ().