Enforcement Problems in ROSCAs: Evidence from Benin

Kyle McNabb, Philippe LeMay-Boucher, Jacopo Bonan

Research output: Contribution to journalArticle

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.

Original languageEnglish
Pages (from-to)1389-1415
Number of pages27
JournalEuropean Journal of Development Research
Volume31
Issue number5
Early online date17 Apr 2019
DOIs
Publication statusPublished - Dec 2019

Keywords

  • Africa
  • Benin
  • Economics
  • Informal finance
  • ROSCAs
  • Social capital

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development

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