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Enforcement Problems in ROSCAs: Evidence from Benin

  • Kyle McNabbEmail author
  • Philippe LeMay-Boucher
  • Jacopo Bonan
Original Article

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 

Résumé

À l’aide des données d’une enquête de terrain unique réalisée dans les zones urbaines du Bénin, nous étudions la perennité des associations rotatives d’épargne et de crédit (AREC) sur la durée. Nous testons les théories de la littérature sur le sujet, qui suggèrent que les AREC peuvent être conçues de façon à minimiser la probabilité de problèmes d’exécution. Les données brossent un tableau d’instabilité inhérente: sur une période de deux ans, un groupe sur trois a eu des problèmes d’exécution, dont les deux tiers se sont effondrés. Les résultats soulignent l’importance de l’ordre d’attribution des pots, de la structure dirigeante et des liens sociaux pour minimiser le risque de problèmes d’exécution. Des interactions répétées entre les membres peuvent également améliorer la durabilité avec le temps.

Notes

Compliance with Ethical Standards

Conflict of interest

On behalf of all authors, the corresponding author states that there is no conflict of interest.

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Copyright information

© European Association of Development Research and Training Institutes (EADI) 2019

Authors and Affiliations

  1. 1.UNU-WIDERHelsinkiFinland
  2. 2.Department of EconomicsHeriot-Watt UniversityEdinburghUK
  3. 3.Fondazione Eni Enrico MatteiMilanItaly

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