Enforcement and Organizational Design in Informal Saving Groups. BREAD working paper no. 74; journal of development economics, 2009

S. Anderson, Jean-Marie Baland, K.O. Moene

Research output: Other contribution

85 Downloads (Pure)

Abstract

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 address enforcement issues. The implications of our analysis are tested against first-hand evidence from rosca groups in a Kenyan slum.
Original languageEnglish
Publication statusPublished - 2009

Fingerprint Dive into the research topics of 'Enforcement and Organizational Design in Informal Saving Groups. BREAD working paper no. 74; journal of development economics, 2009'. Together they form a unique fingerprint.

  • Cite this