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You Cant Save Alone Commitment in RSOCA in Kenya

You Cant Save Alone Commitment in RSOCA in Kenya - You Cant...

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2007 by The University of Chicago. All rights reserved. 0013-0079/2007/5502-0004$10.00 You Can’t Save Alone: Commitment in Rotating Savings and Credit Associations in Kenya mary kay gugerty University of Washington I. Introduction This article examines reasons why individuals develop and maintain local-level financial savings organizations known as rotating savings and credit organi- zations, or Roscas. Roscas are locally organized groups that meet at regular intervals; at each meeting members contribute funds that are given in turn to one or more of the members. Once every participant has received funds, the Rosca can disband or begin another round. In joining a Rosca, an individual agrees to a schedule of periodic payments in return for which she receives a lump-sum payment at a future date. Roscas often pay no interest, and partic- ipants may have little or no control over when they receive the funds. Participants also bear the risk that other participants may not fulfill their obligations. Rotating savings and credit associations are among the oldest and most prevalent savings institutions found in the world and play an important role in savings mobilization in many developing economies. Rosca participation is particularly high in Africa. Estimates suggest that Rosca participation ranges from 50% to 95% in many rural areas in Liberia, Ivory Coast, Togo, and Nigeria (Bouman 1995). Surveys in central Kenya estimate Rosca participation at 45%–50% (Kimuyu 1999). While Roscas are often found in African econ- omies where formal credit markets are thin or nonexistent, they are also found in more developed areas where individuals have access to formal banking institutions. Roscas have been reported among employees of the International Monetary Fund (IMF; Ardener 1995) and among bank employees in Bolivia I thank the World Bank Social Capital Initiative and the MacArthur Network on Inequality for support of this work, as well as ICS Africa for their cooperation and expertise. Helpful comments were provided by Ted Miguel, Ashok Rai, Michael Kremer, David Laibson, Peter Timmer, Merilee Grindle, Robert Bates, Mark Schreiner, Leigh Anderson, Marieka Klawitter, Diana Fletschner, two anonymous referees, and seminar participants at Harvard University and the NEUDC conferences at Cornell University and Harvard University. Everyone at ICS-Busia provided tremendous research assistance, administrative support, and insight; particular thanks go to Robert Namunyu, Moses Osia, John Ikoluot, and Florence Makokha. All errors are my own.
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252 economic development and cultural change (Adams and Canavesi 1992) and Ghana (Bortei-Doku and Aryeetey 1995). In a sample in urban Zimbabwe, 76% of urban market traders participate in a Rosca, even though 77% of these traders have a bank account (Chamlee-Wright 2002). In countries such as Taiwan, with relatively well-functioning credit markets, as many as 80% of adults are estimated to belong to Roscas (Levenson and Besley 1996). Rosca-style banking mechanisms remain popular in modern Japan (Dekle and Hamada 2000) and Argentina (Schreiner 2000).
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