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The Economics Of Savings Groups

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  • Alfredo Burlando
  • Andrea Canidio
  • Rebekah Selby

Abstract

Millions of households worldwide rely on savings groups (SGs) to satisfy their financial needs, yet important gaps remain in our understanding of this novel financial institution. We show theoretically that, within an SG, the supply of funds could fall short or be in excess of its demand. Then, we use week‐by‐week records from 46 Ugandan SGs to show that most groups do not generate sufficient loanable funds. We conclude by proposing three interventions that, in light of our model, should ease credit rationing and improve the welfare of SG members: requiring SG members to publicly state their savings and borrowing goals, encouraging early savings, and linking SGs with formal financial institutions.

Suggested Citation

  • Alfredo Burlando & Andrea Canidio & Rebekah Selby, 2021. "The Economics Of Savings Groups," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(4), pages 1569-1598, November.
    • Handle: RePEc:wly:iecrev:v:62:y:2021:i:4:p:1569-1598
    DOI: 10.1111/iere.12526
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    References listed on IDEAS

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    1. Cassidy, Rachel & Fafchamps, Marcel, 2020. "Banker my neighbour: Matching and financial intermediation in savings groups," Journal of Development Economics, Elsevier, vol. 145(C).

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