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Promises kept: enforcement and the role of rotating savings and credit associations in an economy

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  • N. S. Chiteji
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    Abstract

    Rotating savings and credit associations (roscas) are a popular form of informal finance in developing countries. This paper examines the rosca's ability to enforce its terms of membership and the implications that this has for their existence in an economy. A connection between enforcement costs and the desirability of rosca formation is illustrated using a framework that focuses on the nature of the financial contract that the rosca offers, allowing inferences to be drawn about the likely viability of roscas throughout the development process and the implications this has for debates about financial dualism. Copyright © 2002 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/jid.847
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

    Volume (Year): 14 (2002)
    Issue (Month): 4 ()
    Pages: 393-411

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    Handle: RePEc:wly:jintdv:v:14:y:2002:i:4:p:393-411

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    Web page: http://www3.interscience.wiley.com/journal/5102/home

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    1. Kovsted, Jens & Lyk-Jensen, Peter, 1999. "Rotating savings and credit associations: the choice between random and bidding allocation of funds," Journal of Development Economics, Elsevier, vol. 60(1), pages 143-172, October.
    2. Jaffee, Dwight & Stiglitz, Joseph, 1990. "Credit rationing," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 16, pages 837-888 Elsevier.
    3. Levenson, Alec R. & Besley, Timothy, 1996. "The anatomy of an informal financial market: Rosca participation in Taiwan," Journal of Development Economics, Elsevier, vol. 51(1), pages 45-68, October.
    4. Besley, Timothy & Coate, Stephen & Loury, Glenn, 1993. "The Economics of Rotating Savings and Credit Associations," American Economic Review, American Economic Association, vol. 83(4), pages 792-810, September.
    5. Besley, Timothy & Coate, Stephen & Loury, Glenn, 1994. "Rotating Savings and Credit Associations, Credit Markets and Efficiency," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 701-19, October.
    6. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
    7. Bouman, F. J. A., 1995. "Rotating and accumulating savings and credit associations: A development perspective," World Development, Elsevier, vol. 23(3), pages 371-384, March.
    8. Kimuyu, Peter Kiko, 1999. "Rotating Saving and Credit Associations in Rural East Africa," World Development, Elsevier, vol. 27(7), pages 1299-1308, July.
    9. Handa, Sudhanshu & Kirton, Claremont, 1999. "The economics of rotating savings and credit associations: evidence from the Jamaican 'Partner'," Journal of Development Economics, Elsevier, vol. 60(1), pages 173-194, October.
    10. Stephen D. Williamson, 1984. "Costly Monitoring, Financial Intermediation, and Equilibrium Credit Rationing," Working Papers 583, Queen's University, Department of Economics.
    11. Besley, T. & Levenson, A., 1993. "The Role of Informal Finance in Household Capital Accumulation: Evidence from Taiwan," Papers 171, Princeton, Woodrow Wilson School - Development Studies.
    12. Stephen D. Williamson, 1987. "Recent developments in modeling financial intermediation," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 19-29.
    13. van den Brink, Rogier & Chavas, Jean-Paul, 1997. "The Microeconomics of an Indigenous African Institution: The Rotating Savings and Credit Association," Economic Development and Cultural Change, University of Chicago Press, vol. 45(4), pages 745-72, July.
    14. Calomiris, Charles W. & Rajaraman, Indira, 1998. "The role of ROSCAs: lumpy durables or event insurance?," Journal of Development Economics, Elsevier, vol. 56(1), pages 207-216, June.
    15. Madeleine Leonard, 2000. "Coping strategies in developed and developing societies: the workings of the informal economy," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(8), pages 1069-1085.
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    Cited by:
    1. Gareth A. Jones & Anthea Dallimore, 2009. "Wither participatory banking?: experiences with village banks in South Africa," LSE Research Online Documents on Economics 23354, London School of Economics and Political Science, LSE Library.

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