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The Allocation of Capital in Rural Credit Markets

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  • Alfredo Burlando
  • Andrea Canidio

Abstract

Understanding how capital flows within rural communities in sub‐Saharan Africa can provide important insights on the nature of poverty and the effectiveness of financial intermediation. We use unique individual‐level savings and borrowing data to study the flow of funds within a sample of 104 Ugandan savings groups. We show that poor households borrow from wealthier households, which implies that the marginal benefit of money is decreasing in wealth. Other individual characteristics do not predict the flow of funds within the group. We also fail to detect evidence that members are using savings groups to smooth out occupation‐specific income shocks. Copyright © 2016 John Wiley & Sons, Ltd.

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  • Alfredo Burlando & Andrea Canidio, 2016. "The Allocation of Capital in Rural Credit Markets," Journal of International Development, John Wiley & Sons, Ltd., vol. 28(8), pages 1381-1395, November.
    • Handle: RePEc:wly:jintdv:v:28:y:2016:i:8:p:1381-1395
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    Cited by:

    1. 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.
    2. 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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