The economics of Rotating Savings and Credit Associations
AbstractThis paper analyzes the economic role and performance of a type of financial institution that is observed worldwide: rotating savings and credit associations. Using a model in which individuals save for an indivisible durable consumption good, the authors study rotating savings and credit associations that distribute funds using random allocation and bidding. Each type of rotating savings and credit association allows individuals without access to credit markets to improve their welfare but, under a reasonable assumption on preferences, random allocation is preferred when individuals have identical tastes. This conclusion need not hold when individuals are heterogeneous. The authors also discuss the sustainability of rotating savings and credit associations given the possibility of default. Copyright 1993 by American Economic Association.
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Bibliographic InfoPaper provided by Princeton, Woodrow Wilson School - Development Studies in its series Papers with number 157.
Length: 31 pages
Date of creation: 1992
Date of revision:
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Postal: PRINCETON UNIVERSITY, WOODROW WILSON SCHOOL OF PUBLIC AND INTERNATIONAL AFFAIRS, PRINCETON NEW- JERSEY 08542 U.S.A.
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financial institutions ; consumption ; savings;
Other versions of this item:
- 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.
- Besley, T. & Coate, S. & Loury, G., 1990. "The Economics Of Rotating Savings And Credit Associations," Papers 149, Princeton, Woodrow Wilson School - Development Studies.
- Timothy Besley & Stephen Coate & Glenn Loury, 1992. "The Economics of Rotating Savings and Credit Associations," Boston University - Institute for Economic Development 24, Boston University, Institute for Economic Development.
- Besley, T. & Coate, S. & Loury, G., 1990. "The Economics Of Rotating Savings And Credit Associations," Working papers 556, Massachusetts Institute of Technology (MIT), Department of Economics.
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