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Saving in Sub-Saharan Africa

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Author Info
Ernest Aryeetey
Christopher Udry

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Abstract

Gross domestic savings in Africa averaged only 8 percent of GDP in the 1980s, compared to 23 percent for Southeast Asia and 35 percent in the Newly Industrialized Economies. Aside from being generally low, saving rates in most of Africa have shown consistent decline over the last thirty years. These savings figures must be considered tentative, because they are derived as a residual in the national accounts from expenditure and production data that are themselves quite unreliable. Notwithstanding the problems of measurement, it is clear that savings are dominated by household savings. Survey evidence in turn shows that household savings are primarily in the form of non-financial assets. Financial savings are predominantly directed to informal markets and institutions. The paper documents these trends and provides a simple model of portfolio allocation to guide future research. It is suggested that an array of transaction costs associated with formal financial markets, coupled with the risk management strategies and production activities of households in Africa account for the patterns of saving and portfolio allocation observed in the data.

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Paper provided by Center for International Development at Harvard University in its series CID Working Papers with number 38.

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Date of creation: Jan 2000
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Handle: RePEc:wop:cidhav:38

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Related research
Keywords: saving; Africa; household savings; transactions costs; risk management;

Find related papers by JEL classification:
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Fafchamps, Marcel & Udry, Christopher & Czukas, Katherine, 1998. "Drought and saving in West Africa: are livestock a buffer stock?," Journal of Development Economics, Elsevier, vol. 55(2), pages 273-305, April. [Downloadable!] (restricted)
    Other versions:
  2. Wolff, Edward N, 1998. "Recent Trends in the Size Distribution of Household Wealth," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 131-50, Summer. [Downloadable!] (restricted)
  3. Morduch, Jonathan, 1995. "Income Smoothing and Consumption Smoothing," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 103-14, Summer. [Downloadable!] (restricted)
    Other versions:
  4. John F. Wilson & James L. Freund & Frederick O. Yohn, Jr & Walther Lederer, 1989. "Measuring Household Saving: Recent Experience from the Flow-of-Funds Perspective," NBER Chapters, in: The Measurement of Saving, Investment, and Wealth, pages 101-152 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  5. Younger, Stephen D, 1992. "Testing the Link between Devaluation and Inflation: Time Series Evidence from Ghana," Journal of African Economies, Oxford University Press, vol. 1(3), pages 369-94, November.
  6. Miracle, Marvin P & Miracle, Diane S & Cohen, Laurie, 1980. "Informal Savings Mobilization in Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 28(4), pages 701-24, July.
  7. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 495-526, July. [Downloadable!] (restricted)
  8. Mwega, Francis M, 1997. "Saving in Sub-Saharan Africa: A Comparative Analysis," Journal of African Economies, Oxford University Press, vol. 6(3), pages 199-228, Supplemen.
  9. Deaton, A., 1989. "Saving in Developing Contries: Theory and Review," Papers 144, Princeton, Woodrow Wilson School - Development Studies.
  10. Heston, Alan, 1994. "A brief review of some problems in using national accounts data in level of output comparisons and growth studies," Journal of Development Economics, Elsevier, vol. 44(1), pages 29-52, June. [Downloadable!] (restricted)
  11. Alderman, H. & Paxson, C.H., 1992. "Do the Poor Insure? A Synthesis of the Literature on Risk and Consumption in Developing Countries," Papers 164, Princeton, Woodrow Wilson School - Development Studies.
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  12. Udry, Christopher, 1990. "Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy," World Bank Economic Review, Oxford University Press, vol. 4(3), pages 251-69, September.
  13. Deaton, A., 1992. "Saving and Income Smoothing in Cote d'Ivoire," Papers 156, Princeton, Woodrow Wilson School - Development Studies.
  14. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  15. Bigsten, A. & Collier, P. & dercon, S. & Fafchamps, M. & Gauthier, B. & Gunning, J.W. & Isaksson, A. & Oduro, A. & Oostendorp, R. & Pattillo, C. & Soderbom, M. & Teal, F. & Zeufack, A., 1998. "Rates of Return on Physical and Human Capital in Africa's manufacturing Sector," Working Papers Series 98-12, Centre for the Study of African Economies, University of Oxford.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Janvier D. Nkurunziza & Floribert Ngaruko, 2004. "Explaining Growth in Burundi: 1960-2000," Macroeconomics 0409012, EconWPA. [Downloadable!]
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