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Enforcement Problems in ROSCAs: Evidence from Benin

Author

Listed:
  • Kyle McNabb

    (UNU-WIDER)

  • Philippe LeMay-Boucher

    (Heriot-Watt University)

  • Jacopo Bonan

    (Fondazione Eni Enrico Mattei)

Abstract

Using data from a unique field survey in urban Benin, we investigate the sustainability of Rotating Savings and Credit Associations (ROSCAs) over time. We test the theories from the relevant literature that suggest that ROSCAs can be designed in a manner that minimizes the likelihood of enforcement problems occurring. The data paint a picture of inherent instability: over a 2-year period, one in three groups experienced enforcement problems; two-thirds of which collapsed. The results highlight the importance of the order of pot allocation, ruling structure, and social connectedness in minimizing the risk of enforcement problems occurring. Repeated interactions among members can also enhance sustainability over time.

Suggested Citation

  • Kyle McNabb & Philippe LeMay-Boucher & Jacopo Bonan, 2019. "Enforcement Problems in ROSCAs: Evidence from Benin," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 31(5), pages 1389-1415, December.
    • Handle: RePEc:pal:eurjdr:v:31:y:2019:i:5:d:10.1057_s41287-019-00215-5
    DOI: 10.1057/s41287-019-00215-5
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    References listed on IDEAS

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