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The Role of Savings and Credit in Coping with Idiosyncratic Household Shocks

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  • Stephen B. DeLoach
  • Marquessa Smith-Lin

Abstract

This study examines the effect of access to formal banking services on households’ ability to smooth consumption in response to illness of adult workers. The institutional peculiarities of Indonesia’s largest commercial bank are exploited to separately estimate the effects of access to formal credit from savings. The means by which households smooth consumption differs depending on their access to formal services. Those with access to formal credit increase borrowing from banks, while those with access only to formal savings, but not credit, draw down on savings. Households without access to formal banking services end up liquidating productive assets.

Suggested Citation

  • Stephen B. DeLoach & Marquessa Smith-Lin, 2018. "The Role of Savings and Credit in Coping with Idiosyncratic Household Shocks," Journal of Development Studies, Taylor & Francis Journals, vol. 54(9), pages 1513-1533, September.
    • Handle: RePEc:taf:jdevst:v:54:y:2018:i:9:p:1513-1533
    DOI: 10.1080/00220388.2017.1380795
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    Cited by:

    1. Robert John Kolesar & Guido Erreygers & Wim van Dam & Vanara Chea & Theany Choeurng & Soklong Leng, 2021. "Hardship Financing, Productivity Loss, and the Economic Cost of Illness and Injury in Cambodia," Working Papers hal-03437399, HAL.
    2. Manh Hung Do, 2023. "The Role of Savings and Income Diversification in Households’ Resilience Strategies: Evidence from Rural Vietnam," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 168(1), pages 353-388, August.
    3. Sunil Khosla & Pradyot Ranjan Jena, 2023. "Using Multidimensional Poverty Measure to Target Right Beneficiaries to Achieve Sustainable Development Goal-1 in India," Indian Journal of Human Development, , vol. 17(2), pages 290-309, August.
    4. Fanny Salignac & Julien Hanoteau & Ioana Ramia, 2022. "Financial Resilience: A Way Forward Towards Economic Development in Developing Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 160(1), pages 1-33, February.
    5. Nyanzu, Frederick & Baylis, Kathy, 2023. "Mobile Money Service, Financial Inclusion, and Ag-Investment in Developing Countries: Evidence from Ghana," 2023 Annual Meeting, July 23-25, Washington D.C. 335719, Agricultural and Applied Economics Association.
    6. Ganchimeg Gombodorj & Károly Pető, 2022. "What Type of Households in Mongolia Are Most Hit by COVID-19?," Sustainability, MDPI, vol. 14(6), pages 1-20, March.
    7. Mallick, Debdulal & Zhang, Quanda, 2019. "The Effect of Financial Inclusion on Household Welfare in China," MPRA Paper 95786, University Library of Munich, Germany.
    8. Koomson, Isaac & Bukari, Chei & Villano, Renato A, 2021. "Mobile money adoption and response to idiosyncratic shocks: Empirics from five selected countries in sub-Saharan Africa," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    9. Manh Hung Do, 2023. "Saving up and diversifying income for a rainy day: Implications for households' resilience strategies and poverty," TVSEP Working Papers wp-033, Leibniz Universitaet Hannover, Institute of Development and Agricultural Economics, Project TVSEP.
    10. Alkis Blanz, 2023. "Climate-related Agricultural Productivity Losses through a Poverty Lens," Papers 2310.16490, arXiv.org, revised Oct 2023.
    11. Tim Hartwig & Trung Thanh Nguyen, 2022. "Local infrastructure, resilience capacity and poverty in rural Southeast Asia," TVSEP Working Papers wp-029, Leibniz Universitaet Hannover, Institute of Development and Agricultural Economics, Project TVSEP.

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