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You Can’t Save Alone: Commitment in Rotating Savings and Credit Associations in Kenya


  • Mary Kay Gugerty


This article examines one reason why individuals develop and maintain local-level financial savings organizations known as rotating savings and credit organizations, or Roscas. Economic theories suggest that individuals form Roscas to finance the purchase of a lumpy durable good, in response to intrahousehold conflict over savings, or to provide themselves with insurance. The article proposes an additional hypothesis for Rosca participation: saving requires discipline, and some Roscas may be formed to provide a collective mechanism for commitment in the presence of time-inconsistent preferences. Data from 70 Roscas located in western Kenya indicate that the commitment hypothesis is plausible and broadly consistent with the design and patterns of participation in these Roscas. As many Rosca participants put it, “You can’t save alone.â€

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  • Mary Kay Gugerty, 2007. "You Can’t Save Alone: Commitment in Rotating Savings and Credit Associations in Kenya," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 251-282.
  • Handle: RePEc:ucp:ecdecc:v:55:y:2007:p:251-282 DOI: 10.1086/508716

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    References listed on IDEAS

    1. Jean-Philippe Platteau, 1997. "Mutual insurance as an elusive concept in traditional rural communities," Journal of Development Studies, Taylor & Francis Journals, vol. 33(6), pages 764-796.
    2. Miguel, Edward & Gugerty, Mary Kay, 2005. "Ethnic diversity, social sanctions, and public goods in Kenya," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2325-2368, December.
    3. Levenson, Alec R. & Besley, Timothy, 1996. "The anatomy of an informal financial market: Rosca participation in Taiwan," Journal of Development Economics, Elsevier, vol. 51(1), pages 45-68, October.
    4. George Loewenstein & Drazen Prelec, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 573-597.
    5. George-Marios Angeletos, 2001. "The Hyberbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 47-68, Summer.
    6. Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Tying Odysseus to the Mast: Evidence From a Commitment Savings Product in the Philippines," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 635-672.
    7. Calomiris, Charles W. & Rajaraman, Indira, 1998. "The role of ROSCAs: lumpy durables or event insurance?," Journal of Development Economics, Elsevier, vol. 56(1), pages 207-216, June.
    8. Stefan Klonner, 2003. "Rotating Savings and Credit Associations When Participants are Risk Averse," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 979-1005, August.
    9. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
    10. Chamlee-Wright, Emily, 2002. "Savings and Accumulation Strategies of Urban Market Women in Harare, Zimbabwe," Economic Development and Cultural Change, University of Chicago Press, vol. 50(4), pages 979-1005, July.
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    Cited by:

    1. Jean-Marie Baland & Rohini Somanathan & Lore Vandewalle, 2017. "Socially Disadvantaged Groups and Micro-finance in India," Working Papers id:12201, eSocialSciences.
    2. Deepa Narayan & Lant Pritchett & Soumya Kapoor, 2009. "Moving Out of Poverty : Volume 2. Success from the Bottom Up," World Bank Publications, The World Bank, number 11838.
    3. Abhijit Banerjee & Sendhil Mullainathan, 2010. "The Shape of Temptation: Implications for the Economic Lives of the Poor," NBER Working Papers 15973, National Bureau of Economic Research, Inc.
    4. Karna Basu, 2011. "Hyperbolic Discounting and the Sustainability of Rotational Savings Arrangements," American Economic Journal: Microeconomics, American Economic Association, vol. 3(4), pages 143-171, November.
    5. Brigitte C. Madrian, 2014. "Applying Insights from Behavioral Economics to Policy Design," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 663-688, August.
    6. repec:eee:joepsy:v:61:y:2017:i:c:p:39-54 is not listed on IDEAS
    7. Nordén, Anna, 2014. "Payment Types and Participation in Payment for Ecosystem Services Programs: Stated Preferences of Landowners," Working Papers in Economics 591, University of Gothenburg, Department of Economics.
    8. Ashraf, Nava & Karlan, Dean & Yin, Wesley, 2010. "Female Empowerment: Impact of a Commitment Savings Product in the Philippines," World Development, Elsevier, vol. 38(3), pages 333-344, March.
    9. Christine L. Exley & Jeffrey K. Naecker, 2015. "Observability Increases the Demand for Commitment Devices," Harvard Business School Working Papers 16-064, Harvard Business School, revised Mar 2016.
    10. Basu, Karna, 2014. "Commitment savings in informal banking markets," Journal of Development Economics, Elsevier, vol. 107(C), pages 97-111.
    11. Pascaline Dupas & Jonathan Robinson, 2013. "Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 163-192, January.
    12. Schure, Jolien & Levang, Patrice & Wiersum, K. Freerk, 2014. "Producing Woodfuel for Urban Centers in the Democratic Republic of Congo: A Path Out of Poverty for Rural Households?," World Development, Elsevier, vol. 64(S1), pages 80-90.

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