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Banker My Neighbour: Matching and Financial Intermediation in Savings Groups

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  • Cassidy, Rachel
  • Fafchamps, Marcel

Abstract

Efforts to promote financial inclusion have largely focused on microcredit and microsaving separately, and less so on promoting financial intermediation across poor borrowers and savers. Village Savings and Loan Associations (VSLAs) and other Self-Help Groups have features of both a borrowing and a commitment savings technology, potentially enabling savers and borrowers to meet each other's needs. Intermediation may however be impeded by limited liability and imperfect information. To investigate this, we use a large-scale survey of mature VSLA groups in rural Malawi to analyse how members sort across groups. Wefindthat present-biased members tend to group with time-consistent members, suggesting that the former may be gaining a commitment savings technology by lending to the latter. In contrast, members of the same occupation sort into groups together, suggesting unrealised intermediation possibilities between farming and non-farming households. This has implications for the design of such groups.

Suggested Citation

  • Cassidy, Rachel & Fafchamps, Marcel, 2018. "Banker My Neighbour: Matching and Financial Intermediation in Savings Groups," CEPR Discussion Papers 12715, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12715
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    References listed on IDEAS

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    More about this item

    Keywords

    commitment savings; financial inclusion; Microfinance; savings groups;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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