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Participation in Rotating Savings and Credit Associations in Indonesia: New Empirical Evidence on Social Capital

  • A. Lasagni
  • E. Lollo

    ()

Indonesia has a rich historical tradition of mutual cooperation at the community level. This study argues that rotating savings and credit associations (ROSCAs) constitute successful experiences of collective action within the informal financial sector. Therefore, using data from Indonesia Family Life Surveys, it explores the relationship between social capital and ROSCA participation and extends existing models from individual- to community-level determinants. The endowment of social capital at the village level correlates positively with individual ROSCA participation, because community social capital provides individual members with the resources needed to overcome self-selection and foster coordination -two main characteristics of ROSCAs. These results provide new evidence on the role of social capital for fostering collective action and offer new insights about community-driven development.

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File URL: http://swrwebeco.econ.unipr.it/RePEc/pdf/I_2011-05.pdf
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Paper provided by Department of Economics, Parma University (Italy) in its series Economics Department Working Papers with number 2011-EP05.

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Length: 35 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:par:dipeco:2011-ep05
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  1. Besley, Timothy & Coate, Stephen & Loury, Glenn, 1993. "The Economics of Rotating Savings and Credit Associations," American Economic Review, American Economic Association, vol. 83(4), pages 792-810, September.
  2. Besley, Timothy & Coate, Stephen & Loury, Glenn, 1994. "Rotating Savings and Credit Associations, Credit Markets and Efficiency," Review of Economic Studies, Wiley Blackwell, vol. 61(4), pages 701-19, October.
  3. Aloysius Gunadi Brata, 2004. "Social Capital And Credit In A Javanese Village," Finance 0410008, EconWPA.
  4. Miguel, Edward & Gertler, Paul & Levine, David I, 2006. "Does Industrialization Build or Destroy Social Networks?," Economic Development and Cultural Change, University of Chicago Press, vol. 54(2), pages 287-317, January.
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  6. Handa, Sudhanshu & Kirton, Claremont, 1999. "The economics of rotating savings and credit associations: evidence from the Jamaican 'Partner'," Journal of Development Economics, Elsevier, vol. 60(1), pages 173-194, October.
  7. Olivier Dagnelie & Philippe Lemay‐Boucher, 2012. "Rosca Participation in Benin: A Commitment Issue," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(2), pages 235-252, 04.
  8. Siwan Anderson, 2000. "The Economics of Roscas and Intra-Household Resource Allocation," Econometric Society World Congress 2000 Contributed Papers 1323, Econometric Society.
  9. Miller, Douglas L. & Scheffler, Richard & Lam, Suong & Rosenberg, Rhonda & Rupp, Agnes, 2006. "Social capital and health in Indonesia," World Development, Elsevier, vol. 34(6), pages 1084-1098, June.
  10. Besley, T. & Levenson, A., 1993. "The Role of Informal Finance in Household Capital Accumulation: Evidence from Taiwan," Papers 171, Princeton, Woodrow Wilson School - Development Studies.
  11. Yujiro Hayami, 2009. "Social Capital, Human Capital and the Community Mechanism: Toward a Conceptual Framework for Economists," Journal of Development Studies, Taylor & Francis Journals, vol. 45(1), pages 96-123.
  12. Callier, Philippe, 1990. "Informal Finance: The Rotating Saving and Credit Association--An Interpretation," Kyklos, Wiley Blackwell, vol. 43(2), pages 273-76.
  13. Marcel Fafchamps, 2005. "Development and Social Capital," Economics Series Working Papers GPRG-WPS-007, University of Oxford, Department of Economics.
  14. Zeller, Manfred, 1996. "Determinants of repayment performance in credit groups," FCND discussion papers 13, International Food Policy Research Institute (IFPRI).
  15. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  16. Anju Vajja & Howard White, 2008. "Can the World Bank Build Social Capital? The Experience of Social Funds in Malawi and Zambia," Journal of Development Studies, Taylor & Francis Journals, vol. 44(8), pages 1145-1168.
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