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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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  2. Olivier Dagnelie & Philippe LeMay-Boucher, 2008. "Rosca Participation in Benin: a Commitment Issue," Working Papers 339, Barcelona Graduate School of Economics.
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  12. 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.
  13. Zeller, Manfred, 1996. "Determinants of repayment performance in credit groups," FCND discussion papers 13, International Food Policy Research Institute (IFPRI).
  14. Callier, Philippe, 1990. "Informal Finance: The Rotating Saving and Credit Association--An Interpretation," Kyklos, Wiley Blackwell, vol. 43(2), pages 273-76.
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