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Saving in Sub-Saharan Africa

  • Ernest Aryeetey
  • Christopher Udry

Gross domestic savings in Africa averaged only 8 percent of GDP in the 1980s, compared to 23 percent for Southeast Asia and 35 percent in the Newly Industrialized Economies. Aside from being generally low, saving rates in most of Africa have shown consistent decline over the last thirty years. These savings figures must be considered tentative, because they are derived as a residual in the national accounts from expenditure and production data that are themselves quite unreliable. Notwithstanding the problems of measurement, it is clear that savings are dominated by household savings. Survey evidence in turn shows that household savings are primarily in the form of non-financial assets. Financial savings are predominantly directed to informal markets and institutions. The paper documents these trends and provides a simple model of portfolio allocation to guide future research. It is suggested that an array of transaction costs associated with formal financial markets, coupled with the risk management strategies and production activities of households in Africa account for the patterns of saving and portfolio allocation observed in the data.

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File URL: http://www.cid.harvard.edu/cidwp/pdf/038.pdf
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Paper provided by Center for International Development at Harvard University in its series CID Working Papers with number 38.

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Date of creation: Jan 2000
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Handle: RePEc:wop:cidhav:38
Contact details of provider: Postal: Center for International Development at Harvard University (CID). 79 John F. Kennedy Street, Cambridge, MA 02138.
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  3. Mwega, Francis M, 1997. "Saving in Sub-Saharan Africa: A Comparative Analysis," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 199-228, Supplemen.
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  8. Fafchamps, Marcel & Udry, Christopher & Czukas, Katherine, 1998. "Drought and saving in West Africa: are livestock a buffer stock?," Journal of Development Economics, Elsevier, vol. 55(2), pages 273-305, April.
  9. S. I. Ikhide, 1996. "Commercial bank offices and the mobilisation of private savings in selected sub-Saharan African countries," Journal of Development Studies, Taylor & Francis Journals, vol. 33(1), pages 117-132.
  10. Deaton, A., 1992. "Saving and Income Smoothing in Cote d'Ivoire," Papers 156, Princeton, Woodrow Wilson School - Development Studies.
  11. Paul Collier & Marcel Fafchamps & Francis Teal & Stefan Dercon, 1998. "Rates of return on physical and human capital in Africa`s manufacturing sector," Economics Series Working Papers WPS/1998-12, University of Oxford, Department of Economics.
  12. Younger, Stephen D, 1992. "Testing the Link between Devaluation and Inflation: Time Series Evidence from Ghana," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 1(3), pages 369-94, November.
  13. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  14. Miracle, Marvin P & Miracle, Diane S & Cohen, Laurie, 1980. "Informal Savings Mobilization in Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 28(4), pages 701-24, July.
  15. Udry, Christopher, 1990. "Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy," World Bank Economic Review, World Bank Group, vol. 4(3), pages 251-69, September.
  16. Srinivasan, T. N., 1994. "Data base for development analysis Data base for development analysis: An overview," Journal of Development Economics, Elsevier, vol. 44(1), pages 3-27, June.
  17. Deaton, A., 1989. "Saving in Developing Contries: Theory and Review," Papers 144, Princeton, Woodrow Wilson School - Development Studies.
  18. Heston, Alan, 1994. "A brief review of some problems in using national accounts data in level of output comparisons and growth studies," Journal of Development Economics, Elsevier, vol. 44(1), pages 29-52, June.
  19. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 495-526, July.
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