Roscas as Financial Agreements to Cope with Social Pressure

Preprint
Publisher Website
Google Scholar
  • 1 January 2003
    • preprint
      • Published in RePEc
Abstract
In developing countries, traditional social obligations often press rich individuals to share their income. In this paper, we posit a "model of social pressure" in which people can sign binding financial agreements amongst themselves, thereby forming coalitions. These financial agreements may help them to alleviate their social obligations with respect to income sharing. In the above context, we show that there exists a stable structure of coalitions in which people form rotating savings and credit associations (roscas). We therefore provide a rationale for one of the most prevalent and puzzling financial institutions.
All Related Versions

This publication has 0 references indexed in Scilit: