Are there Financial Benefits to Join RoSCAs? Empirical evidence from Equb in Ethiopia

Abstract

Rotating Savings and Credit Associations (RoSCA) are informal financial institutions serving the financial service needs of many people in the developing countries. Though some researchers recommend the transformation of those institutions into formal ones to create economic efficiency, there is not much research on why members join those institutions and what benefits they derive from them. By taking an empirical example of Ethiopian equb and focusing on the financial feasibility of financial viability of becoming a member in RoSCA, this study assesses why members join RoSCAs. The survey conducted revealed that the financial motives outweigh all other motives in large equbs while the social motives are most important for members of small equbs. Most large and medium size equb members choose equbs than other possible alternatives because it is less expensive and involves very small transaction cost, if any. (C) 2012 Published by Elsevier Ltd. Selection and/or peer-review under responsibility of the Organising Committee of ICOAE 2012

Keywords

RoSCA; Equb; Ethiopia; Credit; Transaction cost

Published in

Procedia economics and finance
2012, volume: 1, pages: 229-238
Publisher: Elsevier

Conference

The International Conference on Applied Economics (ICOAE), Uppsala, Sweden, 2012

SLU Authors

• Karantininis, Konstantinos

  • Department of Economics, Swedish University of Agricultural Sciences
    
  • University of Copenhagen

• Feng, Li

  • Department of Economics, Swedish University of Agricultural Sciences
    

Global goals (SDG)

SDG8 Decent work and economic growth
SDG17 Partnerships for the goals

UKÄ Subject classification

Economics

Publication identifier

• DOI: https://doi.org/10.1016/S2212-5671(12)00027-5

Permanent link to this page (URI)

https://res.slu.se/id/publ/100262