Banking on your neighbours: Savings groups and financial intermediation among the poor

In a new VoxEU article, IFS post-doctoral fellow Rachel Cassidy and Professor Marcel Fafchamps (Stanford University) discuss findings from their study on savings groups and financial intermediation in Malawi. 

Informal savings and borrowing groups may provide a way to intermediate between savers and borrowers in the developing world. But if these institutions attract mostly savers or mostly borrowers, or indeed if their members are concentrated in the same occupation, they may not function as well as they should. This column presents findings from a study of such groups in Malawi. The findings suggest that commitment savers and borrowers do mix in such groups, but people from the same occupation tend to stick together. This limits scope for financial intermediation, and may leave such groups vulnerable to shocks such as a bad harvest. 

Read the full article at VoxEU.

The full CEPR working paper can be found here.