The Economics of Roscas and Intra-Household Resource Allocation

Abstract

This paper investigates individual motives to participate in rotating savings and credit associations (roscas). Detailed evidence from roscas in a Kenyan slum (Nairobi) suggests that most roscas are predominantly composed of women, particularly those living in a couple and earning an independent income. To explain this phenomenon, we propose an argument based on conflictual interactions within the household. Participation in a rosca is a strategy a wife employs to protect her savings against claims by her husband for immediate consumption. The empirical implications of the model are then tested using the data collected in Kenya.

Keywords: Rosca, Gender, Household

JEL Classification: D10, J16, J12