COLLECTIVE ACTION AND INFORMAL FINANCIAL INSTITUTIONS: AN EMPIRICAL ANALYSIS OF ROTATING AND SAVINGS CREDIT ASSOCIATIONS (ROSCAS) IN SENEGAL

This study analyzes how rotating savings and credit associations (ROSCAs) in Senegal were able to overcome the collective action dilemma, maintain institutional performance, and remain sustainable over time. This study models cooperation among members as well as the performance and sustainability of associations using data collected from field research conducted in Dakar, Senegal in 2001. The results show that factors such as homogeneity of individuals within an association, how long the association has existed, how defaults are covered, and rules such residency requirements, individual contributions, and rotation order are to various degree critical to the performance and sustainability of ROSCAs and to the fostering of cooperation among members of these associations.