Year: 2005
Working paper number: 112
Author: Irving, Margaret
Unit: SSU

Informal savings groups (ISGs) provide an important means of consolidating financial resources in poor communities. However, this paper takes the view that the benefits to participation extend beyond conventional economic gains, and membership decisions should thus be viewed in the broader context of the joint accumulation of social and financial capital. The introductory section reviews the existing social capital literature and contextualises the work of Uhlaner (1989) on relational goods in this framework. The importance of social capital in establishing informal social security networks and systems of mutual insurance is highlighted, with a particular focus on the division of social responsibilities as a root cause for the differential formation of these networks by gender. As yet, there has been no systematic study of the role and functioning of ISGs, with the existing literature predominantly in the form of case studies. There is some evidence to suggest that the view that holds stokvels and ISGs as synonymous is inaccurate. This contributes to the considerable inadequacy of existing datasets for drawing reliable conclusions on savings behaviour. As a consequence, this paper is qualitative in its approach, using the social capital paradigm developed previously together with information gathered from a focus group to construct an expanded understanding of why these groups continue to flourish alongside formal financial institutions.

Publication file: wp112.pdf