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The Allocation of Capital in Rural Credit Markets
Author(s) -
Burlando Alfredo,
Canidio Andrea
Publication year - 2016
Publication title -
journal of international development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.533
H-Index - 66
eISSN - 1099-1328
pISSN - 0954-1748
DOI - 10.1002/jid.3256
Subject(s) - flow of funds , economics , intermediation , financial intermediary , sample (material) , poverty , capital (architecture) , capital flows , capital market , monetary economics , demographic economics , finance , economic growth , microeconomics , geography , profit (economics) , chemistry , archaeology , chromatography
Understanding how capital flows within rural communities in sub‐Saharan Africa can provide important insights on the nature of poverty and the effectiveness of financial intermediation. We use unique individual‐level savings and borrowing data to study the flow of funds within a sample of 104 Ugandan savings groups. We show that poor households borrow from wealthier households, which implies that the marginal benefit of money is decreasing in wealth. Other individual characteristics do not predict the flow of funds within the group. We also fail to detect evidence that members are using savings groups to smooth out occupation‐specific income shocks. Copyright © 2016 John Wiley & Sons, Ltd.