Trust and ROSCA membership in rural Cameroon

Abstract

A key element of Rotating Saving and Credit Associations (ROSCAs) is the trust which members must place in each other, and which replaces formal financial contracts in places where financial transactions costs are high. However, there is very little evidence on the relationship between trust and ROSCA membership. We address this issue using new experimental data from rural Cameroon. We find large and statistically significant differences between trust among ROSCA members and trust among other people. However, the demographic characteristics associated with ROSCA membership are rather different from the ones that explain variations in the level of experimental trust.

Measures of Trust and Participation in Collective Actions: Evidence from Rural Senegal

“…A key element of this design is that each participant knows that he/she is randomly matched with a member of his/her own community but he has no idea of his/her opponent's identity. On average, first movers send 53 percent of their endowment, which is consistent with the results in Castillo and Carter (2003) for South Africa and substantially lower than the amount shared in Etang et al (2010). With this design of the trust game that we call Community Condition of Trust Game (CCT), we expect to capture the level of trust (the amount sent by the first player called the CCT trust) which is required for subjects to participate in collective activities.…”

Trust, Trust Attitudes and Group Membership

“…This result is consistent with Schechter () who also finds a negative relationship between education and amount sent in Paraguay. However, Etang et al () find a significant positive effect between education and amount sent in Cameroon.…”

“…To our knowledge, two studies have been conducted focusing on the correlation between trust and group membership in a developing country setting. Etang et al, () find that members of rotating savings and credit associations were more trusting than non‐rotating savings and credit association members. In contrast, Karlan () finds evidence that participants in a microfinance intervention, FINCA in Peru, were not more trusting.…”

“…It has been implemented in the laboratory with students as subjects, and it is being used increasingly in the field to measure trust and reciprocity in developing countries' settings (for a survey study, refer to Cardenas & Carpenter, ). Additionally, the two methods have been used jointly to compare and contrast the two approaches in different settings (Capra et al, ; Etang et al, ; Gächter, Herrmann, & Thöni, ). In this study, we apply the trust game and survey questions.…”

Developing microfinance: A survey of the literature

“…Trust is high as members know each other (Laffont and N'Guessan, 2000). However, in an experimental study in a village in Cameroon, where half the adult population was in some ROSCA, it was found that ROSCA members did not necessarily have kinship or friendship ties with other members (Etang et al ., 2011). Chiteji (2002) examined the ROSCA's ability to enforce its terms of membership and the connection between enforcement costs and the desirability of ROSCA formation.…”