There is still very little evidence to support the common claim that savings groups help members cope with shocks, particularly in areas where traditional and promoted savings groups are rare. This thesis examines the shocks faced by poor rural households in El Salvador, the impacts of those shocks, the coping strategies used, and the role of savings groups, using a combination of in-depth interviews and surveys. Econometric analysis complements the qualitative research by estimating the impact of savings group access on coping abilities and strategies.
Nearly all respondents reported experiencing a negative shock such as high food prices, illness, or bad harvest in the previous year. Credit was the most common coping strategy for all shocks; more than half of respondents borrowed, usually from friends and family. Twenty-five to 43% of respondents used personal savings, mobilized labor or sold liquid assets.
Findings confirm that the greater challenge for many households is not net income over the course of the year; it is managing cash flow so that shocks and short-term needs do not derail long-term well-being. For instance, most households sell maize at low prices during the harvest season and/or buy it at high prices during the hungry season, when they are most vulnerable to shocks.
Participants reported that savings groups help them manage and plan their household finances better, buy more or better-quality food, build a cushion for emergencies, and enjoy greater peace of mind. Participants also cited non-financial benefits, especially stronger friendships and greater solidarity. The econometric analysis provides modest support for the idea that the presence of savings groups increases coping ability by facilitating access to savings and social support. However, many of the group's policy choices are not optimal for reducing vulnerability. For example, most members receive their payouts around harvest time, rather than during the hungry season or planting season when they are most likely to need food or cash.
Overall, though they show potential for improving a household's ability to cope with shocks, savings groups could be more effective if policies were adjusted to better fit members' goals and cash flow needs.
|Commitee:||Schaffner, Julie, Wilson, Kim|
|School:||Fletcher School of Law and Diplomacy (Tufts University)|
|Department:||Diplomacy, History, and Politics|
|School Location:||United States -- Massachusetts|
|Source:||DAI-A 75/11(E), Dissertation Abstracts International|
|Subjects:||Social research, Economics, Latin American Studies|
|Keywords:||Coping, Development, Economic shocks, El Salvador, Microfinance, Poverty, Rural communities, Savings groups|
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