Central Data Catalog

Citation Information

Type Working Paper
Title Peer-to-peer lending and birth outcomes during national economic crises: Lessons from Indonesia.
Author(s)
Publication (Day/Month/Year) 2015
URL http://www.brown.edu/academics/economics/candidates/sites/brown.edu.academics.economics.candidates/f​iles/JMP-Joseph Kofi Acquah.pdf
Abstract
National economic crises increase the incidence of low birth weight rates due to credit
constraints that prevent households from effectively smoothing their food consumption. In
non-crises years, evidence shows that peer to peer banking (P2P) schemes help smooth food
consumption by extending credit to individuals that face idiosyncratic income shocks. However,
during crises years when income shocks may be correlated, there is limited evidence on the credit
extension capabilities of P2P schemes. In this study, I explore the credit extension capabilities
of rotating savings and credit institutions (ROSCAs) during the 1998 Indonesian financial crises.
This study argues and provides empirical evidence that during crises, heterogeneity in income
shocks and differences in the marginal utility of consumption facilitate transfers within P2P
schemes. Study results show informal risk sharing via credit extensions by ROSCA institutions
to its members during the 1998 Indonesian financial crisis. Funds obtained through ROSCA were
primarily used to smooth food consumption as revealed by ROSCA members. Consequently,
conservative estimates show that mothers that participated in ROSCAs observed 2.7 percentage
points fewer low birth weight babies.

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