Informal Savings Mobilization in Africa

Evidence indicates that the informal sector of African economies is larger and more complex than previously thought. A preliminary report on a larger study of mobilization of resources in the informal sector of African economies focuses primarily on the savings accumulated through clubs or associations. In addition, it also surveys the evidence on mobile bankers operating in African marketplaces. There is increasing evidence that such institutions are located widely in Africa and serve a broad spectrum of the population. In Ethiopia, they have been estimated to deal with savings and loans equal to 8% or more of that nation's national income. The informal savings and loan associations examined include the institutions of fixed fund associations, like American savings and loan associations, and rotating funds, a form of group saving and lending with special features. In addition, in parts of western tropical Africa, it is not unusual for traders to make deposits with a mobile banker who visits them regularly. It is concluded that these segments of the informal capital market might be assimilated into the formal sector. In fact, they may end up being able to provide credit to the segment of the market they already know at lower prices than the established formal sector banks.