Abstract

ABSTRACT:

This paper aims to evaluate the impact of Rotating Savings and Credit Associations (RoSCA) on household assets in Indonesia. RoSCA is locally known as arisan in Indonesia and has been around for many centuries as a special form of micro-savings institution that is informal and community based. However, there has not yet been adequate academic research on the economic implications of arisan participation, especially in terms of household wealth and welfare. That is what this paper intends to investigate. We use the Indonesian Family Life Survey (IFLS) data collected in 2000, 2007 and 2014, covering around 83 percent of Indonesia's population. The data in particular provides longitudinal data of various household assets, along with demographic data of household heads including their arisan participation status. We divide the survey participants into two groups based on arisan participation from each period. Then we use the Difference in Difference (DiD) method in multiplicative form with robustness standard errors to evaluate the changes in household assets over time, using results from arisan participation between 2000 and 2007, and then 2000 and 2014, in two models. The estimated results show that participation in arisan has a significant positive impact over time on total household assets, including house and land assets and vehicles in both models with mixed impacts on other categories of assets such as appliances, furniture, poultries and jewellery. The impact on household savings is unsurprisingly negative alongside the asset accumulation. Interestingly, demographic variables such as gender, age and education of the household heads appear to have positive impacts on total household assets while the household's location, i.e. urban or rural, has no significant impact. The results have several implications. The quantum of arisan funds received by the members could often be used for the purchase of household assets, e.g. land, houses and vehicles. The association could also regulate the households' saving behaviour through peer monitoring. Furthermore, it would also enhance social capital and entrepreneurial activities across the community, which could be utilized by various development programs that are run by the government.

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