Autonomy and Financial Performance in Informal Savings Associations

Abstract

A multitude of NGOs form informal savings and lending associations in developing countries, called savings groups. Group members are responsible for the day-to-day governance, operating within the framework provided by the NGOs. As NGOs differ in the model they provide, savings groups are endowed with different levels of autonomy over their operations. Drawing on theories related to autonomy and performance, we test whether more autonomous savings groups perform better. A two-way correlated random effects regression on data for 97,653 savings groups formed by five NGOs in 16 countries shows that savings groups with more autonomy over their financial operations demonstrate greater financial performance. Additionally, the financial performance of more autonomous savings groups improves more in subsequent cycles, suggesting that savings groups with more autonomy have a greater ability to adapt. We argue that groups thus benefit from being granted more autonomy over their day-to-day operations. Our study may have broader implications for similar development interventions by NGOs, in which participants could benefit from increased autonomy.