Fragmentation and Embeddedness: An Alternative Approach to the Analysis of Rural Financial Markets

Susan Johnson

Research output: Contribution to journalArticle

10 Citations (Scopus)

Abstract

Political economy approaches to analyzing the efficiency of rural financial markets have focused on the role of power and social relations. Neo-classical institutional economics, on the other hand, has used information and transaction costs to explain performance. Recognizing the limitations of both approaches, this paper presents an alternative that focuses on the institutional form of financial intermediaries, that is, the governance structure of rules, monitoring and enforcement mechanisms that enable them to operate. This structure is supported by both formal and informal rules, norms and sanctions. As a result, the ways in which transaction costs are affected by governance structures can be identified and the embeddedness of financial intermediaries in social relations can be theorized. The application of this approach in Central Kenya demonstrates the insights that it offers into explaining borrower preferences in the financial market.
Original languageEnglish
Pages (from-to)357-375
Number of pages19
JournalOxford Development Studies
Volume33
Issue number3-4
Publication statusPublished - 2005

Keywords

  • Government Policy and Regulation (G180)
  • General Financial Markets
  • Finance in Urban and Rural Economies (R510)
  • Financial Markets
  • Corporate Finance and Governance (O160)
  • Economic Development
  • Saving and Capital Investment
  • General (includes Measurement and Data) (G100)

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