Interactions between social ties and saving mechanisms as a determinant of savings behaviour

Abstract

The prevalence of a strong saving culture has a positive effect on economic welfare resulting in a reduction in inequalities. Within South Africa, Stokvels are an established informal savings mechanism which this study uses as a proxy for exemplary saving behaviour. The success of stokvels can be attributed to social capital and the spirit of ubuntu. Thus, this research aims to determine whether social capital and the cultural practice of ubuntu can influence saving decisions amongst the broader society. This study adopted a between-subjects Experimental Vignette Methodology design to investigate the effects of social distance and culture on saving contributions. A three by two research design was employed. Social distance increased incrementally across the three levels and culture was tested using a frame. This study also applied strength of social ties as a moderator variable. The study found that saving contributions significantly varies across a neutral framing and an ubuntu framing, which supplements existing claims that culture influences decision making. Thus, this study provides evidence to support the effectiveness of framing as a measure of culture. The study also found that social distance and strength of social ties do not impact saving contribution.