Abstract Using original data on gifts and loans, this paper investigates how rural Filipino households deal with income and expenditure shocks. Results indicate that gifts and informal loans are partly motivated by consumption smoothing motives but do not serve to efficiently share risk. Certain shocks are better insured through gifts and loans than others. Network quality matters.
Risk is shared through flexible, zero interest informal loans rather than gifts.
The evidence is consistent with models of quasi-credit where enforcement constraints limit gift giving.