Out of the Mattresses and Into the Banks: Unpacking Financial Disintermediation and Liquidity Dynamics in South Sudan

Abstract

This study investigates the behavioral, structural, and macroeconomic drivers of mattress banking, the widespread practice of hoarding cash outside formal financial institutions in South Sudan. Drawing on mixed-methods field data collected in 2026 (N=800), consisting of 650 structured survey respondents and 150 qualitative interview and focus group participants, the research identifies cultural attachment to traditional saving methods (12.1%) and fear of government scrutiny (11.3%) as the most salient factors, alongside systemic bank liquidity concerns (7.1%) and institutional distrust (6.7%). Macroeconomic impacts include weakened monetary policy, reduced access to private-sector credit, and significant losses to formal bank deposits, with households facing heightened risks of theft (8.3%) and asset destruction from disasters (7.5%). Regression and thematic analyses reveal that women, rural residents, the unbanked, and informal sector workers are particularly vulnerable to mattress banking, which is further exacerbated by chronic salary delays and low financial literacy. The study recommends a multi-pronged approach to reintegrate informal liquidity: expanding digital and mobile banking, strengthening regulatory oversight and deposit insurance, simplifying account opening, and fostering public trust through robust consumer protection and financial education. Theoretically, the findings advance understanding of financial disintermediation in fragile contexts and highlight that penalizing cash hoarding is far less effective than addressing structural and behavioral barriers to formal saving in South Sudan.