Rotating Savings And Credit Associations Research Articles

Stakeholder mapping to explore social and economic capital of Rotating Savings and Credit Associations (ROSCAs) to increase demand for and access to healthy food

IntroductionSouth Africa, grappling with the complexities of malnutrition, faces a dual challenge of undernutrition in children and overnutrition in adults, particularly among women. This situation is exacerbated by high rates of food insecurity, affecting nearly one-fourth of households. In this context, the role of Rotating Savings and Credit Associations (ROSCAs), locally known as stokvels, becomes increasingly significant. These informal, often women-led, savings and borrowing groups present a unique opportunity to address dietary challenges and promote healthier eating practices in urban, low-income settings. This study explores the potential of stokvels in mitigating the dual burden of malnutrition by facilitating access to healthy, affordable foods.MethodsWe conducted stakeholder mapping to understand the roles and influences of various actors within South Africa's food system, particularly their interactions with stokvels. Our research focuses on how these groups, deeply embedded in the community fabric, can leverage their collective power to negotiate better access to nutritious food and influence healthier dietary choices. Stakeholders identified in the study span diverse sectors, including retail, agriculture, finance, and community organizations.ResultsThe research reveals that stokvels are perceived as vital social and economic entities capable of maximizing value through partnerships and networks. However, challenges such as the informal nature of stokvels and the lack of formal legal agreements often hinder their ability to form partnerships with formal institutions. The findings emphasize the importance of understanding and leveraging the social dynamics within stokvels, recognizing their role in enhancing food security and contributing to economic empowerment, especially for women. The study also identifies the need for formalizing stokvel structures to enhance their operational efficiency and increase their impact on food systems.DiscussionIn conclusion, this research highlights the untapped potential of stokvels in addressing South Africa's nutritional challenges. By fostering stronger connections between stokvels and various food system actors, there is a significant opportunity to improve food security and promote healthier eating habits in low-income communities. Future research should aim to include unrepresented stakeholders and explore strategies to enhance the role of ROSCAs in promoting healthier food choices and addressing affordability and accessibility barriers.

Rotating savings and credit associations (ROSCAs) in prewar China: Communal finance and the roots of economic development

AbstractThis article studies Rotating Savings and Credit Associations (ROSCAs) in late imperial and Republican‐era Shanxi province, China, from the eighteenth to the twentieth centuries. It investigates how communal finance fostered pre‐industrial economic growth and commercial activity. Drawing on previously unused, original materials from historical Shanxi ROSCAs and households, it makes several important discoveries. First, it finds widespread ROSCA participation, estimating no fewer than 7.1 per cent of Shanxi households participated in ROSCAs. Second, it estimates expected internal rates of returns on ROSCA membership at 2.55–6.01 per cent annually. This suggests that ROSCAs were economically competitive with other Chinese traditional financiers, which often charged more for loans and offered less to savers. Third, it finds a surprising degree of liquidity for ROSCA shares. Finally, it uncovers commercial entities participating in ROSCAs, suggesting ROSCAs could be useful to for‐profit enterprises. The article concludes that ROSCAs and communal finance may have played an important role in supporting pre‐industrial economic activity.

Rotating savings and credit associations: A scoping review

A Rotating Savings and Credit Association (ROSCA) is an informal cooperation strategy that has emerged in several parts of the world as a tool to increase the resilience and social development of individuals in underprivileged communities. This strategy has been widely studied for decades to recognize ROSCAs’ benefits, risks, and operation rules in several regions and countries. In this study, we conducted a scoping review using the PRISMA-ScR protocol to determine the most important recent findings about ROSCAs. First, we analyzed the location of the community being studied, methodological approaches, and most common keywords of the 96 articles included in the review. Second, we discussed the most significant conclusions of each article on topics such as the origin, participants, benefits, risks, operation, penalties, and structure of ROSCAs. Based on this review, we discuss how ROSCAs have provided benefits to their members that are not exclusively financial, how these schemes have evolved from traditional ones to strategies with improved structure, rules, and technological tools, and some key research opportunities to be addressed.

Risk management in prewar China: A study of rotating savings and credit associations (ROSCAs) in Qing dynasty and Republican-era Shanxi province

This article studies Rotating Savings and Credit Associations (ROSCAs) in Qing-dynasty (1644-1911) and Republican-era (1911-1949) Shanxi province. These were communally based financial institutions crucial to the traditional Chinese economy. Drawing on previously unused primary sources this article examines historical Chinese ROSCAs from the perspective of risk management. It finds that Chinese ROSCA credit was collateralised by fixed assets. In the event of member default, the ROSCA exercised ‘live sale’ rights over the delinquent member’s ­collateral. These findings have important implications for one of Qing and Republican China’s most critical financial institutions and for Chinese economic history more broadly. They suggest greater liquidity of fixed assets and ability to mobilise capital than has previously been appreciated.

Household welfare effects of ROSCAs

We examine the effects of Rotating Savings and Credit Associations (ROSCAs) on household welfare in India. The identification strategy is based on household fixed effects and instrumental variables (using the geographic leave-one-out instrument). We find that ROSCA membership increases household assets, consumption, energy efficiency and school expenditure, but only in rural areas. Welfare effects are stronger for poorer households and for those living in communities with stronger social ties. We argue that the persistence and success of ROSCAs depends on social ties, which are often stronger in rural communities.

Variations of Rotating Savings and Credit Associations for Community Development

Informal financial cooperation strategies have emerged as a solution to improve the resilience of low-income communities, being one of the most popular ones the rotating savings and credit associations (ROSCAs). In this article, using computational tools and dynamical systems modeling, we study the performance of two variations of ROSCAs that can potentially increase the resilience of communities. First, we propose a strategy that saves a percentage of the contributions of each member of the ROSCA to reduce the impact of individuals who stop contributing to the association and study how this strategy impacts the financial life of the individuals and trust among community members. Second, we study a decentralized version of the ROSCA in which individuals contribute to more than one association and analyze the impact of the size of the cooperation scheme and the number of associations where each individual participates. Through mathematical and simulation analyses, we show how the cooperation strategies impact the resilience of low-income communities.

Charactaristics of Rotating Savings and Credit Associations (ROSCAs) Participants in Ghana: Evidence from Asunafo North Municipality of Ghana

Charactaristics of Rotating Savings and Credit Associations (ROSCAs) Participants in Ghana: Evidence from Asunafo North Municipality of Ghana

Situating the West African System of Collectivity: A Study of Susu Institutions in Ghana’s Urban Centers

West African informal collective institutions have much to offer the study of international development. Susu is the local name for a cooperative system involving rotating savings and credit associations (ROSCAs) practiced by millions of people. This essay argues that the Ghana susu are community economies, drawing on J. K. Gibson-Graham’s theory of community economies and its ethical principles for amplifying well-being, conducting ethical business, encountering others, and the joyful commoning of goods. The essay’s primary research was carried out in a community with forty-six susu members, through focus-group discussions and individual interviews in Accra, Tema, Cape Coast, and Kumasi. By acknowledging the susu system, the essay advances ideas of equity and highlights the African contribution to a sustainable economic model. The Ghana susu have a long-standing history of solidarity economics rooted in mutual aid, self-sufficiency, and the collective, and this history should be noted as a powerful antidote to neoliberal development.

ROSCAs THROUGH THE ISLAMIC COMMUNITY: AN ALTERNATIVE TO ENHANCING ENTREPRENEURSHIP AND WEALTH

The purpose of the study is to analyse the influence of the motives and benefits of participation in Rotating Savings and Credit Associations (ROSCAs) on household wealth and entrepreneurship through mediating community commitment. Structural equation modeling (SEM) was used on the data collected using purposive sampling and a sample of 225 respondents in the provinces of East Java, Central Java, West Java, D.I. Yogyakarta, and D.K.I. Jakarta. The results show that ROSCAs have a direct effect on entrepreneurial intention and may affect household wealth. It is also concluded that ROSCAs can be an instrument of Islamic social finance, as their characteristics are not burdensome to members. They involve the principle of cooperation, and are not affected by interest rates or inflation.

Evolvement of ROSCA to real property acquisition as a form of interest-free SBF model: a PRISMA-compliant systematic review

PurposeThis study aims to investigate the evolvement of the concept and practice of the Rotating Savings and Credit Association (ROSCA) from informal fund collection for indivisible durables to real property acquisition under the interest-free SBF model by analyzing the previously conducted research that focused on the concept in terms of names, forms, and natures.Design/methodology/approachA PRISMA-compliant systematic literature review is adopted to ascertain the most relevant studies from various sources and analyze the extracted data or items to accomplish the research objective. Besides, bibliometric network, thematic, and statistical analysis are also applied to bolster the findings acquired from the systematic review. Furthermore, this study mathematically formulates and introduces the customized PRISMA systematic flowchart.FindingsThe results reveal that the concept of ROSCA has evolved over the years from informal to formal, micro to macro, individual to institutional, social to business, and fund collection for purchasing household items to real property acquisition since 1962. In this process, the focus area of the research has been shifted from characteristics, operation, and economics to law; source of funds, and history to social; benefits and contribution to digital, risk, and savings behaviour. It is noticed that the majority of the study are Africa-centric, followed by Asia; academic discussion on the ROSCA covers most of the social and economic arena, except the real property acquisition aspect. However, the SBF concept fills up this gap by introducing a real-property-acquisition-centric ROSCA model. The authors provide future agendas regarding focus areas that researchers may consider to develop the SBF concept.Originality/valueThe study focuses on the evolvement of a savings-based model. No study concentrates on the evolution process of the model from ROSCA to SBF; in fact, no conspicuous academic study is found regarding the systematic review of ROSCA in the literature archive.

Rotating Savings and Credit Associations, An Alternative Source of SME Financing: The Case of the Inhabitants of the Western Region of Cameroon

The relevance of SMEs to the economy is a globally accepted truth. These small actors generally constitute the largest category of businesses and contribute significantly to vital economic indicators. Despite their relevance, this category of businesses experiences considerable challenges obtaining financing: especially formal financing. This limited access to capital has been reported to constitute a major cause of high SME failure rates. This is mainly because these businesses lack the collateral necessary to access formal financing. Despite the above literature, it is reported that inhabitants of the Western Region of Cameroon, also referred to as the Bamelikes make extensive use of Rotating Savings and Credit Associations (ROSCA) for business financing and that this is partly responsible for their increased success in entrepreneurial activities. However, empirical studies establishing the impact of the usage of ROSCAs on SME access to capital in this region are almost inexistent. Given the above, it is the aim of this study to investigate and empirically establish whether the usage of ROSCAs significantly impacts SME access to capital in the Western Region of Cameroon. Using stratified random sampling, 500 participants from the major settlements of the Western Region of Cameroon were selected for this study. The questionnaire for the study was administered to these participants. 414 questionnaires were returned and after consistency verification, data from 401 respondents were retained for this study. The data was analyzed using the One-Way ANOVA analytical tool in the IBM SPSS software (version 21). The finding disclosed that ROSCAs usage has a statistically significant impact on SME’s access to capital in the Western Region of Cameroon. It is therefore recommended that SME owners/managers join such associations or come together to create such associations to improve their access to capital. In addition to that, since these organizations are widely spread across Africa and developing economies, they could be repurposed for business financing reasons instead of consumption.

On the optimal size of a joint savings association

We develop a formula for the optimal size of a joint savings association between individuals who share the same financial goal and who can save towards that goal at the same rate. Our motivating example and the core of our analysis is a Rotating Savings and Credit Association (ROSCA). We measure the efficiency of a ROSCA by the expected waiting time that it takes a participant to attain his goal when no participant reneges on his commitment to contribute to the common fund, and when each of the participants receives (once) the funds needed to meet his goal. Given this criterion, we define the optimal size of a ROSCA as the number of participants that results in the minimal expected waiting time. We show that an optimal size of a ROSCA exists, that it is limited, and that it is a multiple of the number of time periods that it takes an individual to save on his own. Somewhat surprisingly, we find that when treated as a function of the size of a ROSCA, the expected waiting time is not monotonic when the size builds up from an individual saving on his own to the optimal size. A similar result obtains when we study cases where a ROSCA is enlarged beyond the optimal size. Our findings help explain the limited size as well as other features of ROSCAs observed in developing countries all over the world.

Can Informal Savings Groups Promote Food Security and Social, Economic and Health Transformations, Especially among Women in Urban Sub-Saharan Africa: A Narrative Systematic Review

This narrative review aimed to identify if roles of common informal savings groups known as Accumulating Savings and Credit Associations (ASCAs) or Rotating Savings and Credit Associations (ROSCAs) can play a significant role in mitigating food insecurity, socioeconomic inequality, promoting health, and/or increasing agency in women in urban sub-Saharan Africa (SSA). These organizations exist in most low- and middle-income countries (LMICs) worldwide under various names. A comprehensive search of scholarly outputs across six electronic databases (Pub-Med, Google Scholar, EBSCOhost, Scopus, Sabinet, and Cochrane) from 2000 to 2021 was completed. Twenty-eight (28) records met our inclusion criteria, and their quality was appraised using the Critical Appraisal Skills Programme (CASP) qualitative checklist. We identified through thematic analysis that ROSCAs/ASCAs play a crucial role in advancing social, economic, and health transformations, especially among women in urban SSA. However, while ROSCAs/ACSAs played important roles in food security, it was often not the primary motivation for participation. None of the selected studies identified the importance of dietary quality or access to healthy food in relation to food security. This review suggests a window of opportunity to promote partnerships and collaborations of ROSCAs/ASCAs with relevant stakeholders to leverage the functionalities of ROSCAs/ASCAs as vehicles for re-alignment of priorities, increased knowledge, and opportunities to encourage affordable healthy diets in urban SSA.

Economics of savings-based finance: an interest-free model of rotating savings and credit association in Turkey

PurposeThe emerging markets have been witnessing a remarkable revival of rotating savings and credit associations (ROSCAs) serving as alternative informal financing and investment platforms, also known as savings-based finance (SBF) in Turkey. The purpose of this study is to present the SBF model mathematically, analyse the performance of the SBF sector and propose a new Sharīʿah-compliant SBF model for the acquisition of durables.Design/methodology/approachThe paper thoroughly reviews the concept and practice of ROSCA across the globe, mathematically models and empirically analyses the performance of Turkish SBF companies using a unique data set.FindingsThe study formulates a two-person SBF model and proposes a Mudarabah-Wakalah hybrid model with a new investment feature. It is found that the concept of ROSCA is being operationalized in 105 countries across the globe under different names with slight business model modifications. The research also reveals that the demand for financing of durables in Turkey significantly increased in recent years with the demand for housing is twice greater compared to vehicles. Most importantly, a strong significant inter- and intra-comovement is observed between these durables implying that the success of the sector in one segment has attracted the customers to other SBF products. It shows that the SBF institutions can effectively serve as the alternative financing houses for pooling savings and financing the durables, and they have strong potential to capture a larger financial market share in Turkey and even globally.Originality/valueThe study constructs mathematical models and proposes a new investment wing to an existing SBF wealth fund.

Social Capital and Loan Repayment Capacity of Agripreneurial Groups' in Abia State, Nigeria

Entrepreneurship is the ability to take significant amount of risk while managing and organizing a new or existing business enterprise with the sole motive of making profits. Agricultural entrepreneurship, also known as agripreneurship is the ability of farmers or farm firms to take substantial risks while producing, managing, directing and marketing their agricultural produce. Agripreneurs are the agricultural entrepreneurs. Selected social capital variables such as years of membership in social groups/organizations, number of meeting attendance, cash and labour contributions of members, etc., were incorporated into the research to determine the agripreneurs’ loan repayment capacity in Abia State, Nigeria. A multi-stage purposive sampling technique was employed to select the respondents. Greater percentage of the agripreneurs were male. Mainstream of them were in their active and productive age, hence could form groups for easy access to credit or loans in their respective enterprises. The agripreneurial groups’ sourced their loans from money lenders, ROSCA (Rotating Savings and Credit Association), family and friends/relatives. Others sources were through microfinance banks, commercial banks, self-help groups, cooperative societies and savings collectors/mobile bankers. Majority of the agripreneurs were regarded as good credit risk. The major factors affecting the agripreneurial loan repayment capacity was trust, assets, interest rate and the loan duration. Agripreneurs should be encouraged to participate more actively in group activities, not just for what they can benefit but for what they can give; as effective participation accelerates access to pooled productive resources.

DETERMINANTS OF PARTICIPATION IN ROTATING SAVINGS AND CREDIT ASSOCIATIONS (ROSCAs) IN OGUN STATE, NIGERIA

Due to favorable disposition of residents to participation in Rotating Savings and Credit Associations (ROSCAs) in the Ogun State, Nigeria many individuals are nursing the ambition to establish one. This study provides empirical link between the socio-economic characteristics of residents within the division with a view to helping prospective foreman to understand factors that predispose residents to participation for decision-making. Data were obtained from 400 respondents and 25 randomly selected residents and foremen respectively within the division. Structured questionnaire and semi-structured interview were the instrument for data collection. The mixed-method collected data were analyzed using descriptive statistics, logit regression model and content analysis as applicable. Irrespective of the respondents’ ROSCA participation status, a typical respondent had about two members of his/her household working. Education, marital status, sex and annual income of the respondents were significant (p<0.05) predictors of participation in the ROSCAs. Based on the study findings, it is recommended that the prospective foreman targets residents that are married, with relatively higher income level and the less-educated to increase probability of participation in the association.

Friends and benefits? Endogenous rotating savings and credit associations as alternative for women’s empowerment in India

• We present a theoretical model of spousal bargaining using Rotating Savings and Credit Association (ROSCA) membership. • We examine the effect of ROSCAs and exogenous micro-credit on women’s empowerment in India. • ROSCA increases regular cash flow for women by 1.7 percentage points (pp) and property ownership by 3.3 pp. • We find ROSCAs to be better than exogenous micro-credit schemes in increasing women’s socio-economic autonomy. • Endogenous micro-credit could be critical for financial inclusion of women in developing countries. This study examines the effects of Rotating Savings and Credit Associations (ROSCAs) on women’s socio-economic freedom and autonomy at the national level in India. We compare ROSCAs to agency based micro-credit schemes and analyze their effects using nationally representative longitudinal gender-disaggregated data from 2005 to 2012. Building on a theoretical model of household savings and spousal bargaining power, we use individual fixed effects and instrumental variable regressions to test the theoretical predictions. Results show that ROSCA membership increases the likelihood of women’s cash in hand for expenditure by 1.7 percentage points, say in major purchase decisions by 3.9 percentage points and fertility choice by 4.7 percentage points. These margins exceed those for exogenous micro-credit schemes and are robust to sensitivity tests. This study is the first to contrast ROSCAs with other micro-credit schemes at the national level. We propose scaling up and associating longstanding ROSCAs with self-help groups for more inclusive development.

Assessing MSMEs Growth Through Rosca Involvement Using Paired t-Test and One Sample Proportion Test

Abstract In this research work, rotating savings and credit association (ROSCA) effect on the growth of micro, small and medium enterprises (MSMEs) and identification of a factor supporting the continuity of ROSCAs is studied. A well-designed questionnaire with a reliability value of 0.957 was distributed to 400 entrepreneurs in Wukari through snowball sampling technique. After validity check, 368 valid questionnaires were used for the research. Firstly, a paired t-test was applied to know if entrepreneurs achieve significant positive growth in their business before and after 5 years of joining ROSCAs. At 5% level of significance, entrepreneurs achieved significant positive growth in their businesses 5 years and above of joining ROSCAs. Secondly, a one sample proportion Z-score test was used to identify the major factor responsible for ROSCAs continuity. At 5% significance level, flexibility was identified as the major factor responsible for ROSCAs. It was concluded based on the results obtained that ROSCAs has a significant positive effect on the growth of MSMEs and ROSCAs continuity towards MSMEs growth is due to its flexibility factor in terms of operations, disbursement, seeking loans and interest rate.

Do microfinance institutes help slum-dwellers in coping with frequent disasters? An agent-based modelling study

The vulnerability of slum-dwellers to disasters requires particular attention due to the increasing frequency of disasters in slums combined with dilapidated housing conditions and lack of infrastructure. The absence of appropriate institutional and governmental aid has made slum-dwellers to rely upon their coping capacity. Having own financial capital can strengthen the coping capacity of an individual during disasters. Microfinance Institutes (MFIs) provide loans or microcredits to slum-dwellers to start a business individually or as a group, which eventually helps in increasing their financial capital. MFIs can also facilitate smooth repayment of loans by providing relief funds during disasters. However, frequent disasters might negatively influence the functioning of these mechanisms. Therefore, in this paper, we explore whether MFIs can increase the coping capacity of slum-dwellers by increasing their financial capital while facing disasters. Due to lack of empirical data on the impact of MFIs, we developed a stylised Agent-Based Model (ABM). The model includes interactions between slum-dwellers and an MFI as well as moneylenders. Slum-dwellers are facing disasters of varying frequency and intensity and can form ROtating Savings and Credit Associations (ROSCAs). Overall, the model results supported the claim that providing microcredits through MFIs has the potential to increase slum-dwellers’ coping capacity while facing frequent disasters. However, the study also indicates that MFIs need to be carefully tailored to the local context in order to support slum-dwellers’ coping capacity, for instance by adapting the repayment period.

The Economics of Rotating Savings and Credit Associations (ROSCAs) and Poverty in Indonesia

Abstract: Arisan or Rotating Savings and Credit Associations (ROSCAs) constitute one of the most commonly found informal financial institutions in the developing world. This study aims to analyze the effect of Rotating Savings And Credit Associations (ROSCAs) on poverty in Indonesia using panel data sourced from the fourth and fifth wave of the Family Life Survey (IFLS). This study used a conditional logit or fixed effect logit to see the effect of Rotating Savings and Credit Associations (ROSCAs) participation and control variables, which include individual, household, and community characteristics on poverty variables that are binary or categorized. The results showed that Rotating Savings and Credit Associations (ROSCAs) participation can reduce poverty. Meanwhile, this study shows that women who participate in Rotating Savings and Credit Associations (ROSCAs) can reduce poverty significantly. Keywords: poverty, ROSCAs, IFLS, conditional logit Ekonomi Arisan dan Kemiskinan di Indonesia Abstrak: Arisan atau Rotating Savings and Credit Associations (ROSCAs) merupakan salah satu lembaga keuangan informal paling umum yang terdapat di negara berkembang. Penelitian ini bertujuan untuk melihat pengaruh arisan (ROSCAs) terhadap kemiskinan di Indonesia dengan menggunakan data panel yang bersumber dari Indonesia Family Life Survey (IFLS) gelombang keempat dan kelima. Metodologi yang digunakan dalam penelitian ini adalah Conditional Logit atau Fixed Effect Logit untuk melihat pengaruh variabel partisipasi arisan dan variabel kontrol yang meliputi karakteristik individu, rumah tangga, dan komunitas terhadap variabel kemiskinan yang bersifat biner atau kategori. Hasil penelitian ini menunjukkan bahwa partisipasi arisan dapat mengurangi kemiskinan. Selain itu, penelitian ini menunjukkan bahwa perempuan yang berpartisipasi dalam arisan dapat mengurangi kemiskinan secara signifikan. Kata kunci: Kemiskinan, arisan, IFLS, conditional logit