Rotating Savings and Credit Associations, or ROSCAs, are a popular form of informal saving in many countries and can be considered a form of informal microfinance.

ROSCAs operate on trust; yet even in societies where levels of trust on financial matters are relatively low, it is possible for ROSCAs to be popular and effective.[1] This is likely to be due to:

  • the relative effectiveness of social pressure in some more traditional societies[1]
  • the relative difficulty of saving without an enforced saving mechanism (when the cultural tendency might be to spend the money, and social pressure from family or friends is to give or lend them the money)[1] (Note that cultural tendencies and practices may vary widely, even within the same region, or between countries at a similar economic level.)
  • less trust in the formal banking system than in countries with well established and regulated banking and stable economies[1]
  • small size of savings being impractical in the formal banking sector, perhaps suffering from bank fees.
  • the desirability of socializing and improving relationships with peers, and getting support and advice on financial matters.[verification needed]
  • the possibility of gaining access to the full amount of money before the individual has saved up that full amount (i.e. it sometimes acts as a form of credit, without interest charges).

Terminology[edit | edit source]

ROSCA (or sometimes rosca) is the term usually used in the development finance field; different languages have their own words which typically are not direct translations of the English term, such as arisan, in Indonesian (which is translated in Indonesian-English dictionaries as "savings club" or "regular social gathering for purposes of conducting a lottery".)

Notes[edit | edit source]

  1. 1.0 1.1 1.2 1.3 This is based on observation by User:Chriswaterguy in Indonesia.Template:More sources

External links[edit | edit source]

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Authors Chris Watkins
Published 2007
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