As a distributor of solar lamps in Haiti and, lately, improved charcoal stoves I am always interested in alternative distribution models to get useful products into the hands of the BoP.  Offering credit is something that is known to work but not every organization has the capacity to manage it well.  I was recently reading “The Poor and Their Money” by Stuart Rutherford and Sukhwinder Arora and came across a useful alternative to credit that I think is worth sharing.

Rotating Savings and Credit Associations (ROSCAs) is the formal name for a traditional form of savings that exist in almost all traditional societies.  In West Africa they are called Susus, Committees in India and Paki

stan, Tontines in Cambodia and in Haiti they call them Sols.  They consist of a small group of people banding together and agreeing to contribute a fixed amount into a common pot which is awarded to one of the members, each in turn, until everyone has gotten their “hand”.  These simple but ingenious structures allow poor people to accumulate useful lumps of cash that they might not otherwise be able to get their hands on for making big purchases.  I read pretty widely but I don’t recall hearing about anyone using ROSCAs to sell solar lamps or improved stoves.

 

One particular type of ROSCA from the book that could be applied to my products is the rickshaw ROSCA.

In India rickshaw men form a ROSCA which allows them to accumulate money so that they can buy their rickshaws instead of renting them at usurious rates.  When they have accumulated enough money to make one purchase, one of their names is drawn from a hat and the lucky man gets to own his own rickshaw.

Everyone continues to contribute until all have gotten their rickshaw.  The interesting twist on this model is that those who have already received their rickshaw also have to contribute to the pot the amount they used to pay to rent a rickshaw.  This can reduce jealousy within the group against the early winners and it also greatly reduces that length of time it takes for everyone to reach their objective.

Applying this principal to improved stoves in Haiti would work like this: 

1. A reseller of stoves would find 8 women who want to buy a stove but don’t have the necessary capital (Gdes 650) to make the purchase.  
2. Each woman would contribute Gdes 20 per day to the fund, 
3. According to the funds collected, at the end of each four day cycle the reseller would deliver one or two stoves to the group.  Sometimes the reseller gives the group a small credit to make the numbers work out, this credit is recuperated in the next cycle.
4. Each woman who receives a stove continues to contribute Gdes 20 plus and additional Gdes 20 which is the equivalent of the fuel savings she realizes from the new stove.
5. At the end of 6 cycles (24 days) all of the women have paid for their new stoves.  If each woman was saving by themselves at Gdes 20 per day it would have taken 32 days to purchase the stove.

If the numbers don’t work out you can always adjust the number of days in the cycle or make a bigger payment on the first or last cycle.    

  

“ROSCA MicamaSoley” for the purchase of 8 improved stoves costing Gdes 650 each

MbrCycle 1 2  3  4  5  6

1   80160160160160160

2   8080160160160160

3   808080160160160 

4   80808080160160 

5   8080808080160

6   8080808080160

7   808080808080

8   808080808080

Total 64072080088010401120

Available64071086010908301300

# of Stoves 111212

Cost65065065013006501300

Bal. Frwd-1060210-2101800

 

We have been working with CARE in Haiti to find ways to sell these kinds of products to Village Savings and Loan Associations (VSLAs) and we hope to try out this kind of ROSCA for the purchase of solar lamps in the next few weeks.  I will try to make a new posting once we have tried it out to let you know how it went.

 

Tom Adamson

 www.micamasoley.com

micama45@yahoo.com  

 

(PS from Paul Rippey: Sorry for the layout of the table - you should be able to figure it out even though I couldn’t get Tom’s nice version that he sent me to work well here!)

 

 

Reader Comments (3)

That's really interesting, Tom. You should contact an Ashoka fellow who is doing really interesting stuff in micro-consigment -and building saving groups too- in Haiti and other countries in Latm. His name is Greg Van Kirk: gregvankirk@gmail.com
You probably already know him, but just in case

Wed, July 17, 2013 | Jean Claude Rodriguez

Good luck, and if you do this, let me know how it goes.
For these things to work well, there needs to be a regular meeting place, conveniently close-by, so as to provide discipline. The rickshaw ROSCAs we observed work well because they do their transactions each day at the close of the working day, at the place where they store the rickshaws overnight and relax over a cup of tea. They may pick the tea-stall owner as a guardian of the funds between lottery draws, if he has a strong personality. He may act as an arbiter in case of any dispute. Try to put some version of this kind of structure in place.

Wed, July 17, 2013 | Stuart Rutherford

Jean Claude, Thanks for the heads-up, in fact I know Greg pretty well and have been supplying him with solar lamps for his work in Haiti and the DR for about a year now.

Stuart, Thanks for the support, your two books a part of my favorite reading. I will try to keep you posted.

Thu, July 18, 2013 | Tom Adamson