ROSCAs Revisited!

Rotating Savings and Credit Associations (ROSCAs) are groups in which every member contributes the same amount every meeting (usually the same amount of money, but sometimes sugar or household goods), and the members take turns receiving the entire amount. They provide less flexibility that Savings Groups, but some of the same services: Commitment savings, lump sums, social support. They are simple, generally safe (unless people drop out after they have received their share), and very widespread. ROSCAs have a hundred names in a hundred languages - they exist everywhere, including in big industrialized countries. 

Recently, it seems that ROSCAs are back - well, they never left. In the 2013 Kenya FinAccess study 21% of informal users are in ASCAs as opposed to 77% in ROSCAs!  

Also, the soon to be released Quality of Delivery Study found that 42 out of 100 [not totally random] Savings Groups said that they had started as ROSCAs. A number of the original ROSCAs continue to function in parallel with the SGs. One group had adapted the period of their SG to the exigencies of their ROSCA: the group has 18 members and meets monthly, so they have a year-and-a-half cycle for their SG. One group said that their ROSCA was the most “exciting” part of the group, and another said that they valued the merry-go-round activity of their group more than the ASCA activity.

Finally, two of the 48 SG trainers interviewed said they had introduced ROSCAs to their groups, in one case as a way of helping members repay their loans.

And, an advantage of ROSCAs is that they make it harder for banks to capture the savings, since all the money is distributed at every meeting.

Please don’t dismiss the humble ROSCA!