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Structure Meetings can be regular or tied to seasonal cash flow cycles in rural communities. Each member contributes the same amount at each meeting, and one member takes the whole sum once. As a result, each member is able to access a larger sum of money during the life of the ROSCA, and use it for whatever purpose she or he wishes. This method of saving is a popular alternative to the risks of saving at home, where family and relatives may demand access to savings.[2] Every transaction is seen by every member during the meetings. Since no money has to be retained inside the group, no records have to be kept. These characteristics make the system a model of transparency and simplicity that is well adapted to communities with low levels of literacy and weak systems for protecting collective property rights. The system further reduces the risk to members because it is time limited—typically lasting no more than 6 months. Each member receives at least once the amount collected. This reduces the size of the loss, should someone take funds early and not pay back. Diversity and distribution Variously called "committee" in India and Pakistan, Ekub in Ethiopia, Susus in Southern Africa and the Caribbean, "Seettuva" in Sri Lanka, tontines in West Africa, wichin gye in Korea, arisan in Indonesia, likelembas in the Democratic Republic of the Congo, xitique in Mozambique and djanggis in Cameroon, ROSCAs are informal or 'pre-co-operative' microfinance groups that have been documented around the developing world. A famous early study by anthropologist Clifford Geertz documented the arisans of Modjokuto in Eastern Java. He described them as "an "intermediate" institution growing up within peasant social structure, to harmonize agrarian economic patterns with commercial ones, to act as a bridge between peasant and trader attitudes toward money and its uses."[3] The individuals in the ROSCA select each other, which ensures that participation is based on trust and social forces (see Social capital), and a genuine commitment to participate. Rotating or accumulating? ROSCAs can be compared and contrasted with Accumulating Savings & Credit Associations or ASCAs. Documented extensively in South Asia by Rutherford, ASCAs are also time-limited, informal microfinance groups. Unlike ROSCAs however, they appoint one of their members to manage an internal fund. Records are kept and surplus lent out. After a pre-agreed period (often 6–12 months) all the loans are called back and the fund, plus accumulated profit, is distributed to the members. International development practitioners have been intrigued for years by the potential benefits of attempting to link ROSCAs and ASCAs to formal financial systems. But such linkages tend to defeat the voluntary purpose of these groups and distort member incentives towards securing access to external funds. CARE, an American NGO, has spread standardized ASCAs to reach 2 million people in Africa.[4] These standardized ASCAs are called Village Savings and Loan Associations (VSLAs), and they usually comprise 10 to 20 participants who conduct saving and loan activities for a fixed period, usually 12 months. Unlike informal ASCAs, these use a triple-locked box to secure the funds, have standardized election procedures and maintain a careful separation of various duties, such as record-keeping, money-counting, meeting facilitation etc. Interest rates on loans typically vary from 5-10% a month, while cycle-end pay-outs in most groups range from 30-60% of invested capital.[5] As of the end of June 2012 development agencies (including CARE, Oxfam, CRS and PLAN) were carrying out projects reaching 1.8 million members in 23 countries, mostly in Africa. The Savings Group Information Exchange, a project of the Bill and Melinda Gates Foundation, provides researchers with an on-line database where indicators like savings and loans per member, country, return on assets and percent of female members can be compared. Another interesting variant on this theme are the terminating deposits that formed part of product line of building societies in the last half of the nineteenth century. These provided many workers with the funds required to finance their own homes. |
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