The Rotating Savings and Credit Association - An Economic, Social and Cultural Institution

This thesis investigates the rotating savings and credit association (rosca) as an economic, social and cultural institution. Roscas are one of the most common informal financial systems found in the developing world and provide goods or benefits that are missing or under-provided in the community. As an economic institution, the rosca is able to provide saving, credit and insurance opportunities. As a social institution, the rosca is able to serve as a social meeting place, a provider of social aid and a way of increasing savings when saving is difficult. As a cultural institution, cultural fairness norms affect the optimal organizational design of a rosca. Reciprocity and commitment to the group are essential in order for the rosca to be sustainable, and this is mainly achieved though social enforcement. In addition, the rosca must be sustainable as an institution among other informal and formal institutions. Their importance in Kibera, and their wide geographic range, both in developing countries and among immigrants in developed countries, indicate that roscas are sustainable in the presence of other institutions. The survey "Socio-Economic Survey on Poverty and Collective Action in Kibera", conducted in the slums of Nairobi, Kenya in 1997, is used throughout this thesis to give the reader an illustration of how data can be used to give an indication of whether various hypotheses about rosca participation and enforcement are valid