Rotating Credit And Savings Association (ROSCA)

DEFINITION of 'Rotating Credit And Savings Association (ROSCA)'

A group of individuals that fill the role of an informal financial institution through repeated contributions and withdrawals to and from a common fund. Rotating Credit and Savings Associations are most common in developing economies or among immigrant groups in the developed world. This is because accessing formal institutions is difficult due to their unavailability or because these institutions are unable to provide the appropriate service. The name derives itself from the types of transactions that occur in these associations; members pool their money into a common fund, generally structured around monthly contributions, and money is withdrawn from it as a lump sum by a single member at the beginning of each cycle. This occurs for as long as the group exists.

BREAKING DOWN 'Rotating Credit And Savings Association (ROSCA)'

Memberships are generally based on ethnic or geographical lines, and the structure of payments and withdrawals vary from group to group. Both transactions can vary in occurrences as often as daily to every six months, and recipients of funds are commonly chosen based on financial need or lottery.

RELATED TERMS
  1. Sector Rotation

    The action of a mutual fund or portfolio manager shifting investment ...
  2. Director Rotation

    The cycle by which board members serve and vacate their positions. ...
  3. Common Pool

    A resource or asset that is jointly managed or accessed by a ...
  4. Cleared Funds

    A balance in an account that is able to be withdrawn or used ...
  5. Peer Group

    A group of individuals or entities who share similar characteristics ...
  6. Financial Institution - FI

    An establishment that focuses on dealing with financial transactions, ...
Related Articles
  1. Financial Advisor

    How Financial Advisors Can Learn from Their Peers

    Advisor study groups can be a big help in building a top practice. Here's a guide to creating one.
  2. Markets

    Play the Rotation Out of High Yielders (XLU, TLT)

    The market may be at the cusp of a rotation out of high yielding instruments and into growth plays.
  3. Retirement

    Retirement Planning For 20-Somethings: Choosing Savings Accounts

    Choosing the account to which you add your retirement savings is very important, as your choice could affect the amount of income tax you pay on withdrawals and the net amount you receive for ...
  4. Markets

    What is the Cost of Funds?

    Cost of funds is the interest cost financial institutions pay to use the funds they deploy in their business.
  5. ETFs & Mutual Funds

    Investment Rotation Strategies Using ETFs

    Timely rotation of your investments across multiple sectors and regions can yield higher returns. Here are the basics of investment rotation.
  6. Retirement

    How do Provident Funds Work?

    A provident fund is a government-managed retirement savings plan.
  7. Markets

    What is a Financial Institution?

    A financial institution is in business to, among other things, accept deposits, make loans, exchange currencies, and broker investment securities.
  8. Investing

    Institutional Investors And Fundamentals: What's The Link?

    Big-money sponsorship might make a company look good, but it's not always a reliable gauge of stock quality.
  9. Markets

    Immigration: A High-Stakes Game For US Elections

    We look at why the immigration issue is important going into the presidential election, and the position of both parties.
  10. ETFs & Mutual Funds

    The 4 Best American Funds for Growth Investors in 2016

    Discover four excellent growth funds from American Funds, one of the country's premier mutual fund families with a history of consistent returns.
RELATED FAQS
  1. What are the major categories of financial institutions and what are their primary ...

    Understand the various types of financial institutions that exist in today's economy, and learn the purpose each serves in ... Read Answer >>
  2. How do you withdraw money from your 401(k)?

    Deciding to take a withdraw from your 401k is not a decision that should be made lightly. However, for those who needs funds, ... Read Answer >>
  3. When can I withdraw my IRA money?

    Managing an individual retirement account can be tricky. Find out when you can withdraw IRA money without incurring a 10 ... Read Answer >>
  4. How are benefits from a provident fund taxed?

    Find out how benefits are taxed under the various provident funds around the world, including the Indian Provident Fund and ... Read Answer >>
  5. Can I use my IRA savings to start my own savings?

    Find out whether you can withdraw funds from your IRA to start a savings account, and why this is not the wisest use of your ... Read Answer >>
  6. What are the penalties for early withdrawal from a Registered Retirement Savings ...

    Learn about the three major penalties associated with making an early withdraw from your Registered Retirement Savings Plan ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center