Rotating Credit And Savings Association (ROSCA)

AAA

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members pool their money into a common fund, generally structured around monthly contributions, and money is withdrawn from it as a lump sum by a single member at the beginning of each cycle.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.

INVESTOPEDIA EXPLAINS '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. Third World

    A phrase commonly used to describe a developing nation, but actually ...
  2. Savings Association Insurance Fund ...

    A government insurance fund for savings and loans and thrift ...
  3. Development Economics

    A branch of economics that focuses on improving the economies ...
  4. Microfinance

    A type of banking service that is provided to unemployed or low-income ...
  5. Socially Responsible Investment ...

    An investment that is considered socially responsible because ...
  6. Emerging Market Economy

    A nation's economy that is progressing toward becoming advanced, ...
Related Articles
  1. Credit & Loans

    The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  2. Entrepreneurship

    Microfinance: What It Is And How To Get Involved

    This growing industry is full of opportunities for the socially conscious investor.
  3. Insurance

    An Introduction to Microfinance

    Is microfinance a way to help the poor, or will it just make them poorer?
  4. Economics

    What Is An Emerging Market Economy?

    Emerging markets provide new investment opportunities, but there are risks - both to residents and foreign investors.
  5. Retirement

    Tired Of Banks? Try A Credit Union

    These nonprofit organizations can provide a range of services for lower fees.
  6. Savings

    Online Banks: Lower Costs And Little Sacrifice

    For many, online banking has become a day-to-day routine. Still, there are some holdouts who refuse to accept the method.
  7. Taxes

    How New Offshore Bank Rules Will Affect Americans

    FATCA is being implemented in 2013. Here is how it will affect the personal banking and taxes of Americans who hold offshore bank accounts.
  8. Brokers

    The Future Of Sales Brokers

    The role of the sales broker, as a purely transaction-based salesperson, is changing. Find out what's next for this industry.
  9. Personal Finance

    Understanding The Consumer Financial Protection Bureau

    The new CFPB will try to make sure the financial products and services market is fair, transparent and competitive.
  10. Personal Finance

    The Pros And Cons Of Internet Banks

    Learn how internet banking services stack up against those of their brick-and-mortar peers.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center