ROSCA Composition and Repayment: Evidence from Taiwanese Bidding ROSCAs

2017-06-19T10:59:35Z (GMT) by Jonathan Bauchet Vance Larsen
<p>Rotating savings and credit associations (ROSCAs) are widespread and remain a key financial management tool for poor individuals. We analyse data from Taiwanese bidding ROSCAs and focus on how social relationships within the group influence contribution behaviour and ROSCA failure. We find that less socially-connected participants were more likely to receive the pot early in the cycle, which increases their incentive to default, yet contrary to accepted wisdom groups including more outsiders were not more likely to experience repayment problems. Our results highlights how bidding ROSCAs can be a versatile device that provide profitable savings while allowing for emergency credit.</p>