What Is A Rotating Savings And Credit Association?
What is a ROSCA?
A ROSCA, or rotating savings and credit association, is a type of informal savings scheme set up between friends, family members, colleagues, religious groups, or other communities. It’s designed to help people save money and become financially secure — especially those who don’t want to use or can’t access traditional finance systems like savings accounts or ISAs.
Other names for ROSCAs
ROSCAs are used all over the world — they’re just not usually called ROSCAs. Different communities know them as pardna schemes, committees, ajo, esusu, gameeya, tanda, or hagbad. There are also lots of other names for ROSCAs.
How do ROSCAs and committees work?
A ROSCA is set up by the club organiser, who is responsible for collecting money, tracking contributions, and organising the payout.
Each ROSCA or committee member contributes a set amount of money to the group pot at regular intervals (usually weekly or monthly). When a certain agreed upon amount has been contributed by the group, one member collects this as a payout. The ROSCA continues until all contributors have received a payout (and beyond this, if the group decides to continue).
How much do you have to contribute to a ROSCA?
There’s no set amount you’re required to pay into your savings club — it depends on the committee. Some clubs ask members to pay in £50 per month, while others pay in £500. The main thing is that you commit to contributing only what you can afford on a regular basis.
Why are ROSCAs used?
ROSCAs are a popular alternative to traditional savings schemes all over the world, from East Asia to southern Africa. The system is steeped in cultural tradition, which is why it remains such a popular way to save, even in the 21st century. Find out why ROSCAs are popular across the world and within migrant communities in the UK.
Pros and cons of ROSCAs
Pros
- ROSCAs work for people who can’t or don’t wish to open a savings account
- They help your friends and family save money, too
- They enable you to save in line with your ethical or religious values
- They give you a unique way to connect with your community
- They can help you build a credit score
Cons
- They’re tricky to track if you don’t have the right tools or technology
- Members may need to leave the club if they can’t afford their payments, which can affect payouts
- Schemes aren’t regulated by the FCA, so you should only join a ROSCA with people you trust
- You won’t receive interest on ROSCA savings (although this may be a plus point for those who want Sharia-compliant savings)
Is a ROSCA right for you?
Whether you’re thinking of joining a savings club or setting up your own ROSCA, you need to ensure it’s the right financial decision for you. Here are 3 questions to ask yourself before you commit to joining a savings club:
- Can you afford regular payments into the ROSCA? Unlike some other savings schemes, you can’t withdraw your contributions until it’s your turn to receive the payout, so only commit to contributing what you can afford.
- Do you trust the other committee members? If you like the idea of joining a ROSCA but you don’t know the other members well, it may be a better idea to start your own savings club with people you know and trust.
- How will you keep track of your ROSCA income and outgoings? If you’re setting up your own ROSCA, you’ll need to be highly organised. Using a ROSCA app can help you manage your savings club better.
Find out how to set up your own ROSCA
Interested in setting up a ROSCA with your friends, family, colleagues, or community? Learn everything you need to know about organising a ROSCA committee.