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The basic advantage of Seng, a ROSCA, is that it offers an opportunity for anyone to achieve financial goals together. It’s a simple way of supporting each other socially and financially.  

Why Seng, a ROSCA?

ROSCA stands for Rotating Savings and Credit Association. The basic advantage of Seng is that it offers an opportunity for members to save, and at the same time keep such savings liquid and maximizing return. It facilitates the availability of a lump sum of money, which allows for higher investment to be made earlier than accumulation of savings. When you join a ROSCA, you agree to a schedule of periodic payments in return for which you receive a lump-sum payment at a future date.

As many ROSCA participants put it: “you can’t save alone.” A simple idea is that ROSCA’s can serve as a commitment device and shows how repeated interaction can sustain ROSCA’s even without the use of community-level social sanctions. The commitment idea is consistent with the design of these ROSCA’s.

First, most ROSCA participants report that they join ROSCA’s in order to commit themselves to saving, “to get the strength to save.” A key feature of ROSCA’s is the public nature of deposits and the inability to withdraw funds once they have been deposited.

Second, participants do not always value earlier positions in the ROSCA allocation more highly, implying credit is not the reason for joining a ROSCA.

Third, ROSCA’s monitor and enforce an individual’s payments to herself as well as her payments to the group.

Finally, many ROSCA participants “bind their hands” through the use of a pre-commitment mechanism in which participants agree in advance on how they will use their funds and the group monitors the individual to ensure that she honors her commitment.

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