What Is a Rotating Savings and Credit Association (ROSCA)?

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ROSCA stands for Rotating Savings And Credit Association. A Rotating Savings and Credit Association (ROSCA) is a form of combined peer-to-peer lending and savings. It is also a form of savings and credit union. ROSCAs are informal groups of people who contribute to a shared fund on a regular basis. ROSCAs are mostly used by people who don’t have access to banks or credit unions. It’s designed to help groups of friends or family members save together, as well as provide a source of emergency funds for any individual in the group if they need it. The World Bank reports that ROSCAs have been very popular in Africa and Asia, where they are more widespread than banks.

A ROSCA is a type of savings and credit association where members make regular contributions to a common fund, and at the end of each period, the accumulated funds are distributed to one of the members. The order in which members receive the distribution of funds is decided in advance, usually by lot or by rotation. ROSCAs are often formed by communities and members can pick turns to withdraw funds. Members can also contribute to the group daily, weekly or monthly and withdraw the funds in rotations.

ROSCAs are popular in many parts of the world as a way for small groups of people to pool their resources and access credit. They are often used as a way to finance major purchases or investments or to cover unexpected expenses. ROSCAs can also be used as a form of savings, where members save up for a specific purpose such as buying a house or starting a business.

How a ROSCA works

A ROSCA is a rotating savings and credit association. It is a type of informal banking system where members pool their money together and take turns receiving the whole amount.

There are usually 10-20 members in a ROSCA. Each member contributes an equal amount of money to the pot each month. One member receives the entire pot at the end of each month. The member who receives the money that month uses it as they see fit – to cover unexpected expenses, make a large purchase, or save for something special.

The following month, another member receives the pot of money. And so it goes, with each member taking their turn receiving the pooled funds.

ROSCAs are popular in many parts of the world because they provide a way for people to access credit and save money without having to go through formal banking channels. They also help build community ties and social cohesion.

Who can participate?

A ROSCA is a type of savings and credit association where members contribute equally to a pool of money every month. The money in the pool is then given out to one member in the form of a loan or prize.

To be a part of a ROSCA, you must be nominated by another member and approved by the group. There are usually strict requirements for membership, such as attending all meetings, making timely contributions, and having a good credit history.

Mode of Payment

In a ROSCA, a group of participants agrees to make regular contributions over a pre-agreed time period.

ROSCA is an acronym for Rotating Savings And Credit Association. ROSCAs are a form of peer-to-peer lending and savings. ROSCAs are typically used by people who don’t have access to banks or credit unions

Mode of Collection 

Contributions are collected by one participant each cycle.

This is called the collection round. The collection round is usually done by the person who started the ROSCA at a meeting place and at a pre-agreed time. When the cycle ends, all of the money is given to one participant. One participant gets all the money and the other participants get nothing. This continues until every participant has received the full amount of their contributions in a single payout. 

Payout is a one-time only. Payout is not a return on investment and it is not a loan. The payout can be used for any purpose. The cycle ends when everyone has received their contributions. This is called a “payout”

Who is ROSCA’s target audience?

ROSCAs tend to target people with no access to banks or credit unions. ROSCAs are used for making small and medium purchases. ROSCAs are also used for savings and lending. People who participate in ROSCAs are typically from low-income communities. ROSCAs are a form of microfinance with members typically from low-income communities

Pros and Cons of the ROSCA

A ROSCA is a great way to save money and build credit, but there are some drawbacks to consider.

One pro of ROSCA is that it can help you save money. When you’re part of a ROSCA, you agree to make regular contributions to the pot. This can help you stay disciplined with your savings goals and avoid the temptation to spend.

Another pro is that a ROSCA can help you build credit. You can improve your credit score if you make your payments on time and manage your account well. This can open up opportunities for better loan terms in the future.

There are some cons to consider, such as the fact that you could lose your money if someone in the group defaults on their payments. There’s also the potential for peer pressure to spend or borrow more than you can afford.

Overall, a ROSCA can be a great way to save money and build credit, but it’s essential to weigh the pros and cons before deciding if it’s right for you.

Where to find a ROSCA in my community?

A ROSCA can typically be found in faith-based organizations, community groups, and even workplaces. Finding a ROSCA in your community may take some effort, which is why AjoMoney has digitized this centuries-aged method of saving and accessing credit. This has also made access to a lump sum of money easier, safer, and certain for Nigeria’s unbanked and underbanked communities.

ROSCA with AjoMoney

With several limitations that come with traditional ROSCA, AjoMoney is on a mission to encourage and enable more Africans to become financially free and build great credit history through flexible savings such as rotating group savings and thrift contributions with collective investment. With AjoMoney, you can Join a community of SMEs and corporate employees with cooperative significance pooling money together to rotate the lump contribution as micro-credit for other members.


A ROSCA is a great way to save money and build credit, but it’s important to understand how they work before you join one. Make sure you know the rules of the ROSCA, as well as the risks and rewards involved. With a little research, you can find a ROSCA that’s right for you and start reaping the benefits of this unique savings opportunity.

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