ROSCAs Role in Facilitating Control to the Unbanked : Evidence from Pakistan

Abstract

This study investigated the role of Rotating savings and credit association ''ROSCA'' in allowing unbanked consumers to control and manage their routine financial matters and assessed the consequences of the Committee (i.e.ROSCA) system for unbanked consumers in the Pakistani context. Qualitative data were gathered from low-income unbanked consumers through semi-structured interviews. The study finds that the institutional culture and rules of Committees offer unbanked participants control over their everyday financial affairs and generally provide the unbanked an opportunity to address their vulnerability. However, Committees lack legally binding contracts and thus the possibility of fraud by Committee organizers cannot be completely discounted. Moreover, Committee institutions are unable to offer safekeeping services to their members, which raises concerns about the safety and privacy of money collected by a member from the Committee fund. Therefore, Committees cannot consistently ensure that the unbanked have the ability to manage their day-to-day financial affairs; thus, the unbanked individual could experience vulnerability. Finally, policy implications regarding the financial inclusion and wellbeing of unbanked consumers are discussed.