Rosca are locally organized groups that meet at regular intervals; At each meeting, members contribute funds which are in turn given to one or more of the members. Once each participant has received funds, the Rosca can dissolve or start again Besley, Coate and Loury (1993). By joining a Rosca, a person agrees to a schedule of periodic payments in exchange for which they receive a lump sum at a later date. Roscas often pay no interest and participants may have little or no control over when they receive the funds. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an original essay Participants also bear the risk that other participants will not fulfill their obligations. According to Besley, Coate and Loury (1993), individuals can join Roscas to finance the purchase of an indivisible durable good, taking advantage of the gains from intertemporal trade between individuals. All but the lowest individuals improve their well-being by joining a Rosca, because everyone receives indivisible durable goods sooner than by saving alone. ROSCAs play an important role as a risk management tool; they can provide an insurance mechanism against income shocks, provided that these shocks are uncorrelated across participants. They are an extension of traditional savings groups which, as Maloney and Ahmed (1988) documented, consist of individuals who regularly or irregularly deposit funds with an individual or subset of the group . Funds are returned to individual savers at the end of a given period and there is no systematic rotational distribution mechanism. Although there are important financial reasons for joining a ROSCA, the main characteristic of a successful association is the reduction of the risk of opportunistic behavior that results from peer pressure for the performance of all members. Although ROSCAs are financing instruments mainly used by the poor, they are not exclusively used, unlike microfinance. According to Adams and Canavesi de Sahonero (1999), the subscribers most likely to join ROSCA in developing countries are among white-collar workers in large cities. Nevertheless, ROSCA appears to be a fairly rigid credit granting system, whose survival depends almost entirely on the use of social pressures to ensure the preservation of the personal resources of the members of the group within the association. Informal financial groups face many challenges due to the fact that their activities and operations are very informal. These challenges include: late payments, poor group management and governance, mismanagement of funds and theft. According to Siwan et al. (2003) in Kenya, he shows that ROSCA groups encounter two main problems: there are members who do not regularly pay their contributions and there are members who stop contributing after receiving the kitty. Another challenge lies in the element of negotiability enabled by these systems, which allows powerful individuals to manipulate groups for their personal advantage. Additionally, a few powerful community members take advantage of weak systems; by quickly creating a group, raising money from other members, taking out large loans for themselves, and not paying. Keep in mind: this is just a sample. Get a personalized article from our expert writers now. Get a personalized trial According to the FinAcess report (2016), the.