Do institutions matter? The persistence of ROSCAs among immigrants in developed economies
Journal of Enterprising Communities: People and Places in the Global Economy
ISSN: 1750-6204
Article publication date: 28 March 2019
Issue publication date: 12 July 2019
Abstract
Purpose
Guided by the institutional theory of savings, the purpose of this study is to assess the institutional elements of rotating, savings and credit associations (ROSCAs) that enable participants to save.
Design/methodology/approach
The study used data from in-depth qualitative interviews (N = 10) conducted among the ROSCA group leaders from African immigrant communities in the USA.
Findings
The primary goal for joining the ROSCA group among participants is to achieve economic stability. The results of the study postulate that, through institutional mechanisms and social networks, ROSCAs create an environment for families to save and invest. The emphasis on the concept of “you cannot save alone” underscores the importance of supportive structures to enable low-income households to save. Although “alternative savings programs” such as ROSCAs are imagined as something that less well-to-do persons use, the findings from this study demonstrate that such strategies also appeal to some people with higher socioeconomic status. This appeal and utility speaks to the importance of ROSCAs as an institutional response, rather than just an informal arrangement among persons known to each other.
Research limitations/implications
It is prudent to bear in mind that the study sample is not nationally representative, and therefore, the results presented cannot be generalized to immigrants across the country. However, as one of the few ROSCA studies in the USA, the findings from this study make generous contributions to the immigrants’ savings and ROSCA practices literature.
Practical implications
ROSCAs could be used as a bridge to the formal financial institutions. Non-profit agencies working with these communities could work with these groups to report ROSCA payments to the major credit bureaus, to help them build a credit line in their new country.
Originality/value
Previous studies of ROSCAs have assessed ROSCAs as community support systems and social networks. The current study has analyzed ROSCAs from an institutional perspective by examining the institutional characteristics of ROSCAs comparable to the institutional determinants of savings that enable savings among the participants.
Keywords
Citation
Ibrahim, H. (2019), "Do institutions matter? The persistence of ROSCAs among immigrants in developed economies", Journal of Enterprising Communities: People and Places in the Global Economy, Vol. 13 No. 3, pp. 319-332. https://doi.org/10.1108/JEC-04-2018-0027
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited