Dr. Habiba Ibrahim
Dr. Habiba Ibrahim presented at the SMART Africa and ICHAD Speaker series on Tuesday November 27th, at the Brown School at Washington University in Saint Louis. Her presentation explored Rotating Savings and Credit Associations (ROSCAs), a trust-based practice of group saving, with no formal agreement or documentation. To become a member of such a group, you must be recommended by another member. Each ROSCA designates a group leader who coordinates the operation including collecting and following up on payments and overseeing distribution of funds. At the end of every month, one group member receives all the collections. Next month another member receives the collections and this cycle continues until everyone has received a month of collections.
Dr. Habiba examined how these associations are formed and what benefits participants have gained. She found that people joined ROSCAs for several reasons including being unfamiliar with the complexity of the financial system in the host country, language barriers, previous experiences, and cultural and religious reasons.
In terms of benefits, Dr. Habiba found that this saving structure has been helpful to these groups of immigrants and has enabled them to participate in various investments, including starting up small businesses, home ownership, vehicle purchases, and vocational training. Members generally set target-oriented goals. While many use the money to invest, it can also be used for any expense deemed necessary, including bills, emergencies, or food.