Importance of rotating savings and credit associations in Lesotho

Abstract

Rotating savings and credit associations (ROSCA) are an important form of savings structure that responds to the needs of the majority of the population. This exploratory research investigated the importance of ROSCA in Lesotho through assessing motivation for their establishment, how they function and their social and economic roles. In-depth interviews were conducted on a randomly selected group of women and documentary review was used to back-up the findings. Information from the two sources were corroborated with the research questions. The results indicated that ROSCA offers a way to accumulate savings and provide credit to people who cannot access credit from established financial institutions. Through ROSCA members displayed their ability to save, invest and acquire assets which theu would not do on their own. ROSCA functions are simple and effective though not guided by legal structure. Funds obtained from ROSCA were used for comsumption and investment purposes and this has played a key role in the economic and social uplifting of members and their families. Though the actions of ROSCA have proved to be substantial to the economic growth and poverty reduction strategies, nothing has been done to incorporate them in development activities. This has implication of financial policies to establish institutions that cater for structures such as ROSCA.