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Finance\savings.doc
FACET BV 2000 © Savings Mobilisation 2
There are various types of ROSCA's. Some of them are originally intended to save in cash or in kindin order for members to assist each other in case of emergency or to distribute the accumulated itemsin a rotating order. Other ROSCA's have moved into insurance or the provision of social services as asecondary function, others again perform credit-related functions. One can distinguish between twoprincipal types of ROSCA's
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ROSCA:
The money is put up daily, weekly or monthly and the distribution takes place at theend of the month or the year.
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ASCRA:
Accumulating savings and credit association; the sums collected are invested or on lentagainst interest during the cycle, thus yielding a net return to members' savings: the contributionscan also be used to finance a collective activity of common concern.Informal methods of saving play an important, often indispensable role in developing countries,especially when credit is difficult to obtain. Apart from ROSCA's, many societies have burial or funeralassociations, where members contribute money, food or gifts regularly or as and when required.
2. FACTORS INFLUENCING SAVINGS' BEHAVIOUR
Depositing money in a savings account with a financial institution is by no means the only form ofsaving. It may not necessarily be the best and it is certainly not the most common form of saving. Thesavings mode that people opt for and the savings pattern they display are influenced by a number offactors.These include:
Incomegeneration
A key determinant of a person's capacity to save. People's propensity to save variesconsiderably. Personal savings are positively related to income levels. Consequently, people'scapacity and willingness to save grows as their income increases. There is growing evidence,however, that poor people's capacity to save is much more than was commonly recognised.The realisation that poor people can and indeed do save has prompted several micro and smallenterprise programmes, to incorporate savings mobilisation as an essential component intoprogramme design.
Macro-economicenvironment
An important determining factor in savings patterns. Whether savings are made in real assetsor in monetary form depends primarily on the degree of monetisation of the economy. Themonetary form of holding wealth or capital formation, which a household chooses, depends onthe return, the risk, the convenience and the flexibility or liquidity of the alternative investmentopportunities. When there is a high rate of inflation and little market integration (economic
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There exists a big diversity in ROSCA's. One could further distinguish between:i.
rotating savings association
: each member pays a fixed amount at regular intervals; one memberreceives the total amount at a given time; when the cycle ends a new cycle begins;ii.
rotating savings and credit association
: each member pays a fixed amount at regular intervals and partof the contribution is allocated to one member at a time; another part is put into a general fundfor loans;iii.
non-rotating savings association:
each member pays a fixed or variable amount at regularintervals. The contributions are deposited and paid back to the individual at the end of thestipulated period;iv.
non-rotating savings and credit association
: each member pays a fixed or variable amount atregular intervals. The income generated by the association (from contributions, interest, fees,etc.) are put into a fund, which may be utilised for loans, insurance or social services.
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