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Rotating and Savings Credit Association (ROSCAs): A Veritable Tool for Enhancing the Performance of Micro and Small Enterprises in Nigeria

Author

Listed:
  • Ademola Abimbola O
  • Ben-Caleb Egbide
  • Adegboyegun Adekunle E
  • Eluyela Damilola F
  • Falaye Adebanjo J
  • Ajayi Abiodun S

Abstract

ROSCAs are informal financial institutions serving the financial needs of many people especially in developing countries. They provide an alternative through which entrepreneurs raise funds to support their business operations. Therefore, this study evaluated the relationship between ROSCAs participation and MSEs performance in Nigeria. A sample of 240 ROSCAs members was selected using stratified random sampling. Data were analysed using Frequency and Percentages, Regression analysis and Goodman and Kruskal’s gamma statistics. Findings showed that significant and positive relationship exist between ROSCAs participation and MSEs performance (G = 0.768, p< .005). By establishing this connection, the analysis elucidates the prominent role of ROSCAs in enhancing MSEs performance. Additionally, this paper discusses factors influencing participation in ROSCAs and the implications on ROSCAs existence. Internal regulations of Formal Financial Institutions (FFIs) influence ROSCAs participation positively and significantly while income, level of education and attitude of ROSCAs members’ impacts significantly but negatively on ROSCAs participation. This study examines rationale for joining ROSCAs and findings indicate that financial motives outweigh all other motives. Our analysis suggested that ROSCAs participation is beneficial because it serves as a mechanism for saving, provides capital with little or no interest, strengthens networks and helps to accumulate assets. Consequentially, it would be important for policy reforms to integrate ROSCAs to FFIs rather than seeking to eliminate them in order to pave way for appropriate linkages and integration of the two systems.

Suggested Citation

  • Ademola Abimbola O & Ben-Caleb Egbide & Adegboyegun Adekunle E & Eluyela Damilola F & Falaye Adebanjo J & Ajayi Abiodun S, 2020. "Rotating and Savings Credit Association (ROSCAs): A Veritable Tool for Enhancing the Performance of Micro and Small Enterprises in Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(2), pages 189-199.
    • Handle: RePEc:asi:aeafrj:v:10:y:2020:i:2:p:189-199:id:1918
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    Citations

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    Cited by:

    1. Akim Tafadzwa Lukwa & Feyisayo Odunitan-Wayas & Estelle Victoria Lambert & Olufunke A. Alaba & on behalf of the “Savings for Health” IDRC Collaborators, 2022. "Can Informal Savings Groups Promote Food Security and Social, Economic and Health Transformations, Especially among Women in Urban Sub-Saharan Africa: A Narrative Systematic Review," Sustainability, MDPI, vol. 14(6), pages 1-26, March.
    2. Catherine W. Gathitu & Dr David Kabata & Dr Grace Kiiru, 2024. "Influence of Government Sponsored Enterprise Funds-Credit Services on the Growth of Group-Based Micro and Small Enterprises in Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(2), pages 1326-1340, February.
    3. Francis Lwesya & Adam Beni Swebe Mwakalobo, 2023. "Frontiers in microfinance research for small and medium enterprises (SMEs) and microfinance institutions (MFIs): a bibliometric analysis," Future Business Journal, Springer, vol. 9(1), pages 1-18, December.
    4. Patrick Behr & Jorge Jacob, 2024. "Neighbourhood social capital, account usage and savings behaviour in low‐income countries: Field experimental evidence from Senegal," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(1), pages 84-108, January.

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