The Efficiency Of Roscas's Investment And Financing

Being an informal financial institution, Roscas(Rotating Savings and Credit Associations) has existed widely for a long time in Wenzhou. Since the reform and opening up to the outside world, although Roscas has played an important role in improving the consumptive demand and investment & financing of the small & medium Enterprise, frequently occurred storms of participants' breaking the agreement have a big negative impact on the development of Wenzhou's economy. Efficiency is a key problem of Roscas. As the economical incentives of the participants of Roscas are investment and financing, this paper makes a case analysis of the efficiency of Wenzhou's Roscas from the perspective of investment & financing.After making analysis on the definition, operational mechanism and classification of the Roscas, this article examines three Roscas examples collected from Cangnan County of Wenzhou City. Firstly, it uses the method of interest rate comparison to analyze the efficiency of Roscas's investment and financing. Then, it goes further to analyses the risk of breaking the agreement that has a strong impact on the efficiency of Roscas's investment and financing. The conclusions are:1. Different kinds of Roscas have different rules of recurrent rotation of founds. People in different social environments can adjust the key structure elements of the Roscas according to the real needs.2. The Roscas is an efficient financing and investment mechanism on the aspect of financing cost and investment revenue. Cultural traditions, such as human kindness and personal loyalty, are the sources of the efficiency of Wenzhou's Roscas's investment and financing.3. The participants' worry about the risk of breaking the agreement reduces Roscas's efficiency of investment and financing. Although it can reduce the risk through the information-exchanging, mutual check and restrict of the capital use, when the economy and finance develops, Wenzhou's interpersonal trust gradually change from the particularistic trust(based on the consanguinity) to universalistictrust(based on the occupation). As a result, the cost of breaking the agreement decreases and the revenue of breaking the agreement increases, this makes the participants more likely to break the agreement and makes the Roscas very hard to develop.Government's decision-making, especially the law support, is a key factor that determines the development trend of the Roscas. Based on the above-mentioned conclusions, this article gives several corresponding advices.