The Research On The Operating Mechanism And Operating Efficiency Of Roscas

Rotating saving and credit associations (Roscas) are important informal financial systems all through the world. It is. a financial system that has high efficiency, livingness and competition, which can heighten the welfare of its members all together.Firstly this paper makes a positive analysis of factors that affect farmers to join a Rosca. The analysis shows that Rosca mainly depends on personal relationship and trust between members, personal reliability and reputation determine whether a person can join a Rosca or not. Simultaneity, farmers--who have large demands on cash flow-prefer to attend a Rosca to finance their money. Based on above analysis, this paper explores the operating mechanism of Roscas from three sides: dynamic mechanism, control mechanism and self-coordination mechanism. It is found that the particular and effective operating mechanism can lower trade costs, control risks and maintain operation of Roscas to make the welfare of all members better off.This paper is based on investigation and research in Cang Nan Town, Wen Zhou City on the spot, and makes positive analysis of operating efficiency in the view of interest rates. The results show that Rosca is a valid credit mechanism, which can provide facilities both on saving and lending and also heighten credit efficiency inside.Finally, this paper looks forwards the future of Roscas. When we truly understand the function of Roscas, we should allow those normative and small-scaled Roscas in the market, and furthermore, encourage their development in affirmative and hortative attitude. And we can also accept those middle- and large-scaled Roscas to become normal financial institutions.