ROSCAs and susu — the rotating savings circles that quietly bank the continent

<p>Across West Africa they are called *susu* (in Akan and adopted into Caribbean English). In East Africa they are *chama* (Swahili). In Cameroon they are *tontine*. In Egypt they are *gam&#x27;eya*. In Ethiopia *ekub*. The structure is everywhere similar: a rotating savings and credit association (ROSCA) in which a fixed group of members each contribute a fixed amount on a regular schedule, and on each schedule cycle the entire pool is given to one member by rotation.</p> <p>From a formal banking perspective, ROSCAs look primitive. They have no interest payments. They have no formal contracts. They rely on social pressure for enforcement. They are vulnerable to a member defaulting on later contributions after receiving their payout. From a developmental economics perspective, they are routinely cited as evidence of &#x27;financial inclusion gaps&#x27; to be closed by mobile banking or microfinance.</p> <p>This view is mostly wrong. ROSCAs are not primitive substitutes for banking; they are *alternative* financial institutions that do things banks cannot easily do. Specifically: ROSCAs are interest-free, which matters in jurisdictions where interest is religiously objectionable. ROSCAs enforce *commitment* — the social cost of dropping out is a feature, not a bug, for members who want to save against present-bias. ROSCAs build *social capital* — the regular meetings, the shared trust-building, the small-talk in the back of the *gam&#x27;eya* hostess&#x27;s living room — that translates into business networks, marriage introductions, and emergency reciprocity.</p> <p>The empirical literature supports this. Anderson and Baland&#x27;s 2002 paper on Kenyan ROSCAs found that women joined them partly to commit savings beyond their husbands&#x27; reach. Bouman&#x27;s 1995 survey across West Africa documented ROSCA volumes — in some economies approaching 5-10% of GDP — that simply do not appear in central-bank monetary aggregates. More recent work on mobile-money-mediated ROSCAs (Kenya&#x27;s chama-on-M-Pesa platforms) shows that the institution adapts to new technology without losing its core function.</p> <p>The policy implications cut against the financial-inclusion orthodoxy. Pushing ROSCA members onto formal banking platforms — where their savings can be lent out at interest, tracked by tax authorities, and subjected to fee structures designed for a different kind of customer — is not obviously welfare-improving. The better policy is the one Kenya and Ghana have, in practice, pursued: tolerate ROSCAs, allow mobile-money platforms to support them, and let the institutions evolve. The continent&#x27;s quiet trillion-shilling parallel banking system is not the problem. It is the resilience.</p>