Promises kept: enforcement and the role of rotating savings and credit associations in an economy

Rotating savings and credit associations (roscas) are a popular form of informal finance in developing countries. This paper examines the rosca's ability to enforce its terms of membership and the implications that this has for their existence in an economy. A connection between enforcement costs and the desirability of rosca formation is illustrated using a framework that focuses on the nature of the financial contract that the rosca offers, allowing inferences to be drawn about the likely viability of roscas throughout the development process and the implications this has for debates about financial dualism. Copyright © 2002 John Wiley & Sons, Ltd.