What are ROSCAs? Understanding the lesser-known alternative to formal credit

ROSCAs (short for Rotating Savings and Credit Associations) are a form of informal and unregulated credit which have operated for decades but are largely unknown. 

They are often associated with minority communities and people of varied ethnicities excluded from mainstream credit, which is supported by data from MoneyView. 

However, people who could borrow from mainstream lenders still sometimes choose to use ROSCAs. With tighter regulation of Buy Now Pay Later in effect, could this lead to a change in who typically uses ROSCA’s?

I didn’t know the answer to this question until I became involved in a longitudinal research project run by the Centre for Inclusive Money at Nest called Real AccountsOpens in a new window. One of the participants Sadie (not her real name) used ROSCAs.

ROSCAs have existed for generations and can be defined as:

“A group of people who agree to save together. Everyone contributes regularly to a shared pot, and each member takes a turn receiving the full amount.”

The term ROSCA was popularised by the economic anthropologist Shirley Ardener in a paper written in 1964.

It’s easier to understand with a worked example. Here is a diagram showing a ROSCA with 5 people putting in £100 for 5 months.

There have been several pieces of qualitative work that academics have conducted on this topic over the years, typically focusing on a particular ethnic minority community (more about that later).

In this blog, we aim to establish quantitatively who is taking part in ROSCAs, describing their demographic and financial profile by using MoneyView’s nationally representative coverage of the UK.

ROSCAs are named differently in different ethnic minority communities. These arrangements are informal, so the list below isn’t comprehensive and the spelling could be different to the term you are familiar with.

ROSCAs are created by people who have a shared connection coming together to support each other financially. These arrangements are not about making money.

We’ve published guidance on ROSCAs, which anyone thinking about taking part in one should read. 

The main risks of taking part are default and the lack of legal protection.

• The system breaks down if someone takes their payout early on and is unable to pay their contributions in the remaining months or decides not to. ROSCAs are informal verbal agreements so there is no regulatory protection from the Financial Services Compensation Scheme.
• The person who receives their payout in the final month receives the same as the first person, meaning the purchasing power of their payout may have been eroded by inflation over the life of the arrangement.  Also, regardless of which month a payout is received, no interest is generally paid on top
• It can be difficult to access your money if you need it before your turn for a payout

But ROSCAs do have advantages over conventional financial loans or savings accounts. Depending on when a member is paid out, a ROSCA functions as either a 0% interest loan or a disciplined savings plan. 

• The person who is paid out in the first month receives a lump sum immediately while only having contributed a fraction of it. They spend the remaining months paying off that "loan" completely interest-free.
• The person who is paid out in the final month has effectively forced themselves to save every month. At the very end of the cycle, they receive all their payment back in one lump sum.
• The organiser who is trusted to coordinate the collection and distribution of funds might take a small fee or get the first payout as compensation for managing the risk
• No interest is charged, and the total amount paid in always equals the total amount paid out.
• This off-book system involves no formal credit checks, which would rule some people out of mainstream lending. It offers a cheaper alternative to regulated short-term, high-cost lending or illegal money lending that they would otherwise need to use.

One final observation: people who take part in a ROSCA to its conclusion have demonstrated sustained financial discipline. Unfortunately, credit reference agencies won’t recognise this as they will not be aware of informal arrangements like this.

Last year, I wrote a blog based on the findings of our MoneyView survey about the financial lives of people with debts in the UK. These insights come from questions that we ask every year, and you can see the results of the latest MoneyView 2026 survey, including breakdowns by nation, here. 

Every year MoneyView also includes question modules that we swap in and out to explore topics that we want to understand more about, but don’t need to be tracked over time.

The survey uses a blend of online panels and face-to-face interviews, ensuring we get the opinions of people who are under-represented on panels.  This includes people aged 75+, those living in socially deprived communities and ethnic minority communities.  

This makes MoneyView an excellent vehicle to explore systems that fall outside of the mainstream financial services sector, including ROSCAs.

ROSCAs are not a major source of credit for the UK population with only 8% of adults telling us they used ROSCAs in the last 12 months. However, usage varies widely among people of different ethnicities:

Percentage who used a ROSCA in the last 12 months:

Around a third of some minority communities are using ROSCAs, which makes them a part of their financial world that cannot be ignored. Geographically, London and the North West show the highest levels of ROSCA usage and this is driven by the minority communities in these regions.

But usage is not confined solely to these communities. People of white ethnicity, who make up most of the UK population, are also using them, but to a much lesser extent.

People using ROSCAs are typically younger: 87% of users are under 45 years old.  They often live as families with children, as most (57%) live with a partner and one or more children, and nearly one in five (18%) are single parents.

What is striking about them is the level of self-reported mental health conditions among ROSCA users: 40% tell us that this has affected them in the last 3 years.

The short answer is yes, some of them probably could. 

The financial wellbeing of ROSCA users is generally much lower than the UK population, but there are members of this cohort who should be able to borrow from conventional channels based on what they told us:

As the table above shows, around 30% of people participating in ROSCAs don’t have arrears and haven’t been turned down for credit, and just over half don’t need debt advice. For these groups, participating in ROSCAs appears to be a choice rather than a necessary alternative to mainstream credit.

Without access to a complete picture of someone’s finances we cannot tell whether ROSCAs are a direct replacement for another type of credit.  But in MoneyView 2026 we also had questions about types of mainstream credit that people used and unsuccessful credit applications

Among those participating in ROSCAs, we were told the following about being turned down for certain types of mainstream credit:

Every application needs to be considered on its own merits, but the proportion of ROSCA participants turned down for Buy Now Pay Later is striking given the lighter touch credit checks for those agreements that would have been in place when interviewing took place (Summer 2025).  

Buy Now Pay Later (BNPL) is now regulated by the FCA including a requirement for providers to carry out affordability checks. Fair4All Finance have suggested that between 10-30% of current BNPL users are likely to be rejected from now onOpens in a new window and could turn to unregulated lenders instead. “Unregulated lenders” may include ROSCAs.

Looking at people who were using BNPL and ROSCAs reveals how dependent they were on BNPL. We asked BNPL users how often they used it in different ways. People using ROSCAs are much more likely to say they used BNPL for essentials some or all of the time.

BNPL users were given a 5-point scale to record their answer to the following question:

In the last 12 months, how often did you use BNPL to buy essentials such as food for you or your family?

This suggests that ROSCAs may become part of the solution to replace BNPL for people who do not pass the new affordability checks.

We will plan to work with academics who have looked at ROSCA use in specific minority communities and create further publications on this topic. We will also be sharing more insights from MoneyView throughout the rest of 2026.

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