ROTATING AND SAVINGS CREDIT ASSOCIATION (ROSCAs): A VERITABLE TOOL FOR ENHANCING THE PERFORMANCE OF MICRO AND SMALL ENTERPRISES IN NIGERIA

Ademola, A. O. and Ben-Caleb, Egbide and Eluyela, F. D. and Falaye, Adebanjo Joseph and Ajayi, S. A. (2020) ROTATING AND SAVINGS CREDIT ASSOCIATION (ROSCAs): A VERITABLE TOOL FOR ENHANCING THE PERFORMANCE OF MICRO AND SMALL ENTERPRISES IN NIGERIA. Asian Economic and Financial Review, 10 (2). pp. 189-199. ISSN 2222-6737

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Abstract

ROSCAs are informal financial institutions serving the financial needs of many people especially in developing countries. They provide an alternative through which entrepreneurs raise funds to support their business operations. Therefore, this study evaluated the relationship between ROSCAs participation and MSEs performance in Nigeria. A sample of 240 ROSCAs members was selected using stratified random sampling. Data were analysed using Frequency and Percentages, Regression analysis and Goodman and Kruskal‟s gamma statistics. Findings showed that significant and positive relationship exist between ROSCAs participation and MSEs performance (G = 0.768, p< .005). By establishing this connection, the analysis elucidates the prominent role of ROSCAs in enhancing MSEs performance. Additionally, this paper discusses factors influencing participation in ROSCAs and the implications on ROSCAs existence. Internal regulations of Formal Financial Institutions (FFIs) influence ROSCAs participation positively and significantly while income, level of education and attitude of ROSCAs members‟ impacts significantly but negatively on ROSCAs participation. This study examines rationale for joining ROSCAs and findings indicate that financial motives outweigh all other motives. Our analysis suggested that ROSCAs participation is beneficial because it serves as a mechanism for saving, provides capital with little or no interest, strengthens networks and helps to accumulate assets. Consequentially, it would be important for policy reforms to integrate ROSCAs to FFIs rather than seeking to eliminate them in order to pave way for appropriate linkages and integration of the two systems.

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