Introduction:

Borrowers in rural Bangladesh are unable to take the money and run. For one thing, the small size of each loan reduces the benefits of deliberately defaulting. Second, living in a small village makes disappearing within the village impossible, unlike living within a large city. Third, family ties make relocating to avoid repayment a costlier decision than in a highly mobile society such as the United States. Fourth, the skills residents of rural areas possess are typically such that rural labor is not substitutable for urban labor, again making default less likely. Thus the combination of monitoring and geographic immobility allows the bank to remain profitable despite the bank's inability to screen out high-risk borrowers as do commercial banks. Informal Savings and Credit Association (ROSCAs) have remained popular in many developing countries for over a long period of time. In fact, in some countries, they have become increasingly popular among almost all sections of society. However, their emerging features and flexibility are little understood by those interested in savings mobilization and credit provision in developing countries. Existing economic models of ROSCAs are based on the experience of a limited number of countries and, thus, have failed to fully explain the distinct characteristics and dynamism of this fascinating financial intermediary.

About ROSKA:
The rotating savings and credit association (ROSCA), an informal financial institution observed around the world, has attracted considerable theoretical and empirical research recently. ROSCAs are popular among high as well as low-income households and flourish in economic settings where formal financial institutions seem to fail to meet the needs of a large fraction of the population. In general terms, a ROSCA can be defined as a voluntary grouping of individuals who agree to contribute financially at each of a set of uniformlyspaced dates towards the creation of a fund, which will then be allotted in accordance with some prearranged principle to each member of the group in turn. Once a member has received a fund, also called pot, she is excluded from the allotment of future pots until the ROSCA ends. In a so-called random ROSCA, a lot determines each periods winner of the pot. In a bidding ROSCA, an auction is staged among the members who have not yet received a pot. The highest bid wins the pot and the amount the winner pays is distributed among the members or added to future pots. In a third, empirically relevant, allocation mechanism, the decision on each periods allocation of the pot is left to the ROSCA organizer.

Benefits of ROSCA
The ROSCA has some potential benefits. These are: No collateral is required. Instead, each circle member ``must establish a regular pattern of weekly saving before seeking a loan''. We refer to this as pre-loan monitoring. The structure--small circles of borrowers with a mutual interest in seeing loans repaid--gives borrowers the ability and incentive to monitor their fellow circle members. This intra-group monitoring behavior is clearly efficient, and appears again in rotating credit associations. Commercial banks are typically unable to tie the status of one loan to that of another individual and hence are unable to benefit from the practice. In this case, ROSCAs have some potential benefits.

Objectives of ROSCA:
The following objectives are the main theme behind growing up this association: Creation of interest in Savings. Bringing Economic Welfare. To help each other in time of financial distress. To help the members financially by providing loans or credits out of the fund generated by the Tohobil. Creating Progress through Unity.

Study on: Rotating Savings and Credit Associations

Name: Md. Zariab Hossain Roll No. # 025 Group no: 01 Name of the Organization: Khilgaon Taltola Market Babshayee Somobay Somity Year of Establishment: June, 2004. Brief History of the Organization: From the inception of the Khilgaon Taltola Super Market, so many small co-operative societies had been formed but did not continue to work for the longer period. These typical co-operative societies were used to be formed for only 1 year. After the stipulated period, these societies had been disappeared. But in 2004, one of the shop owners Mr. Abu Zafar Muhammad Saleh Mukul of M/S Karnafuly General Store wanted to get the small savings of the several shop owners and to do something constructive with that accumulated savings. Registration of the Organization: This Organization is not registered. Address: No formal address of the Organization is available but if any meeting between the members is required then the meetings are done in M/S Karnafuly General Store. The address of the store is 122, City Corporation Super Market (Grocery Market), Khilgaon Taltola, Dhaka-1219. Telephone Numbers: Office Telephone: Not Available Office Fax: Not Available President Telephone: 7216826, 0178-572426 Secretary Telephone: Not Available Treasurer Telephone: Not Available Members: a. Number of Founder Members: 400 b. Number of Current Members: 400 c. Occupation of most of the current members: Business

Profile of the Founder Members: Serial no. 01. 02. 03. Name Abu Zafar Muhammad Saleh Mahfuzur Rahman Roni Title Ag e President 40 Secretary Treasurer 24 Educatio n B.S.C H.S.C Occupatio n Business Student

Current Office Bearers: Serial no. 01. 02. 03. Name Abu Zafar Muhammad Saleh Mahfuzur Rahman Roni Title Ag e President 40 Secretary Treasurer 24 Educatio n B.S.C H.S.C Occupatio n Business Student

Savings collection methodology: The daily savings collected per shop ranges from Tk. 50 to Tk. 500 but maximum shop owners make average payments equal to Tk. 250. The whole amount is deposited to the Sonali Bank Ltd. (Khilgaon Branch). There are some rules regarding the savings collection: a) Minimum savings per name is Tk. 10 and many names can be opened by one member. b) If any member make his or her payment due for seven days then his or she will not be entitled to get the profit for that month. c) If any member stops his or her payment, then he or she will not be entitled to get the profit rather will receive the principle payment after the stipulated period. Loan giving methodology: The maximum amount of loan given to any shop owner is usually Tk. 20,000-Tk. 25,000 in any month. There are some rules regarding the loan giving methodology: a) For getting the loan, an application must be submitted to the President of the Organization 30 days before getting the loan. b) Every member is entitled to get the loan on his or her own name. c) For getting the loan amount which is well over the deposited amount, the member must buy a Stamp of Tk. 150 on his or her own and signs in it in front of the Guarantor.

d) The amount given as loan must be backed to the Organization 5 days before the Organization dissolves. e) The interest rate on the loan is 3% per annum.

Uses of the loans: Usually the savings of small associations are quite small. As a result, the loans given to its members will not turn into a big and healthy amount. Generally, the loans given to the members of a small savings associations are used for personal and family purpose. But as our study is concerned with the business savings association, the loans are used for some business purposes along with the family and personal uses. The business purpose means purchasing of grocery items, extending and refurnishing the shops and so on. Total assets of the organization: The total amount of the savings is deposited to the Sonali Bank Ltd. (Khilgaon Branch). As there is no formal office of the organization, the assets of the organization are the summation of the bank deposits and the loans outstanding to its members. As the members of the organization are very in numbers, the aggregate savings collected turn into a very big amount. At present the total amount of assets of the organization are approximately 25 lacs. This amount includes the deposits in the Sonali Bank Ltd. and the loans given to its members. Governance-procedure of electing office bearers: There are no formal rules and regulations regarding electing the office bearers. No voting system is used. The office bearers are usually selected based on their fame and goodwill and also on their locality. The locality is important because the members believe that if the office bearers are local people, the chance of fraud and cheating will not be a matter of concern. There is also no rule regarding the timing or the working period of the office bearers. If the members wish, the same office bearers can perform their duty for a longer period or until the end of the organization. Record keeping: There are mainly two kinds of record keepings in the organization. One is a register maintained by the shop owner or member. They generally keep their record by filling up the tables every day after making the payments. Another is the bank account maintained by two persons. They are the accountant and on of the members from the general members of the organization. He is known as acting member. All the bank accounts are signed by these two persons.

Study on: Rotating Savings and Credit Associations

Name: Muhammad Amanullah Rumee Roll No. # 026 Group no: 01 Name of the Organization: Babupura small business owners cooperative society Year of Establishment: 1984. Brief History of the Organization: Some 30 newspaper hawkers of Chouddogram, Comilla established this rotating savings and Credit Association to raise up a lump some fund in future and provide credit to the m,embers according to their needs. Registration of the Organization: 1984. Reg. No. - 46 Address: Nilkhet Book Market, Nilkhet,Dhaka. Telephone Numbers: Office Telephone: Not Available Office Fax: Not Available President Telephone: 0189148516 Secretary Telephone: 0171372436 Treasurer Telephone: 0176527678 Members: a. Number of Founder Members: 200 b. Number of Current Members: 300 c. Occupation of most of the current members: Business and job in book stores. Profile of the Founder Members: Sl. No Name 1 Maqbul Hossain Khan 2 Tareq Ahmed Designation Age Education President 55 m.com Secretary 50 B.A Occupation Business Business

Md. unus Ali

Treasurer

45

H.S.C

Business

Current Office Bearers: Sl. No Name 1 Maqbul Hossain Khan 2 Tareq Ahmed 3 Md. unus Ali Designation Age Education President 55 m.com Secretary 50 B.A Treasurer 45 H.S.C Occupation Business Business Business

Savings collection methodology: A monthly non-refundable amount of Tk 50 is collected from the members. 60% of it stored in creation of fund.40% is kept for administrative expenditures. It is a community savings method where the saver cant claim his money back. This is why no proclaimed interest rate of saving is not viable. Loan giving methodology: As we said the savers do not accumulate funds. But there is a provision that if the governing body permits, on emergency basis some members can take small loans. But it is not on the basis of provided fund by the member. No interest is charged on these short term loans Uses of the loans: The loan is used by its members for short term financing, especially for the family purposes and needs. Also the loan is used for the purpose to help the members to strengthen their businesses. Total assets of the organization: The number of total assets, cash deposits, of this organization is around 5,00,000 (up to 2005). The society operates a bank account. The cash fund is an accumulation through monthly fees of the members throughout the years. Governance-procedure of electing office bearers: In case of electing the office bearers, the formal voting technique is followed. Each member of the organization write down their secret voting decision and then the results is got out. Record keeping: There are no accountant in the organization to keep the record of collected savings and disbursed loans. So the records are kept by assistant secretary of the organization.

Study on: Rotating Savings and Credit Associations

Name: Shahin Sultana Roll No. # 054 Group no: 01 Name of the Organization: SHOMOBAY. Year of Establishment: February 17, 2000. Brief History of the Organization: Few Rickshaw pullers of Khilgaon Tilpapara in the starting of year 2000 thought to have some means that will provide them some money as help. They started a co-operative society named SHOMOBAY for this purpose. Registration of the Organization: It is not yet registered. Address: 63/a Khilgaon Tilpapara. Telephone Numbers: Office Telephone: Not Available Office Fax: Not Available President Telephone: 0171-044174 Secretary Telephone: Not Available Treasurer Telephone: Not Available Members: a. Number of Founder Members: 40 b. Number of Current Members: 25 c. Occupation of most of the current members: Rickshaw Puller Profile of the Founder Members: Serial no. 01. 02. 03. Name Mohammad Shah Alam Title Ag e President 48 Secretary Treasurer Education Occupation

Class Eight Rickshaw Puller -

Current Office Bearers: Serial no. 01. 02. 03. Name Mohammad Shah Alam Title Ag e President 48 Secretary Treasurer Education Occupation

Class Eight Rickshaw Puller -

Savings collection methodology: Each and every member of the organization provides TK 10 every week. However, the main problem with this organization is that some members do not want to provide the subscription fees when the date becomes due. But the president is strict enough to cancel the membership when they default for a longer period. Loan giving methodology: Loans are given only to its members. The amount of loans given usually ranges from TK 500 to TK 10000. But before giving the loan, the integrity of the member is judged at first and then the purpose of the loan. Uses of the loans: The loan is used by its members as their own purpose. There are no fixed criteria of using the granted loan according to the organization. Generally, members use their loans for their family affairs and other business purposes. Total assets of the organization: The main assets of this organization is the cash at hand and the loans outstanding. In the year 2005, the amount of the assets reaches to around TK 100000. Governance-procedure of electing office bearers: The current office bearer is the president of the organization. He was elected by the oral votes of all the members and the members have much faith on him so that in every year since the inception, he is elected as the president. There are no written articles for this purpose. Record keeping: To keep the records of their contributed funds and loans provided to the members, the organization uses a register book. The president of the organization maintains it. It does not maintain any standard accounting books for record keeping.

Study on: Rotating Savings and Credit Associations

Name: Mehedi Hassan Roll No. # 129 Group no: 01 Name of the Organization: Ekata Bohumukhi Kollan Tohobil Year of Establishment: February 17, 2000. Brief history: It is an informal association built to make betterment of each others especially for the neighborhood. It developed to increase the standard of its members livelihood by changing their usual financial behaviors. All members are of same area/locality. Registration of the Organization: It is not yet registered. Address: 22/b Purbo Jurain, Dhaka. Telephone Numbers: Office Telephone: Not Available Office Fax: Not Available President Telephone: Not Available Secretary Telephone: Not Available Treasurer Telephone: Not Available Members: a. Number of Founder Members: 78 Family b. Number of Current Members: 78 Family c. Occupation of most of the current members: Small businessmen and Housewives. Profile of the Founder Members:

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Serial no. 01. 02. 03.

Name Md. Kalu Mia -

Title

Ag e President 65 Secretary Treasurer -

Educatio n Class Ten -

Occupation Small businessman -

Current Office Bearers: Serial no. 01. 02. 03. Name Md. Kalu Mia Title Ag e President 65 Secretary Treasurer Educatio n Class Ten Occupation Small businessman -

Savings collection methodology: Though this association is built informally but they follow some rules and regulation to run their activities smoothly. They follow some rules regarding the savings collection. Every member has to subscribe tk100/- per month. A meeting is held on the first Friday of the month in every members house on rotation. In the meeting the subscription as well as installment of credits is also collected. Loan giving methodology: Ekata Bohumukhi Kollan Tohobil mainly grew up to enhance the status of its members livelihood by changing their financial behavior. They collect saving from its members in a regular form and allocate these saving at the time of crisis its members face. Money is not allocated whenever its members require. To get loan from this association its members have to go thorough some of obligation which were established at the time of it origination. A member can take a loan amounting to (total deposit by him/her 5000 tk). To get this type of loan a member must apply for loan in a application form. S/He has to give guarantees of at least two members amongst all the members against his/her loan. Borrower him/herself can not be a guarantor. President and secretary have been empowered to sanction this type of loan. 2% interest is charged on the loan. Uses of loans: The tohobil maintains a savings collection behavior to help the members at the time of their financial need. As a result they have developed a credit giving methodology. The saving is collected from each and every member but the savings are 11

distributed among the members who are in need of them. As a result savings are rotating among the members themselves. A needy member can use his savings as well as other members savings by maintaining some rules and regulation. The members use this kind of loan for various criteria. They can take loan if a sudden need arisen. They can use the loan for the meeting various expenses. They can use the loan for their treatment purpose.

Thus the members can take the loan from the tohobil by maintaining some easy terms and conditions and use these loans to meet their various purposes. Total assets of the organization: As Ekata Bohumukhi Kollan Tohobil is an informal association built to bring enhancement in the livelihood of its members. It has only asset of cash balance amount to tk. 6 lac which is maintained by a bank account. Governance: procedure of electing office bearer: Office bearers are selected by following two procedures. Nomination Election. Nomination: In this procedure the name of the office bearers are proposed in the general meeting. The members of the executive body select the name of the nominee. If maximum number of the members support then the person nominated are selected as the office bearer for the next 5 years. Election: Under this procedure candidates for the respective titles want vote from the members. Election will be conducted through secret ballot. Candidates gaining the maximum votes are selected as office bearers for next two years. Record keeping: The tohobil does not follow any accepted method of book keeping. A register is maintained to record the receipt from and payment to members. The subscription is collected by giving the members receipt. The amounts of subscription are mentioned in the receipt.

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Study on: Rotating Savings and Credit Associations

Name: Mohammad Sanaur Rahman Roll No. # 274 Group no: 01 Name of the Organization: Chouddogram Adarsha Shamabaya Shamity. Year of Establishment: August 5, 2003. Brief History of the Organization: Some 30 newspaper hawkers of Chouddogram, Comilla established this rotating savings and Credit Association to raise up a lump some fund in future and provide credit to the m,embers according to their needs. Registration of the Organization: It is not yet registered. Address: 386, Elephant Road. Telephone Numbers: Office Telephone: Not Available Office Fax: Not Available President Telephone: Not Available Secretary Telephone: 0187-074448 Treasurer Telephone: 0189-925663 Members: a) Number of Founder Members: 30 b) Number of Current Members: 30 c) Occupation of most of the current members: Daily Newspaper Hawkers Profile of the Founder Members:

13

Serial no. 01. 02. 03.

Name Sayed Ahmed Mr. Alam

Title President Secretary

Ag e 67 47

Education Class Eight Class Eight Alim Pass

Occupation Newspaper Hawker Newspaper Hawker Newspaper Hawker & Readymade Garments Business at Dhaka

Mr. Yusuf Treasurer 40

Current Office Bearers: Serial no. 01. 02. 03. Name Sayed Ahmed Mr. Alam Mr. Yusuf Title President Secretary Ag e 67 47 Years in the Current Position Since Establishment Since Establishment Since Establishment Educatio n Class Eight Class Eight Alim Pass Occupation Newspaper Hawker Newspaper Hawker Newspaper Hawker & Readymade Garments Business at Dhaka

Treasurer 40

Savings collection methodology: All the members provided TK 5000 each at the time establishment of the organization in 2003. In 2004, they saved TK 1000 each. Next they will contribute in three years later, in 2007. Although they had resolution that they will save their savings in yearly basis, recently they have decided this new resolution. Loan giving methodology: Loans are given only to its members. Some 3 percent interest per annum is charged on the principal payment. There is no certain limit of amount of loan for any individual member. A member who has a good past record of loan payment, financial solvency and business purpose of the loan is preferred in case of providing loan. Uses of the loans: The loan is used by its members as their own purpose. There are no fixed criteria of using the granted loan according to the organization. Generally, members use their loans for their family affairs and other business purposes. Total assets of the organization: The number of total assets, cash deposits, of this organization is around 3,00,000 (up to June 2005). There are no land assets of this organization.

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Governance-procedure of electing office bearers: The current office bearers of Chouddogram Adarsha Shamabaya Shamity were all elected by its members oral votes. As it is an unregistered organization, there are no written articles for this purpose. Record keeping: To keep the records of their contributed funds and loans provided to the members, the organization uses an ordinary book. It is maintained by the treasurer of the organization. It does not maintain any standard accounting books for record keeping.

Concluding Thoughts

In this study, we have endeavored to present the picture of grass route capital accumulation through some case studies held on small level cooperative societies around our surrounding. Though ROSCA is a very effective measure here, an interesting fact is that people use this without knowing about it. By compiling the whole documents we have, we can only say that, though the organizational framework, the environment within, the occupational status of the member, the volume of the assets-base etc. are little differentiated from organization to organization, all are serving the same purpose and have the same code: TO BRING SOCIAL & ECONOMICAL DEVELOPMENT FOR THE MEMBERS.

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