ROSCAs as a source of housing finance for the urban poor: An analysis of self-help practices from Hyderabad, India

Abstract

For the urban poor, housing finance from ROSCAs (rotating savings and credit association) is an alternative to conventional housing finance, which requires conventional collateral. Contrary to conventional housing finance, the creditworthiness of ROSCA participants is determined largely by social factors. Moreover, a link exists between ROSCA participation and house (or shack) ownership. Apart from obtaining short- to medium-term ROSCA finance, participation offers security for obtaining finance from, for example, moneylenders. Notably, auction ROSCAs offer cheaper housing finance than Indian housing finance corporations. The middle classes mainly use this finance, but the poor tend to obtain more expensive finance for incremental building.