Comparing Rotating Credit Associations in Asia


This Keytext reports some of the ideas and findings from the following source:
Geertz, Clifford. 1962. The Rotating Credit Association: A "Middle Rung" in Development. Economic Development and Cultural Change, vol. 10, no. 3, pp. 249-54.


Clifford Geertz, a cultural anthropologist, studies the different forms of rotating credit in China, Japan, and Vietnam on the basis of their complexities, similarities, and differences. Although the associations in Asia differ according to their specific country, environments, and the populations they serve, they all provide a variety of economic and social benefits. ... He compared a variety of forms of rotating credit associations in Asia and Africa and explains that although there are many different possible structures of rotating savings and credit associations (ROSCAs), they all have elements in common: they fill economic and social needs, they function as means of credit, and they combine traditional and modern methods.


Rotating Savings and Credit Associations Meld Traditional and Modern Methods


Geertz believes that ROSCAs are necessary for the advancement of developing countries because while they stress the importance of savings and provide access to credit, they do so in a way that melds traditional and modern methods and values. In this section of his article, Geertz compares different ROSCAs in Asia to demonstrate their similarities and differences.


Chinese ROSCAs Mirror Chinese Culture


Geertz found the simplest form of ROSCAs in Southern China, in the village kulp. These ROSCAs are founded by individuals who are in need of a lump sum of money. The individuals will go to family members to form groups, which is very reflective of the Chinese familial culture. In these groups, only the founder pays interest and his/her debt can be paid off with either money or with giving feasts.

In Peking, the ROSCA is an auction variety that stresses it economic functions over the social ones (although there still are social functions). The participants claim that these ROSCAs encourage thrift and "[provide] investable funds of low costs" (p. 252). One of the most striking features of these ROSCAs is that they require a written contract for the founder of the group. Similarly, each member must sign a contract and then have two guarantors sign as well. These ROSCAs are very businesslike and not very influenced by traditional ways.

In Shanghai, the ROSCAs are also started by those in need of cash, but these groups can be together for long periods of time, up to 7 years. The contribution system is much more complex. In these ROSCAs, contributions are calculated through an incredibly detailed formula that is often so complex that the villagers usually need to call in the head of the village in order to instruct them on the proper payments.


Competitive Bidding Found in Japanese Roscas


In Japan, the ROSCAs are also started by individuals who need money but, in contrasting to southern China, these funds are open to competitive bidding. These ROSCAs are more complex than in Java or South China as the bidding process becomes very complicated. And yet, similar to the arisan, the social aspects of groups are very important and everyone belongs to more than one ko, which further strengthens the overall solidarity of the villages. Whoever wins the fund must provide his house and refreshments to the others in the group when it is their turn to repay the loan. The ROSCAs in Japan reflect the Japanese importance placed on cooperation.


Vietnamese ROSCAs Are Primarily Social


In traditional villages in Vietnam, the ROSCAs, called ho, are primarily social groups with secondary economic functions. The defining characteristic of the rural Vietnam ho is that they are run by professional managers. The creation of the ho is specially for business, not personal, loans. These ROSCAs are much more economic in their function. The managers take 1/3 of the fund for themselves and distribute the other 2/3. The managers are not members of the associations, but they are responsible for providing the feasts at each meeting, bookkeeping, keeping track of payments and defaults. Their role is very business oriented, and they often run several ROSCAs at one time.


Varieties of rotating credit in Asia


Region Name Primary Function Interest on Loan? Defining Feature
Swatow, southern China   Economic & social Yes Familistic
Japan ko Economic & social Yes Mutual aid
Shanghai China hui Economic & social Yes Kinship
Peking northern China   More economic Yes Low cost
Vietnam ho Economic & social Yes Professional managers


Geertz found that although each rotating credit association differed based on the community it served, there were similar economic and social benefits.


Research Design:

Geertz's article is based on fieldwork conducted from May 1953 through September 1954, which he undertook as a part of a group project of 7 anthropologists and sociologists and for which he used a variety of secondary literature. The fieldwork was sponsored by the Center for the International Studies of the Massachusetts Institute of Technology. The project was also funded by the Ellis L. Phillips Foundation.


This Keytext reports some of the ideas and findings from the following source:
Geertz, Clifford. 1962. The Rotating Credit Association: A "Middle Rung" in Development. Economic Development and Cultural Change, vol. 10, no. 3, pp. 249-54.




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