Building Immigrants Financial Capabilities: The Role of Rotating, Savings and Credit Association (ROSCAs) in Savings and Asset Accumulation Among African Immigrants in the United States

Background and Purpose: The U.S. immigrant population makes up a significant and growing share of American consumers. Currently, there are more than 44 million immigrants in the U.S. accounting for almost 14% of the U.S. population (PEW Research Center, 2019). Immigrants face unique challenges, such as navigating the immigration process, potentially learning a new language, and assimilating to a new (or different) financial system. Some of the difficulties get easier with time but, building financial well-being can be a long process. As a result of these challenges, immigrants lag in both the use of financial market services and wealth ownership. It is estimated that immigrants are 12% more likely to be unbanked compared to native-born Americans (Bohn &Pearlman, 2011; Department of Consumer Affairs, NYC, 2013). Studies suggest the complexities of the U.S. financial system be barriers for immigrants in the financial markets (Department of Consumer Affairs, New York City, 2013). As a result, utilization of alternative financial services such as rotating, savings and credit associations (ROSCAs) is common among immigrant communities. While there have been some studies on the use of ROSCAs for small business capitalization, research has yet to explore the uses of ROSCAs as asset-building tool. Guided by the institutional theory of savings, this study examined the association between savings in ROSCAs and asset ownership among African immigrants in the U.S. The study also assessed the institutional element of ROSCAs that facilitate savings.

Methods Data for this study comes from surveys (N=292) and in-depth-interviews (N=10) collected from African immigrants in four cities across the US. Convenience and snowball sampling were used to recruit participants for the study who met the study criteria. Criteria for selection included: i) Adults over the age of 18, ii) participated in ROSCAs since moving to the U.S. iii) Must be of African origin. Descriptive statistics and logistics regressions was used to analyze the survey data while major theme extraction was used to analyze the qualitative data.

Results: The results suggested that both men (53%) and women (47%) equally participated in ROSCAs but the group leaders were overwhelmingly women. Over 90% of the participants had bank accounts but still used ROSCAs to reach their saving goals, and over 60% were low-income families. After receiving the ROSCAs savings, home ownership among participants increased by 13.6%, small businesses increased by 27.2% and car ownership by almost 20%. Participants were attracted to ROSCAs because of the structured group support it offered. Most team leaders reiterated “you cannot save alone” underscoring the importance of institutional support.

Conclusions and Implications: The study found that through institutional mechanisms and social networks, ROSCA create opportunities for families to save and invest. Saving requires structural support (Sherraden, 1991); ROSCAs provide that support to the members through several institutional elements. As the use of ROSCAs among immigrants persists, it is imperative to examine ways in which ROSCAs can be used as a bridge to the formal financial markets.