Rotating savings and credit associations: an alternative funding for sustainable micro enterprise- a case study of Chinhoyi Zimbabwe

Abstract

Micro enterprises and sole proprietorship have long been recognized as a very important source of self employment, job creation, innovation and economic development. However, funding constraints in financial markets limit entry of new firms and development of existing micro enterprises, thus affecting economic growth. This paper reports on a research study examining the role of Rotating Saving and Credit Associations (ROSCAs) in Chinhoyi and explores how local enterprises use the finance made available in their businesses through ROSCAs to ensure operations sustainability. The study adopted a descriptive research design and a questionnaire was used to collect information together with interviews. Findings points to a strong relationship between ROSCA membership and operations sustainability. The attractive feature of ROSCAs as a funding methodology as derived from the findings is that it can be formed with variations depending on funding needs and how much entrepreneurs can afford to put aside. Investment ROSCAs were found to be prevalent in the town as compared to other types. Most thriving businesses in Chinhoyi were found to be members of some informal credit association. Most thriving businesses were found in the retail sector with fair results in manufacturing. However, for ROSCAs to be effective there is need for formal workshops and or seminars to members to boost their entrepreneurial capabilities thus resulting in sustained Growth of MSMEs.