The short answer
- A savings circle is a group where everyone pays in the same amount at regular intervals; each round, one member receives the whole pot, until everyone has received it once.
- Economists call it a ROSCA (rotating savings and credit association). It goes by dozens of names: tanda, susu, chama, stokvel, esusu, paluwagan, hui, kye, chit fund, tontine…
- According to the World Bank, 25% of adults in Sub-Saharan Africa saved using a savings club or a person outside the family in 2021.
- Its value: getting a lump sum sooner than saving alone, without borrowing. The main risk: a member who stops paying after receiving the pot.
- Written rules, a transparent payout order and tracking everyone can see prevent most disputes.
How a savings circle works
Six friends agree to contribute $100 a month for six months. Each month the pot is 6 × $100 = $600. In round one, Ama receives $600; in round two, Kofi; and so on until month six. By the end, everyone has paid in $600 and received $600.
- receives this round
- has paid
- hasn’t paid yet
If nobody gains or loses money, why do it? Because the circle changes when you get the money. Economists Timothy Besley, Stephen Coate and Glenn Loury analysed this in the American Economic Review in 1993: for people without access to credit, a circle lets members buy a costly item earlier, on average, than saving alone. Only the last person in line gains nothing on timing. They actually lose a little: the money earns nothing during the cycle and inflation erodes it, a point Mexico’s financial consumer watchdog, Condusef, makes about tandas.
Savings circles around the world
Anthropologist Shirley Ardener wrote the classic comparative study of these associations in 1964. The same principle shows up on nearly every continent:
| Name | Where | Distinctive features |
|---|---|---|
| Tanda (cundina) | Mexico, Latino communities in the US | Unregulated in Mexico |
| Susu | Ghana, the Caribbean | Not to be confused with “susu collectors”, a paid daily-deposit service that doesn’t rotate |
| Esusu, ajo, adashe | Nigeria | Esusu and ajo in Yoruba, adashe in Hausa |
| Chama | Kenya | 30.7% of Kenyan adults belong to an informal group (FinAccess 2024) |
| Stokvel | South Africa | Rotating, year-end grocery or investment stokvels; exempt from banking law if affiliated to the national association, NASASA |
| Iqub (equb) | Ethiopia | Payout order usually drawn by lottery |
| Tontine, natt, njangi | Francophone Africa, Senegal, Cameroon | “Njangi” in Cameroon’s anglophone regions; groups may also lend to members |
| Partner | Jamaica | Run by a “banker” who sets the order |
| Sòl | Haiti and its diaspora | Widely used in the US |
| Paluwagan | Philippines | Among colleagues or family |
| Arisan | Indonesia | The winner is drawn by lot at each meeting |
| Hui, hụi | Chinese and Vietnamese communities | Often with bidding to receive earlier |
| Kye (gye) | Korea and its diaspora | Researchers counted at least 1,000 in 1980s Los Angeles; US courts have enforced them |
| Chit fund | India | Run by a licensed “foreman”; Chit Funds Act 1982, amended 2019 |
| Lending circle | United States | Formalised by non-profits such as Mission Asset Fund, reported to credit bureaus |
Tanda (cundina)
WhereMexico, Latino communities in the US
Distinctive featuresUnregulated in Mexico
Susu
WhereGhana, the Caribbean
Distinctive featuresNot to be confused with “susu collectors”, a paid daily-deposit service that doesn’t rotate
Esusu, ajo, adashe
WhereNigeria
Distinctive featuresEsusu and ajo in Yoruba, adashe in Hausa
Chama
WhereKenya
Distinctive features30.7% of Kenyan adults belong to an informal group (FinAccess 2024)
Stokvel
WhereSouth Africa
Distinctive featuresRotating, year-end grocery or investment stokvels; exempt from banking law if affiliated to the national association, NASASA
Iqub (equb)
WhereEthiopia
Distinctive featuresPayout order usually drawn by lottery
Tontine, natt, njangi
WhereFrancophone Africa, Senegal, Cameroon
Distinctive features“Njangi” in Cameroon’s anglophone regions; groups may also lend to members
Partner
WhereJamaica
Distinctive featuresRun by a “banker” who sets the order
Sòl
WhereHaiti and its diaspora
Distinctive featuresWidely used in the US
Paluwagan
WherePhilippines
Distinctive featuresAmong colleagues or family
Arisan
WhereIndonesia
Distinctive featuresThe winner is drawn by lot at each meeting
Hui, hụi
WhereChinese and Vietnamese communities
Distinctive featuresOften with bidding to receive earlier
Kye (gye)
WhereKorea and its diaspora
Distinctive featuresResearchers counted at least 1,000 in 1980s Los Angeles; US courts have enforced them
Chit fund
WhereIndia
Distinctive featuresRun by a licensed “foreman”; Chit Funds Act 1982, amended 2019
Lending circle
WhereUnited States
Distinctive featuresFormalised by non-profits such as Mission Asset Fund, reported to credit bureaus
The Global Findex 2021 also records 24.7% in Nigeria, 19.6% in Ghana, 15.9% in Indonesia and 7.2% in the Philippines. The often-quoted “19% of adults in Africa” comes from the 2011 edition.
Bidding circles
In some circles (hui, Indian chit funds), members who want the pot early bid for it: they accept a little less, and the difference is shared with the others. An example published by the Federal Reserve Bank of Philadelphia: ten members pay $100 a month. An early winner who bids $25 takes an $800 pot; a later winner with the same bid gets $950. Early winners are effectively borrowers; late winners are savers who earn a return.
Can a savings circle build credit?
A traditional circle doesn’t show up on your credit report. In the US, non-profit lending circles do: Mission Asset Fund runs zero-interest circles of $300 to $2,400 with 6 to 12 people and reports payments to all three major credit bureaus. MAF reports an average score increase of 168 points for participants; that is the organisation’s own figure.
The risks, and how to limit them
- Default: a member stops paying after receiving the pot. Put newcomers and the members the group knows least at the end of the order. Jamaican partner bankers do exactly this, keeping early draws for established members.
- The organiser: a badly kept or misused kitty. Write down from the start whether the organiser takes a turn, a fee, or nothing.
- Disputes: “I paid!” with no written record. Log every payment where all members can see it.
- Hidden charges: in Kenya, 28.9% of group members reported unexpected charges (FinAccess 2024). Any fee belongs in the written rules.
- Fake circles: the US Federal Trade Commission warns about “savings clubs” that promise you’ll make more than you put in and depend on recruiting new members (“Blessing Loom”, “Money Board”, “The Circle Game”). A real circle never pays out more than members pay in.
Running a savings circle, step by step
- 1The group6 to 12 people who know each other, the most common size.
- 2Amount and rhythmA sum everyone can pay comfortably, weekly or monthly.
- 3Payout orderA draw or a group decision, written down; newcomers last.
- 4The rulesLate payments, penalties, leavers, replacements, any fees, start date.
- 5TrackingWho paid, who receives, when: visible to everyone.
- 6ReviewAt the end of the cycle, take stock before starting another.
For day-to-day tracking in detail, read our guide Run a savings circle without a notebook.
Maria paid for the office circle
Logged: Maria ticked for round 3. Sam still has to pay. Maria will receive $600 once everyone has paid.
One sentence ticks a payment, and the whole group sees the same list.
Try Binome360 for freeSavings circle or saving alone?
| Your situation | Circle | Saving alone |
|---|---|---|
| You need a lump sum soon | ✓ | |
| You struggle to save regularly | ✓ | |
| Your income is very irregular | ✓ | |
| You don’t know the members well | ✓ | |
| You want the money available at any time | ✓ |
You need a lump sum soon
Circle✓
Saving alone
You struggle to save regularly
Circle✓
Saving alone
Your income is very irregular
Circle
Saving alone✓
You don’t know the members well
Circle
Saving alone✓
You want the money available at any time
Circle
Saving alone✓
Many people combine both: a circle for a specific project, and a personal emergency fund for the unexpected.
Members in payout order, contributions ticked as they come in, the pot worked out for you.
- Set up in seconds: name, amount, rhythm, members
- Say “Kofi and Ama have paid”: your binôme ticks them
- Current round, who receives and the next round always visible
- Shared with members in a group assistant
A note: Binome360 keeps the circle’s record. The app doesn’t collect or move money: contributions still change hands in cash, by bank transfer or by mobile money.
Frequently asked questions
What happens if someone leaves the circle?
It depends on your rules, which is why you write them before starting. A member who hasn’t received the pot yet is often repaid their contributions at the end of the cycle, or replaced by a newcomer who takes their place. A member who has already received it still owes their contributions until the cycle ends.
How do you decide the payout order?
The most common methods are a draw, a group decision based on need (a birth, school fees, rent), seniority in the group, or bidding. Whatever you choose, write the order down and put the least-known members last.
How many members should a circle have?
Usually 6 to 12. Fewer members means a smaller pot and a short cycle; more members means a bigger pot and a long cycle, with more chance of someone dropping out along the way.
How can you spot a fake savings circle?
Be wary of any promise to receive more than you pay in, any requirement to recruit new members to get paid, or an organiser nobody in the group knows. Those are the signs of pyramid schemes dressed up as savings circles.
In short
A rotating savings circle, known by dozens of names worldwide, lets a group finance each other round after round, with no interest. It runs on trust: written rules, a transparent payout order and tracking everyone can see are the best safeguards. First action: write your next circle’s rules on one page before the first payment.
Sources
- World Bank, The Global Findex Database 2021, Little Data Book on Financial Inclusion 2022 (indicator “saved using a savings club or a person outside the family”).
- Timothy Besley, Stephen Coate and Glenn Loury, “The Economics of Rotating Savings and Credit Associations”, American Economic Review, 83(4), 1993, pp. 792–810.
- Shirley Ardener, “The Comparative Study of Rotating Credit Associations”, Journal of the Royal Anthropological Institute, 94(2), 1964, pp. 201–229.
- Central Bank of Kenya, KNBS and FSD Kenya, 2024 FinAccess Household Survey: centralbank.go.ke.
- NASASA (National Stokvel Association of South Africa): nasasa.co.za; Banks Act Notice 404, Government Gazette 35368, 2012.
- Federal Reserve Bank of Philadelphia, “Alternative Financial Vehicles: Rotating Savings and Credit Associations (ROSCAs)”, 2006.
- Sudhanshu Handa and Claremont Kirton, “The economics of rotating savings and credit associations: evidence from the Jamaican ‘Partner’”, Journal of Development Economics, 60(1), 1999.
- Mission Asset Fund, Lending Circles: missionassetfund.org.
- Federal Trade Commission, “Real or fake savings club?”, 2020: consumer.ftc.gov.
- The Chit Funds Act, 1982, and Chit Funds (Amendment) Act, 2019 (India).
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