Abstract

Rotating savings and credit associations (roscas) are informal financial organizations common in settings where communities have reduced access to formal institutions. In a rosca, a fixed group of participants regularly contribute sums of money to a pot. This pot is then allocated periodically using lottery, aftermarket, or auction mechanisms. Roscas are empirically well-studied in the economics literature. Due to their dynamic nature, however, roscas have proven challenging to study theoretically, and typical economic economic analyses stop at coarse ordinal welfare comparisons to other credit allocation mechanisms and leave much of roscas’ ubiquity unexplained. This work takes an algorithmic perspective on the study of roscas. We present worst-case welfare approximation guarantees, building on tools from the price of anarchy. These cardinal welfare analyses help rationalize the prevalence of roscas. We conclude by discussing several other promising avenues.