The Risk Management Mechanism of China’s Bidding Rotating Savings and Credit Association: A Case Study of Chengnan Village in Wenzhou

Shenchao Han, Qiang Zhang and Liyun Liu

Emerging Markets Finance and Trade, 2020, vol. 56, issue 13, 3095-3105

Abstract: China’s rural economy growth since the reform has been very rapid. The informal finance including the bidding Rotating Savings and Credit Association (ROSCA) has emerged to meet increasing funding needs of rural residents. This paper conducts a survey on Chengnan Village in Wenzhou to analyze how bidding ROSCA operates and the roles bidding ROSCA’s participants play as investors and borrowers, and thus to identify the potential risk. By explaining bidding ROSCA’s both internal and external risk management mechanisms, it finds that village ethical community is the informal institutional foundation of risk management.

Date: 2020
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DOI: 10.1080/1540496X.2019.1587609

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