Financial Well-being and Households’ Intention to Participate in ROSCAs: An Extended TPB Model

Abstract

Rotating savings and credit associations (ROSCAs) are informal credit associations emerging in underprivileged communities around the world as a key financial management tool for poor individuals. Although ROSCAs have been widely studied for decades to clarify their benefits, risks, operation rules, the investigation of factors influencing individuals’ intention to participate in ROSCAs is ignored. By employing the extended theory of planned behavior (TPB), the research aims to unearth key antecedents of the rural households’ intention to participate in ROSCAs. The partial least squares structural equation modeling (PLS-SEM) is applied to analyze 205 rural households in Vietnamese context. The research findings showed the importance of perceived economic usefulness, attitudes towards ROSCAs, financial well-being, and the ability to access formal credit facilities in predicting rural households’ intention to participate ROSCAs, in which perceived economic usefulness and attitude towards ROSCAs had significantly positive impacts on intention to participate, whereas financial well-being and the ability to access formal credit facilities had significantly negative impacts. The implications for policy and practice are discussed from the perspective of how the increased financial well-being and formal credit access, as well as the decrease in ROSCAs’ perceived economic usefulness and positive attitudes can discourage rural households from participating.

Keywords: Rotating savings and credit associations (ROSCAs), extended theory of planned behaviour (TPB), Financial well-being, saving commitment, perceived trust