Possibility of Default and Sustainability in a Random Rosca

An important reason behind rural poverty in the less developed countries is the lack of access to credit. In this context 'Micro Finance' programmes play a crucial role. The most common form of micro finance institution in India is Rotating Savings and Credit Associations (Rosca). This paper develops a stylized model where possibility of default exists in a Rosca. We investigate if the Rosca can survive even when some members default. Consequently, this nwdel analyses the condition for sustainability of the Rosca in presence of default. Policy implications of this result are also discussed.