Community-driven financial practices: socioeconomic determinants of interest-free ROSCAs in Muslim communities

Purpose This study aims to investigate the socioeconomic and demographic factors that influence participation in interest-free loan-based rotating savings and credit associations (ROSCAs) within Muslim communities. These associations, rooted in community-driven financial practices, serve as vital mechanisms for promoting financial inclusion and social cohesion, particularly in contexts where traditional financial services are limited. Design/methodology/approach Using data from the Household Integrated Economic Survey conducted by the Pakistan Bureau of Statistics, covering 24,052 households, this study uses a logistic regression model to analyze the determinants of ROSCA participation. The analysis focuses on the interplay between socioeconomic status, community dynamics and participation in these community-centered financial enterprises. Findings This study reveals that urban residents are more likely to participate in ROSCAs compared to their rural counterparts, with significant regional variations. Higher income levels, wealth and employment status are positively related to ROSCA participation, underscoring the role of these associations in supporting both economic stability and social obligations. In addition, the findings suggest that ROSCAs play a critical role in upholding cultural and social norms within communities, while also adapting to the life cycle needs of their members. Originality/value This research explores the determinants of interest-free loan-based ROSCAs in a Muslim context, providing insights into how community-based financial practices contribute to sustainable prosperity and social well-being. This study highlights the potential of ROSCAs as models of community enterprise that align with both cultural values and economic needs.