Financial Worry, Financial Literacy, Trust and ROSCA Participation of Farmers in Rural Vietnam

Rotating savings and credit associations (ROSCAs), serving the needs of people in many countries, are often considered a key financing tool for farmers and rural households. Researchers have addressed various aspects of ROSCAs in the last decades, yet the identification of factors influencing ROSCA participation is still ignored. This paper aims to explore key determinants of the farmers’ participation in ROSCAs. To evaluate the proposed hypotheses, Structural Equation Modeling is employed using SmartPLS 3.2.9 with data from farmer households in Vietnam. The findings revealed interesting insights, showing that financial worry, financial literacy, and fundraiser trust can be used to predict farmers’ intention to participate ROSCAs, in which financial worry and fundraiser trust had significant, positive impacts on participation intention, whereas financial literacy had significantly negative impacts. Although the relationship between trust in financial association and ROSCA participation intention was found statistically insignificant, trust in financial association indirectly influenced ROSCA participation intention through fundraiser trust. More importantly, financial literacy exhibited a direct and positive impact on risk perception, which in turn negatively influenced ROSCA participation behavior, emphasizing the mediating role of risk perception. Furthermore, this study contributes to the existing body of literature by exploring the intention-behavior gap on financial investment decisions. The theoretical and practical implications as well as contributions of this study should be of concern to policymakers and practitioners in developing countries with similar ROSCA practices.