Southeast Asia’s oldest savings product still has no price for going first

Southeast Asia is home to a myriad of traditional savings products that have been relied upon for centuries. These groups, known by various names such as arisan, paluwagan, hui, chit fund, tanda, gam'eya, stokvel, susu, and susu, involve ten individuals pooling together $100 each month. After ten months, the group disburses $1,000 to each member, providing a lump sum that can be used for various expenses, such as deposits, motorbikes, or school fees.

This system, which converts a slow trickle of savings into a larger sum, has persisted despite numerous attempts to replace it with formal banking products. However, there is one unsolved problem that has plagued these savings circles: determining who goes first in the queue. This issue has three main manifestations – the organizer deciding, a lottery deciding, or seniority deciding.

Each approach has its own drawbacks, including patronage, inequity, and the taxation of newcomers. Historically, this problem was resolved in India through a process called chit funds, where members bid down the amount they are willing to accept, with the lowest bid taking the pool and the discount being distributed among the rest.

This system has been formalized in law since 1982. A solution that has never been implemented outside its jurisdiction is the registration of chit funds, which would allow for formalization, denominating in rupees, and compliance with Indian regulation. The gap that remains unfilled is the ability to price the position in the queue, turning a favor into a good with a market price.

A platform called ROSCASH has emerged to address this issue by implementing a descending-discount auction, where members bid a discount against their own payout. The lowest bid wins and receives the pool minus that discount, with seventy percent of the discount being split among the remaining members. This approach ensures that the queue is no longer a favor, but a good with a market price, set by the specific group of individuals in that week.

The platform earns only when a member chooses to pay for speed, generating revenue for the platform. This design stops the queue from being a favor and becomes a good with a market price, set by the people in that specific circle in that specific week. While there are still challenges related to custody and regulation, ROSCASH operates in public beta, with funds held and processed by the platform under each circle's published rules.