Rotating saving system - A bank for cash

The rotating saving system is an informal way of saving which has certainly been evolved long before the formal banking system was streamlined. Meanwhile, the Rotating Saving and Credit Association (RoSCA) has become a universal phenomenon in the developing countries. „The classic ROSCA formula is flexible, and modified forms to accomodate members’ priorities and the environment are numerous. In more complex forms of ROSCAs, for example, the hand may be distributed by predetermined order, but with arrangements for interruptions to assist a member in need. ROSCAs may have very long lives. In parts of Asia, for example, chit funds have produced 20-year savings programs combined with 20-year loans. Interestingly, the Reserve Bank of India has outlawed chitties having cycles in excess of seven years. ROSCAs such as the one formed by staff members of the International Monetary Fund often include people who prefer the social ambience the ROSCA offers. They may also compete with high cost or lethargic commercial banks or handle transactions that banks regard as too risky. Tanomoshii associations of businessmen of Japanese ancestry in Hawaii are reported to put up relatively large sums to finance construction of buildings, in Africa, some ROSCAs, intermediate large sums. For example, tontines with a hand equivalent to US$1 million are reported in Cameroon, where these informal groups greatly economize transaction costs for people active in large-scale modern sector activities“ (PISCHKE 1992:332-333).

In Pakistan, this saving procedure is termed 'Committee System' and is more common in the women's sphere. The ‘committee’ is constituted by a group of participants, for example, twelve members, each contributing 100 Rs. monthly. The committee is usually appointed for one year. One year's cycle means a total of 1200 Rs. Every monthly total

contribution is given to any one member as decided by lottery. Such a system is usually organized by a committee head, a person selected by mutual consent. It is usually the person who initiates the game and seeks the participants.

The method is a very successful one. It performs a dual purpose of credit as well as saving.

For early receivers, it is a credit, i.e., if one has contributed 100 Rs. and has received 1,200 Rs. which he is supposed to repay in interest-free installments of 100 Rs. per month. For late receivers, however, it is a saving which somehow or other comes into the category of compulsory saving. The system requires no overhead and capital accumulation, since all participants are residents of the same area or are colleagues; default chances may be checked by social pressure and group sincerity. All members are linked with more than one channel most of the time. The method lacks any intervention of the formal credit and saving institutions. A small saver does not have to hide the cash at home or to deposit it with some relative for safety. Another advantage may be the availability of the interest-free credit for the early receiver, which is hardly available in any other method. The receivers may also exchange their turns through mutual consent if someone needs the money immediately.

Nevertheless, the method has some limitations as well. The availability of regular income is a necessary condition to maintain a saving discipline. Salaried jobs bring regularity and pay certainty. The practice is, therefore, common among schoolteachers. In twelve case study households, three cases are found to be practicing it. Two women and one man all are school-teachers, as it is easier for the regular employees to deduct a specific sum from their salary for payment to the committee every month, just after receiving it. The male schoolteacher wanted to buy a color television set, while the female teachers wanted to buy some item for a dowry.

The ‘committee head’ has to take the responsibility of the smooth running of the process and has to be in a position to manage some minor conflicts among members. He/she has to seek and convince potential members and has to bear the costs of collecting the monthly contributions. Sometimes, the situation may become critical if one or two members may drop out because of some economic crisis and others want to continue. A proper management in such cases is the actual guarantee of the group’s future stability.

Unfortunately, this internationally recognized and highly successful saving method is not widespread in rural Pakistan. However, it is more familiar in female than in male spheres.

Women groups are found among housewives as well as employed women such as school-teachers. Women may perhaps better organize themselves in such groups, depending upon the similar nature of financial worries in poor and middle class strata. The participation of women from affluent classes is comparatively rare. The situation is the reverse in the case of men. There exists no such groupings of men among poor or middle class strata at household or farm level. The affluent businessmen such as shopkeepers etc. practice it very often. As no official data has ever been collected on the topic, exact data on the number of such informal groups and the extent of male and female participation cannot be produced here.

5.5.5 'Vartan Bhanji' - A bank for cash and kind

The term ‘Vartan Bhanji’ means „an exchange of gifts and also refers to gifts so exchanged“ (EGLAR 1960:105). It represents a traditional system of reciprocal exchange of cash and kind on different occasions within biraderi. Vartan means 'exchange' and

Bhanji means 'sweets'. In reality, however, it is far more than just an exchange of sweets.²³² The system traces its history from the past, when there were no banks and rural people were badly in need of a trustworthy institution for saving their cash and kind.

Since saved resources were usually employed at life cycle ceremonies such as marriage, birth, death, etc., and every one was in an equal need, the village community developed their own ‘traditional bank-like mechanism.’ Even after the invasion of formal commercial rural banking, people preferred to practice the old native method, which proves its desirability. In fact, the mechanism fulfills a multi-dimensional role in cementing intrabiraderi interactions and securing capital for future big events, which minimizes the social, economic, emotional and even natural risks.

„The system also represents a periodical check of social interactions among biraderi. Obligation of gift giving is an expression of mutual feelings. One can easily guess which sort of help can be acquired from which source. „Extravagant festivities and manifold gift exchange are not just ‘uneconomic’, they seem to withdraw the productive resources of a household, should among others 1) be regarded as reciprocal 'redistribution mechanisms' and 2) as a form of insurance that grants the giver the right to expect under special circumstances and in times of need“²³³ (HERBON 1990:106ff).

232 Vartan Bhanji involves an exchange of sweets, fruit, food, money, and yard goods for clothes;

extending beyond material things, apart from this, it includes the exchange of favours, services such as treatment, entertainment, and participation in ceremonial events.

233 Although ‘Vartan Bhanji’ develops from gift exchange, the term may be applied to another kind of relationship in which no gifts are exchanged, but in which two parties, two individuals, two families, two villages feel free to ask favours of each other. For instance, if a landowner is in need of Wanghar (see Section 5.5.2), he would prefer to put himself under obligation to the person with whom he is on Vartan Bhanji terms (EGLAR 1960:106).

Diagram 12: Exchange relation in Vartan Bhanji

The mechanism operates on two bases: daughter’s rights in her parent’s home²³⁴ (non-reciprocative) and the relationship established through the exchange of gifts and favors (reciprocative) (EGLAR 1966:108). In other words, ‘Vartan Bhanji’ may be divided into two major parts: ‘non-reciprocative²³⁵ and reciprocative’. Since the non-reciprocative component does not function as a saving bank, the discussion in this section is limited to the reciprocal exchange only.

The people who deal in ‘Vartan Bhanji’ include: 1) relatives, blood or affinal; 2) friends; 3) members of the caste group, i.e., landowner with other landowner groups and kammis with other kammis; 4) member of different castes such as landowner with a kammi or vice versa; 5) neighbors; 6) the villagers as a whole; 7) village with another village.²³⁶ Table 50 presents a detail of gift exchange on different occasions.

These transactions do not take place only on some specific ceremonial occasions. Although the principal occasions include birth, the circumcision of a son, marriage, and the death of an old person. Once this relation is established, it is performed for all events when the organizer needs extra cash or kind, in the case of sickness and convalescence, departure on pilgrimage to Mecca, etc.

‘Vartan Bhanji’ functions according to the following three rules (EGLAR 1960:122):

234 A daughter’s right in her parent’s home is constantly validated through the gifts she receives on her visits and on all the major occasions celebrated in her conjugal or natal family. Although what she receives is not ’Vartan Bhanji’, yet it serves as a pattern for the operation and continuation of this mechanism (EGLAR 1960:106).

235 In this form of Vartan Bhanji, the daughter’s role is to receive on all occasions. On the occasion of the birth of a child, on the marriage of a son, or a daughter, brother or sister, visits to natal family, etc., she always receives cash, outfits and sweets.

236 For further details in the case of individual transations, see EGLAR (1960:116ff).

1. the fundamental rule is reciprocity: a gift should be returned as gift, a favor as favor, a good treatment as a good treatment;

2. there should never be an equilibrium in this reciprocity. The things exchanged should not exactly balance, because this would bring the relationship to an end;

3. it should be carried on according to the family’s ability to participate in the exchange;

since the exchange is always kept in near balance, the scale of exchange should be determined by the ability of the less well-to-do partner.²³⁷

In the case of marriage ceremonies, Vartan Bhanji functions as a 'marriage account.' Gifts given at the ceremonies are returnable. The ceremony is composed of a series of five major events (Maiyun, Mehndi, Khara, Baraat, and Waleema)²³⁸. Every household keeps a separate balance of every event. A proper record is maintained in written form, what is given, when, and to whom. Every household keeps a marriage register, Aqeeqa register, childbirth register and death register for all transactions made up to the present time with everyone. When an invitation from the biraderi is received, the host’s balance is consulted in the register containing all details of cash and kind received from different households with date, name, and amount. If the invited guest owes some money, he has to accept the invitation to repay the outstanding debt to maintain this social transaction. If the host has just equalized the last balance, the guest is not supposed to contribute.

Every event has its own monetary or non-monetary exchange history. The matter is kept on record. It is managed properly even if the number of occasions differs in various households, e.g., if one brother has two and the other four sons, both exchange gifts normally up to two marriages. The guest has no obligation for the remaining two marriages; his gifts may be compensated on other occasions. As a general practice, on the occasion of the last marriage, the host announces everybody's balance and requests repayment. Following the dissolution of an extended family, each nuclear family starts its own transactions and establishes a new balance. A married couple keeps on depositing money in different accounts for a period of 20-25 years until their own children reach marriageable age and they are able to withdraw it.

The saving aspect of this ceremony depends upon the type of exchange and the amount exchanged. Exchange is indeed a great help for the organizer of a ceremony. It may not be any trouble for the payee as well, if the amount exchanged remains at a reasonable level.