There are versions of this 'ROSCA' Tontine in most countries and continents in the world. In the past when formed among strangers they have proven to be super susceptible to scams.
Where they work is when each member of the group is known to each other and therefore would lose social status by defaulting on their obligations.
The benefit of these arrangements when run properly is that instead of saving $10 per month and after a year having the $120 to buy a productive asset (let's say a cow), they can get the $120 up front from the Tontine and pay the money back to the community group out of the earnings from the milk etc.
The persistance of these schemes everywhere indicates that this is a valuable means for the less well off to gain access to lump sum amounts for purchases without paying interest. Not everyone will be happy about the last part of course.
Where they work is when each member of the group is known to each other and therefore would lose social status by defaulting on their obligations.
The benefit of these arrangements when run properly is that instead of saving $10 per month and after a year having the $120 to buy a productive asset (let's say a cow), they can get the $120 up front from the Tontine and pay the money back to the community group out of the earnings from the milk etc.
The persistance of these schemes everywhere indicates that this is a valuable means for the less well off to gain access to lump sum amounts for purchases without paying interest. Not everyone will be happy about the last part of course.