The faults in our committees

Pakistan is primarily a consumption-driven economy where the savings rate is just 4.5 per cent of the gross domestic product. This number puts us well behind the South Asian average of 28pc or the low-income group’s 23pc. However, these statistics often miss the massive informal economy that most people in the country turn towards due to the dismal reach of existing financial institutions. Rotating savings and credit association (Rosca), or committee as they are better known, is a group of individuals who agree to meet for a defined period to save and borrow together, a form of combined peer-to-peer banking and peer-to-peer lending. According to research by Oraan, around 41pc Pakistanis saved via committees (or Rosca), whereas Karandaaz puts that figure at 34pc. Assuming the informal economy accounts for roughly 30pc, as suggested by research from the Pakistan Institute of Developing Economics, it translates into annual committees of Rs4 trillion at base prices, using conservative inputs.