The traditional ROSCA: instructions and insights

What is a ROSCA?

A tontine is a pooled savings: a circle of participants commits to contribute the same amount into a common pot at regular intervals. At each round, one member of the group takes the entire pot.

⚠️ What are the disadvantages and problems of a ROSCA?

Risk of default: if a participant stops contributing (due to death, financial difficulties), the group may lose part of its capital.

Required trust: the operation relies on good faith: there is no legal mechanism to ensure payment from a latecomer.

Absence of financial return: no interest generated by the pot; you gain early access to the capital, but without any added value.

Time-consuming organization: planning meetings and tracking payments require rigor and time.

Limitation on amount and duration: not well suited for very large projects: the amount is limited to the contribution capacity of the members.

🇫🇷 Is the ROSCA legal in France?

An informal practice, but tolerated: as long as the ROSCA (aka "tontine" in French) remains a private circle, without financial interest or management fees, it does not fall under banking regulation.

The obligation to declare these incomes for tax purposes: when the amounts collected by a person (for example, the “President” who centralizes contributions, or the beneficiary of the month) exceed a certain threshold, they must be declared to tax authorities as miscellaneous income. In this case, you must keep a certain number of supporting documents: ROSCA contracts, bank statements, and proof of redistributions in case of an audit.

Bank vigilance: regular and close transfers to the manager's account (President) may trigger a request for explanation from the bank regarding the origin and destination of the funds. To anticipate these questions, you can present your advisor with a tontine charter and participant lists to prove the non-commercial and solidarity nature of the operation.

Beware of reclassification: if an organizer charges fees or if the tontine promises a return, the Prudential Control and Resolution Authority (ACPR) may consider this to be illegal deposit collection.

Among the good practices to adopt, you can:

1. Draft a simple group charter (amounts, schedule, replacement rules).

2. Do not charge commissions or promise capital gains.

3. Limit the circle to people who know each other well.

🎯 What is the role of a tontine?

Savings discipline: compels each member to contribute regularly, even in small amounts.

Early access to capital: each member benefits at some point from a larger sum than their cumulative contributions.

Strengthening social ties: the ROSCA creates a space of trust and mutual aid within a family, a community, or among colleagues.

Access to project financing: weddings, studies, housing, starting a micro-business...

👥 Who can participate in a tontine?

Everyone!

Individuals (family, friends, African diaspora...) as well as informal groups (work colleagues, members of an association, network of entrepreneurs, for example).

The key is to meet a few essential conditions:

1. Mutual trust: the basis of fund rotation.

2. Commitment (ideally written, even briefly) to limit misunderstandings.

3. Small group size (5 to 15 people) to facilitate management.

✅ What are the advantages of a tontine?

Solidarity and inclusion: the ROSCA allows everyone, regardless of budget, to build capital.

Simple and accessible: no need for a sophisticated bank account or heavy documentation.

Flexibility: amount, frequency, and number of rounds defined by the group.

No hidden fees: no account maintenance fees, no management commissions.

Collective motivation: commitment to the group enhances the regularity of contributions.

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