B-ROSCA: A Smart Contract-Based Selection of ROSCA Communities Using Collateral

The rise in inflation triggered by the COVID pandemic puts tremendous pressure on low or fixed-income family, who may be unqualified to take loans from banks. As a solution to this, a traditional community-based financial product, i.e., Rotating Savings and Credit Associations (ROSCAs), can bring individuals together to pool resources and provide access to credit. However, ROSCA communities have traditionally been formed by individuals with acquaintances, such as family, neighbors, and friends. To rely solely on these relationships can limit the potential profitability and accessibility of the group. Which subsequently leads to smaller, less diverse groups with limited access to resources and reduced financial outcomes. Therefore, marginalized communities will still be financially excluded. In this paper, we present B-ROSCA (Blockchain-based Rotating Savings and Credit Association), a mechanism to implement smart contract-based collateral to form ROSCAs using social network analysis. We designed a multi-mode and one mode projections-based method to connect the ROSCA members on similar financial situations and life experiences. Furthermore, we incorporate smart contract-based collateralization to increase trust. The members need to provide collateral in the form of cryptocurrency, to secure their contributions and reduce the risk of default. We argue that smart contract-based selective constitution of ROSCA groups has the potential to increase the size and diversity of the group. This leads to greater access to resources and improved financial outcomes for all participants by gaining the trust of people on the ROSCA platform. Moreover, B-ROSCA designed to leverage the improved execution speed of Ethereum 2.0 and the benefits of EIP1559 for more efficient operation.