In today’s economic landscape, where inflation remains a pressing concern and the cost of lending and borrowing continues to rise, more Americans are turning to community crowdfunding to secure loans. An emerging channel in the alternative lending market, community crowdfunding, especially rotating savings and credit associations (ROSCA), enables borrowers to bypass traditional banks, credit unions, and digital lending platforms to access cash quickly.
Jeff Bezos, the founder of Amazon, has backed a platform that allows anyone to invest in rental homes for as little as $100. However, this article will focus on community-based lending channels, which have been around for centuries. A major historical community lending source is the Keh, an ancient Korean-based community lending model that allowed borrowers to borrow directly from local community finance sources, often including friends, neighbors, and even family members as organizational lenders.
Now, centuries later, local community lending groups have organized more tightly and are now typically found at Rotating Savings and Credit Associations (ROSCA). These associations stand as a thriving component in the larger alternative lending ecosystem. The worldwide crowdfunding market is rising, with data from Research and Markets showing that crowdfunding has grown from $20.34 billion in 2025 to an estimated $23.82 billion in 2026, representing a compound annual growth rate of 17.1%.
Of that marketplace, debt crowdfunding maintains the largest lending share, comprising 51% of the overall crowdfunding market. This is because lenders and borrowers view debt crowdfunding as a favorable option due to its predictable repayment terms, fixed interest rates, and relatively clear loan and investment terms.
How ROSCAs are Structured
Lending circles (ROSCAs) are groups that agree to contribute a fixed monetary amount on a fixed schedule. For example, 10 people contributing $100 each, with one participant receiving the total amount each round in a scheduled rotation. This structure allows community donors to fund borrowers for a worthy cause, such as a high school sports team’s trip out of state or for a new local food bank, with little or no focus on any return on investment.
While there are no fees or interest rates charged, there’s a regular repayment timeline (usually each month until the debt is fully repaid). A lending circle actually provides a behavioral return, as members are compelled to be disciplined with savings, and the circle allows members to combine their individual but small savings into one big savings pot that is disbursed periodically.
The Benefits of Lending Circles
One of the main benefits of lending circles is that they provide a source of capital with no interest or profit. This is especially beneficial for individuals with limited or no savings who have a reliable but low-paying job. Lending circles are a far better alternative to payday loans or other high-interest credit options, as members do not lose their savings.
Eventually, members need to establish other savings and create a credit history, especially if they intend to purchase a home one day. Lending circles also work best for people with limited or no savings who have a reliable but low-paying job.
In addition, lending circles are often more reliable than traditional banks, as the group leader is responsible for managing the funds and ensuring that repayments are made on time. This sense of responsibility and accountability can lead to a more stable and secure financial situation for the borrower.
The Potential Downside of Lending Circles
One potential downside of lending circles is that they can be unreliable if the group leader is not trustworthy or if the group is too large. In such cases, the model can fail, and the borrower may not receive the funds they need.
However, if the group is genuinely small and close, and the group leader is trusted and consistent, the model can work well. The model also relies on social capital, where the borrower’s reputation is used as collateral.
This can be a stronger enforcement mechanism than credit scores, as the borrower’s reputation is at stake. Overall, lending circles can provide a reliable source of capital for individuals with limited or no savings, but it’s essential to carefully evaluate the group and its leader before participating.
Before entering a lending circle as a lender, it’s crucial to ask the right questions. According to Jacob Bayer, a certified financial planner at Jacob Bayer Wealth Management, lenders should ask about the financial commitment, the terms of the money pool, and who gets paid out and in what order.
Cody Schuiteboer, President and CEO of Best Interest Financial, also advises asking about the facilitator’s history with running such groups, the number of full cycles the participants have been through, and whether there are any answers to these types of questions.
If there are no answers to these questions, Schuiteboer advises not entering the financial commitment. Everything should be transparent and predictable, and when circles are well run, they are predictable, and they remain small enough to ensure that you know and trust every participant.
