Banking is a complicated process for working-class people who fail to comply with anti–money laundering regulations. Know your customer (KYC) requirements mandate prospective clients to provide their source of funding and possible employment history. Such policies make it difficult for working-class entrepreneurs to formalize and access funding. By restricting poorer people to informality, KYC requirements sap the growth potential of small businesses.
However, the ingenuity of working-class entrepreneurs has allowed them to compete by creating an alternative to the financial system. Due to the success of rotating savings and credit associations (ROSCA), informal entrepreneurs have managed to build lucrative businesses. In developing countries, these informal institutions are a pivotal source of capital formation. For example, in Nigeria, credit contribution clubs are quite popular, especially among the Igbo and Yoruba people.