The Mujin is a traditional Japanese rotating saving and credit association (RoSCA) that provided financial aid for the lower-middle class in Japan until the postwar reconstruction period. The traditional Mujin has disappeared from most regions, and the surviving Mujin provides more of a social networking than a financial function for its members. We investigated the association between level of participation in the Mujin and the capacity for independent living in older adults. Baseline data of an ongoing cohort study of 581 self-sufficient older adults were analyzed. The Tokyo Metropolitan Institute of Gerontology Index of Competence was used to measure higher-level functional capacity, and the level of engagement in the Mujin was determined by a score derived by factor analysis. We found that a higher level of engagement in the Mujin was associated with greater functional capacity, especially social role performance, the highest-level function. We conclude that the Mujin provides a venue for community interaction that serves to increase the social capital of the community and may have psychosocial benefits for its members due to strong membership ties and mutual trust. Further investigation of the causal relationship between participation in the Mujin and functional capacity, and the psychosocial effects of similar financial mutual-aid systems in other social contexts is warranted.