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Tandas, cundinas, susu, hui: Local credit pools as a way to exit the financial system and avoid being ripped off by banksters

Fascinating story from Reuters, with one detail they don't focus on, which I've underlined:

Little known outside migrant communities, these funds are known as "cundinas" or "tandas" in Mexico and Central America.

Similar associations, known as "susu" in West Africa and the Caribbean and "hui" in China and parts of Asia, are also common in U.S. migrant communities.

Now as the recession shrivels up credit and makes consumers wary of racking up debts, these small savings and credit associations are thriving.

Since these clubs help people spend money, they can act like mini, private stimulus packages for local economies. They also encourage financial discipline and credit-worthiness -- two attributes that come in handy in real loan applications.

"They are a worldwide phenomenon for poor people [like all of us] whose access to capital is limited ... The easiest way to do it is to pool your resources," said Carlos G. Velez-Ibanez, an anthropologist at Arizona State University.

"There's an increase in (their) use right now. It's harder and harder to get money from formal institutions, so middle class people ... are accessing these tandas and cundinas to make up the shortfall."

The tandas often operate in work places and many are run by women. Participation is by invitation.

How it works:

Typically a group of 10 to 20 members put away anywhere from $50 to $100 at an agreed interval of one or two weeks, and receive a payout when the fund comes round full circle, or beforehand, as an interest-free loan.

"Nobody makes money and nobody loses. It's like we're playing around with the money for people who need it," said Evelyn Alvarado, 23, a nonprofit worker in Los Angeles who pays $100 a week into a 12-member cundina.

NOTE This seems like something we could do online, and it might be useful. Or does it only work locally, because "we know where you live." Readers?

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MsExPat's picture
Submitted by MsExPat on

in Trinidad (where I used to live) and in the Trini community in Brooklyn. Lots of people take advantage of sou-sous to save up for a Carnival costume, or to help pay for a vacation, a trip to New York, or big family event like a wedding or baptism.

The key to the sou-sou is that it takes place in a context of extended large families (it seems like everybody is a second cousin to somebody in Trini). This is what keeps it honest, so that it doesn't turn into a pyramid scheme in which the people who get the first payoffs (the "sou sou han") turn around and disappear before paying off their share to the others.

There's a good academic article on the Trini sou-sou here. And here's something from a woman blogger who already got the idea to use the sou sou to beat the financial crisis blues.

It works to do two things, depending on where you are in the order of payouts. If you get your money early, the sou sou is like a cheap form of credit. If you get your payout towards the end (after you've paid in for many months), then it becomes a way to save money, in a disciplined way. (Although then you don't get any interest--but right now that's not a factor, is it?)

Could non-ethnic groups successfully adopt this kind of banking? I guess you'd have to really trust your group members, and maybe have another relationship with them (co-workers, family, old friends) to keep things from getting messy.

Submitted by lambert on

I can't imagine forming a susu with anybody who hadn't been writing a lot for a long time (assuming there was no other way to verify identity). OTOH, what a great way to incentivize writing a lot for a long time....