The Alternative to Traditional Banking You’ve Never Heard Of

What Westerners can learn from collective “money circles.”

Valerie Vande Panne November 26, 2018

Nkem Khumbah (R) stands with his son Betanga, 17, at their Ann Arbor, Mich., home. When Nkem came to the United States from Cameroon in 1990 he joined a njangi, a group that collectively saves money outside of a bank. The njangi was crucial to Nkem and his family establishing themselves and prospering. (Photo by Erik Howard)

Nkem Khum­bah immi­grat­ed to the Unit­ed States from Cameroon in 1990. The sev­enth of eight chil­dren, he came for an edu­ca­tion at the Uni­ver­si­ty of the Dis­trict of Colum­bia. Deter­mined to start build­ing his sav­ings, he worked odd jobs, often tutor­ing or work­ing the front desk of an apart­ment build­ing. In order to stick to a sav­ings plan, he put $300 a month into his community’s njan­gi, and about a year lat­er received over $3,000 to buy his first car. As more of his fam­i­ly came to the Unit­ed States, the njan­gi grew to 30 par­tic­i­pants. The fam­i­ly pros­pered, obtain­ing advanced degrees, buy­ing prop­er­ty and start­ing busi­ness­es. Today, Khum­bah is a lec­tur­er at the Uni­ver­si­ty of Michi­gan-Ann Arbor.

Facing obstacles to banking, many immigrants use ROSCA systems to help establish themselves by buying a home or founding a business, or to fund their children’s education.

Brazil­ian Jacque­line Muniz, 44, had a sim­i­lar expe­ri­ence when she first immi­grat­ed to the Unit­ed States. Infor­mal con­sor­cios were an inte­gral part of estab­lish­ing her­self, and her com­mu­ni­ty, in Mass­a­chu­setts. She didn’t know about or under­stand the U.S. bank­ing sys­tem — how to open a check­ing account or even what that was — so she turned to a con­sor­cio to save mon­ey, con­tribut­ing $100 a week. Even­tu­al­ly, she received $5,000 from the con­sor­cio to pur­chase her first car.

Lin­da Sil­va Thomp­son is a born-and-raised U.S. cit­i­zen who worked in New York City with immi­grants from all over the world. She par­tic­i­pat­ed in her work­place sousou, and with the mon­ey she col­lect­ed, paid off her car loan and her children’s col­lege tuition.

Njan­gi, con­sor­cio and sousou are all words used to describe a rotat­ing sav­ings and cred­it asso­ci­a­tion,” short­ened to the acronym ROSCA in Eng­lish. In Peru, it’s called a jun­ta or pan­dero. In Egypt, gameya. There are more than 200 words used around the globe. Often peo­ple know it by their native word, so if you ask them if they par­tic­i­pate in a ROSCA, the answer is an emphat­ic no. If you explain what a ROSCA is, you might get an enthu­si­as­tic yes. It’s the most pop­u­lar finan­cial sys­tem you’ve prob­a­bly nev­er heard of.

Used for cen­turies in the non-West­ern world, a ROSCA works like this: A group of, say, 10 peo­ple (but it can be any­where from a few to more than a hun­dred) decide they can each afford to save, say, $100 a month. So every month, the group col­lects $1,000. Each month, a dif­fer­ent per­son in the group receives the full amount, until every­one has received it once. The cir­cle is then com­plete and the group can decide if they want to renew, expand or shrink the cir­cle, or change the amount contributed.

The num­ber of par­tic­i­pants in a ROSCA and the amount and fre­quen­cy of con­tri­bu­tions vary. What remains the same is the equal­i­ty: every­one puts in the same amount and every­one with­draws the same amount when it is their turn. Some ROSCAs are large, with indi­vid­ual con­tri­bu­tions of $10,000 or even $50,000 a month, while some can be as small as $20 a week.

The order of dis­per­sals may be deter­mined by a lot­tery or demo­c­ra­t­i­cal­ly, based on need. When Khumbah’s nephew Moses Mbe­se­ha, 27, had an unex­pect­ed car break­down, the cir­cle allowed him to trade places with the next month’s recip­i­ent. He used the $6,000 he received to pur­chase a new car.

The dis­burse­ment may hap­pen at a month­ly gath­er­ing, or one-on-one at a trust­ed com­mu­ni­ty member’s home. In Khumbah’s njan­gi, the per­son who receives the mon­ey that month hosts a din­ner at their house, a rit­u­al that has cre­at­ed strong fam­i­ly bonds. Cousins grew up togeth­er, raised like siblings.

Beyond the social and cul­tur­al impor­tance, the ROSCA func­tions as a bank of sorts: If you receive your mon­ey at the begin­ning of the circle’s cycle, the ROSCA fund is tan­ta­mount to an inter­est-free loan. If you receive the mon­ey at the end of the cycle, it’s a sav­ings mechanism.

ROSCAs also offer a social sup­port around sav­ings. As our bank­ing sys­tem has become auto­mat­ed, where it’s just so easy to have full access to all of our cash 247, a lot of peo­ple find it dif­fi­cult to save,” explains Lin­da Sil­va Thomp­son, who became a schol­ar of work­place ROSCAs, author­ing a ground­break­ing study on the prac­tice: Mov­ing from Rags – to – Rich­es: Togeth­er or Alone? Under­ground Coop­er­a­tive Sav­ings — An Ethnog­ra­phy of Work­place Rotat­ing Sav­ings & Cred­it Asso­ci­a­tions (ROSCAs).” With ROSCAs, Thomp­son says, people’s sav­ings are out of their reach,” and avail­able when needed.

It is not a for­mal­ized sys­tem. There are no laws, reg­u­la­tions or writ­ten doc­u­ments that gov­ern it. There is no inter­est, and there are no penal­ties or fees. There are no police involved if some­one doesn’t ful­fill their respon­si­bil­i­ty. The strength of the ROSCA is found in community.

AN ALTER­NA­TIVE TO BANKS

Many U.S. house­holds ta ke for gr anted that they can turn to banks for per­son­al sav­ings accounts, loans and cred­it cards, cru­cial to weath­er­ing finan­cial emer­gen­cies and build­ing wealth. But the bank­ing sys­tem was not orig­i­nal­ly built for this pur­pose. The first mod­ern cen­tral bank, the Bank of Eng­land, was found­ed in 1694 to help finance King William III’s war with France. Suc­ces­sive West­ern Euro­pean bank­ing exper­i­ments main­ly involved colo­nial finan­cial spec­u­la­tion by the wealthy — loans to fund the plun­der­ing of the New World.” While bank­ing ser­vices even­tu­al­ly expand­ed, bank loans and sav­ings accounts are still only acces­si­ble to the wealthy and the urban in much of the world — 1.7 bil­lion adults don’t have a bank account, most of them in the Glob­al South (but includ­ing 8.4 mil­lion U.S. house­holds). In many rur­al areas, includ­ing some Native reser­va­tions in the Unit­ed States, banks sim­ply don’t exist. High ser­vice fees, bar­ri­ers to cred­it and gen­er­al dis­trust fur­ther deter the unbanked. In this con­text, form­ing a sav­ings or lend­ing cir­cle with close­ly trust­ed peo­ple makes enor­mous sense.

In rur­al Cameroon, for exam­ple, where banks are scarce, par­tic­i­pat­ing in a njan­gi (also called a ton­tine in West Africa) was com­mon for Khumbah’s fam­i­ly. It’s how his father saved for all eight of his chil­dren to go to school.

Even when peo­ple migrate to the Unit­ed States, they still face obsta­cles to bank­ing: lack of papers, no cred­it his­to­ry, dif­fi­cul­ty meet­ing min­i­mum bal­ances, lan­guage bar­ri­ers or unfa­mil­iar­i­ty with the sys­tem. As a result, a quar­ter of U.S. house­holds head­ed by non-cit­i­zens (and 35 per­cent of those where only Span­ish is spo­ken) have no bank account.

Instead, many immi­grants use ROSCA sys­tems to help estab­lish them­selves by buy­ing a home or found­ing a busi­ness, or to fund their children’s edu­ca­tion. One of Jacque­line Muniz’s friends in the ROSCA pur­chased a food truck. Anoth­er want­ed to become a pilot, so he used the mon­ey to get licensed.

Out­side the Unit­ed States, ROSCAs some­times exist in more for­mal­ized set­tings. In Brazil, for exam­ple, a con­sor­cio might be orga­nized by a car deal­er­ship, and every­one con­tributes month­ly toward down pay­ments on a car. There, con­sor­cios are con­sid­ered an inte­gral part of the nation­al bank­ing sys­tem. More than 7 mil­lion peo­ple active­ly use this for­mal­ized mar­ket­place to pur­chase prod­ucts rang­ing from heavy machin­ery to real estate.

While peo­ple in many non-West­ern coun­tries view the ROSCA as an impor­tant tool for asset build­ing, ROSCAs are not part of main­stream finan­cial thought in the Unit­ed States. There are no hard num­bers on their prevalence.

Some U.S. non­prof­its are start­ing to spring up with the basic struc­ture of a ROSCA, but a few key dif­fer­ences. Par­tic­i­pants might not know one anoth­er, for exam­ple. In San Fran­cis­co, the non­prof­it Mis­sion Asset Fund func­tions like a ROSCA but requires a for­mal appli­ca­tion and can be used to build credit.

While this process might be appeal­ing to curi­ous West­ern­ers, one of the ben­e­fits of the ROSCA is, in fact, pri­va­cy. Not every­one wants to (or can) pro­vide the infor­ma­tion the Mis­sion Asset Fund requires, like a Social Secu­ri­ty num­ber, pay stubs or proof of a check­ing account.

HON­OR CODE

Many first-gen­er­a­tion immi­grants stay with ROSCAs even as they become estab­lished in the Unit­ed States and gain access to com­mon insti­tu­tion­al finan­cial tools — because the ROSCA sys­tem works for them. Their chil­dren may decide to opt in as well. Many peo­ple join the [ROSCA] their moth­er joined. There’s a lot of trust,” explains Lisa Ser­von, a for­mer mem­ber of the con­sumer advi­so­ry board of the Con­sumer Finan­cial Pro­tec­tion Bureau and author of The Unbank­ing of Amer­i­ca.

Khumbah’s son Atabong, 18, is head­ing to Brown Uni­ver­si­ty next year. Atabong has access to tra­di­tion­al Amer­i­can bank­ing sys­tems— he was born here, his father is now a uni­ver­si­ty lec­tur­er, and he’ll be attend­ing an Ivy League school. Things I had to deal with, he doesn’t need to deal with,” Khum­bah says. But Atabong believes in car­ry­ing on the njan­gi tradition.

It is the mod­el I’ll always fol­low,” Atabong says. It just becomes more of a con­scious choice. This sys­tem is the one my fam­i­ly flour­ish­es in. The con­cept of com­mu­ni­ty is essen­tial to those who are marginalized.”

Khum­bah thinks that ROSCAs could be used as a tool for cul­ti­vat­ing inter­gen­er­a­tional wealth in the African-Amer­i­can com­mu­ni­ty, help­ing to over­come the racial wealth gap caused by cen­turies of discrimination.

Thomp­son is one of the few Amer­i­cans not from an immi­grant com­mu­ni­ty to join a ROSCA. She stum­bled upon one when she worked at a com­muter col­lege in the New York City area, along with a num­ber of immi­grants from all over the world. She says the same banker” — the per­son respon­si­ble for col­lect­ing and dis­trib­ut­ing the ROSCA’s mon­ey — held the role for more than 20 years. Main­te­nance work­ers, pro­fes­sors and col­lege admin­is­tra­tors” all par­tic­i­pat­ed, she says. It wasn’t just blue col­lar.” Through her research, she dis­cov­ered that in a lot of [police] precincts, cor­rec­tion­al insti­tu­tions, oth­er col­leges — any place where there is a siz­able pop­u­la­tion of immi­grants, there was a ROSCA.”

What fas­ci­nates me is how well they can work and for how long,” Ser­von says, adding that those with ade­quate income and resources still choose to par­tic­i­pate in these sys­tems out of tra­di­tion­al cul­tur­al adher­ence, or sim­ply because it makes sav­ings easy.

She also likens ROSCAs to the Christ­mas Clubs banks once offered. Muniz echoes that sen­ti­ment: She says her broth­er-in-law just start­ed a ROSCA where par­tic­i­pants con­tribute $100 a week through Christ­mas — to save for, of course, Christmas.

Khum­bah says that those few who miss their pay­ments into the njan­gi are ostra­cized. When every­one in a ROSCA is from the same fam­i­ly or com­mu­ni­ty, if you don’t pay, some­one calls your father, your sis­ter, your cousin or your spouse.

That doesn’t mean peo­ple don’t occa­sion­al­ly skip out on their respon­si­bil­i­ty, espe­cial­ly if they took the pool at the begin­ning of the cycle. Thomp­son recalls dis­cov­er­ing a ROSCA where each of the mem­bers con­tributed $5,000 a month. One guy … got his $50,000, and then he dis­ap­peared,” she says. The risk is that they are unreg­u­lat­ed. You real­ly don’t have recourse. The con­cept is based on trust.”

ROSCA par­tic­i­pants are aware of this as well. Amelton Archie” Archelus, who immi­grat­ed to the Unit­ed States from Haiti in 1994, now lives in Den­ver and has been look­ing to join a sol (a term for ROSCAs in Haiti) to help with unex­pect­ed expens­es, but hasn’t yet found peo­ple with whom he’d be com­fort­able participating.

For Muniz, the con­sor­cio is just a part of what Brazil­ians do to help each oth­er. I think Amer­i­can peo­ple just go to the bank,” she says with a light laugh. We try to be friends and help each other.”

As we grow, the sup­port sys­tem grows,” Mbe­se­ha says of his family’s net­work of njan­gi. It’s a honeycomb.”

Nobody gets less, nobody gets more,” Archelus says. You don’t lose, I don’t lose. Every­body equal. Maybe one day Amer­i­cans will know about it.”

Valerie Vande Panne is an inves­tiga­tive fel­low with In These Times’ Leonard C. Good­man Insti­tute for Inves­tiga­tive Reporting.
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