Trusted Lending Circles Around the World

Leon Di, Product Marketing @ WeTrust

In India, they are known as chits. In Mexico, they’re called cundinas. They’re also known as hui (China), susu (West Africa and the Caribbean), Game’ya (the Middle East), pandeiros (Brazil), tanomosiko (Japan), and tandas (Latin America). No matter what they’re called, one thing is certain: Trusted Lending Circles are used in almost every corner of the world. In this article, we scour the globe and highlight some rich cultural traditions associated with this unique form of banking and lending.

India: Chit Funds

India has a long history of community based savings lending through what are known as “chit funds”. The first chit fund came into being in the 1800’s, when Raja Rama Varma, ruler of the Cochin state in India, used a chit to loan funds to a Syrian trader while keeping a portion for himself. In South India, particularly in the state of Kerala, the access to credit enabled by chit funds has fueled economic growth, and it is now estimated that there are around 5,000 chit companies in Kerala employing over 35,000 people. In North India, there exists a unique type of chit fund in which each week, the names of the members of the fund are placed into a box, and one person’s name is selected at random. The person so selected receives the funds for that time period, and his name is discarded so that he may not receive the collected funds again. Chits are used by people in all levels of Indian society and there are even chit fund companies that manage and supervise these funds.

Latin America: Tandas

Trusted Lending Circles are used throughout Latin America, where they are most commonly known as tandas but are also referred to as cundinas (Mexico), juntas (Peru), and pandeiros (Brazil). They tend to be informal arrangements between friends or family members, and are often formed because one member of the tanda has a pressing need for money due to an emergency or debts. According to Carlos Vélez-Ibáñez, a cultural anthropologist, tandas are a significant cultural practice among Latino and Chicano populations in the US, are are based on mutual trust, or “confianza”. In the modern era, the company Moneyfellows has created an online solution for collecting cash for tandas, making the process more global and transparent.

China: Hui

In China, Trusted Lending Circles tend to be created among extended family members, where it is known as a hui. The process of participating in a Trusted Lending Circle is known as biao hui. The money from the Trusted Lending Circle is often used for down payments on houses or cars, or to start new businesses. The hui is usually initiated by a trusted figure within the community, who is in charge of recruiting and vetting all participating members. While the new members can vouch and invite their friends and family, each new participant must be approved by the group leader. This group leader is also held responsible in the case of fraud or default of anyone within the hui group. To compensate for this additional risk, the group leader is given priority in any borrowing situations; to that extent, the group leader is sometimes the person in the hui who must fulfill their borrowing needs first. In addition, members of the hui must pay an interest rate to the group when taking the money, with earlier payments typically requiring higher interest payments. In the modern era, hui schemes have been adapted to online platforms, such as Monk, Puddle, and LendingCircle.

Africa: Susu

Throughout Africa and the Caribbean, a form of Trusted Lending Circle known as Susu is practiced. The name susu comes from the twi language of the Ashanti people of West Africa and means “plan”. Participating in the susu is referred to as “throwing hands.” Oftentimes, these susus provide a means to access capital for the “underbanked.” It is estimated that three quarters of Jamaican immigrants in New York participated in susus according to a study conducted in the 1980s, and a popular modern susu is run by the Bay Area Nigerian Association of Oakland, California. The UK-based app Partnerhand is an example of a modern susu.

Japan: Tanomosiko

Tanomosiko, as Trusted Lending Circles are known in Japan, have played a major role in the economic development of Japan. The name “tanomosiko” is derived from “tayori ni naru mono”, meaning reliance. These social finance schemes have existed in Japan since at least the middle Kamakura Period (1185–1333), and by the Tokugawa Period (1603–1868) they were widespread. These tanomosikos facilitated savings, property and enterprise investments, insurance, personal loans and assistance for poorer Japanese people. In the late 19th century, even as commercial banking developed in Japan, many of them were reluctant to offer small scale and personal banking services. It wasn’t until 1915 that many of these tanomosikos were incorporated into mutually financed companies. In the modern day, the use of tanomosiko has declined in Japan, though they are still used informally in Kyushu and Okinawa. In fact, in Okinawa, a currency for facilitating Trusted Lending Circles known as Moai Cho has been sold in stationery stores — and work similarly to the WeTrust TrustCoins!

Trusted Lending Circles have long been used by many people in all corners of the world. Different cultures have put their own unique spin on these unique lending schemes. They may go by many names, but the concept of all of these Trusted Lending Circles is the same: a group of people relying on their trust in each other to provide social banking and insurance!

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