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ASU Regents' Professor explains Latina 'lending circles'


April 08, 2014

In the midst of tax season, a National Public Radio series is looking at women and wealth. A recent report included an interview with Arizona State University’s Carlos Vélez-Ibáñez about how Latinas rely on no-interest lending circles with friends, called “tandas.”

Vélez-Ibáñez, ASU Regents’ Professor and director of the School of Transborder Studies, has written a book on the subject, titled "An Impossible Living in a Transborder World: Culture, Confianza, and Economy of Mexican-Origin Populations."

Tandas act as no-interest loans or savings accounts, depending on when participants receive the payout. The NPR story gave an example of how it works: Ten friends, family members or co-workers get together, and each agrees to give $100 every two weeks to the group's organizer. One person ends up with the whole pot at the end of the month: $2,000. This goes on for 10 months until everyone gets the pot.

A level of trust is fundamental to making the tanda work, Vélez-Ibáñez explained. The risk is that someone receives the pot and never comes back or the leader who banks the cash for the group skips town. But he said that rarely happens.

"In the United States there is such emphasis given to individuality and individuation and individual success," Vélez-Ibáñez said. "The bottom line is trust. They can't believe people trust each other."

In the piece, Vélez-Ibáñez pointed out that newly arrived Mexican immigrants have to trust each other for survival. Their neighbors and co-workers are also their mechanics, seamstresses, baby sitters and interpreters. Such social connections are critical, he added, especially for those who are undocumented or do not speak English.

Because it is women primarily who maintain these connections, they also are the ones most frequently running tandas – or what Vélez-Ibáñez refers to as rotating savings and credit associations.

"When you participate in rotating savings and credit associations, everybody already knows your name, everyone already knows what your social collateral is and whether you're trustworthy or not," Vélez-Ibáñez said.

The story described how the quick infusion of cash provides an alternative to payday lenders with their exorbitant interest rates, and can help Latinas pay bills or even start a business. In California, legislation has been proposed that would exempt tandas from having to get a state lender’s license.

Article source: National Public Radio

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