Over the last 24 years where I have been a licensed broker with Monterey mortgage, and today, I am a consultant with California hard money lender, I have seen a first hand experience on how the immigrant communities have mastered the informal financial systems that leaves the traditional banks in embarrassment. These revolving savings groups, also referred to as tadras in Mexican groups, susus in Africa, and hui in Chinese groups offer a loaning and savings system to the individuals who are not in the mainstream banking networks. I have worked with the Latino clients in Central California and observed that the families share 500 dollars monthly among 10 family members and each member has access to 5000 dollars without interests and credit checks. Social accountability goes a mandatory mile beyond any bank underwriting process. A client paid back her tanda as down-payment of an investment property after she had been declined by conventional lenders in spite of her stable salary. This was formalized by Mission Asset Fund, which had a 2024 loan portfolio of 797 individuals worth over $821,000 and shows that these circles can be scaled without negatively impacting community trust. The most notable to me is the financial discipline developed by these systems. Members have very high saving rates that are usually higher than those of the average American household. With implications that are broader than financial. By monitoring these payment patterns by the healthcare systems, they may be in a better position to predict the community health needs. School districts would be able to predict how many individuals were going to enroll to their schools based on the money flow in and out neighborhoods. Such over-the-counter economies offrecords indicate billions of economic activity that policy makers do not think about at all in the compact of establishing a housing, education, or small business initiative.
Founder and Managing Director at Entscheidung Auswandern GmbH
Answered 7 months ago
These informal networks typically involve community-based lending, pooled savings, and mutual financial assistance, where members contribute funds that are accessible when needed. I've observed how these systems empower individuals, providing them with financial options that traditional banks might not be able to accommodate, especially in the face of language barriers or mistrust of the formal financial sector. There is growing interest in fintech startups and community-based lending platforms that are working to integrate these informal economies into more structured financial systems. Some companies have started providing microloans or peer-to-peer lending models that mimic these community-based practices. However, there is still a major opportunity to develop localized products that are better suited to the specific characteristics of immigrant groups. Recognizing the value of these informal economies could reveal important insights that influence healthcare, education, and government policy. Understanding the financial activities within immigrant communities can offer key perspectives on broader trends, such as access to healthcare, support in educational settings, and workforce integration. For example, businesses that focus on immigrant communities could greatly benefit from financial awareness programs, while government policies could evolve to better address the economic realities encountered by these groups.
Throughout my professional journey, I have worked with immigrant communities. In Southern California, where I primarily based, these informal financial systems are highly sophisticated. What regular lenders overlook is that these informal systems are not just survival systems, but instead highly orchestrated systems that are even better than traditional banking in trust and efficiency. The rotating credit associations (also called "tanda" within Latino communities) often consist of 10 to 20 people depositing $500-2000 monthly. I've seen families utilize these systems to purchase homes, open businesses and manage emergencies weeks faster than traditional banking can approve. The Korean "kye" system works the same, but often involves larger amounts mainly for commercial businesses and enterprises. These communities have found their own way to score credit based off of relational networks, family reputation, and business history, which banks simply do not have access to. A restaurant owner can obtain a loan for $50,000 from the community based on 30 years of relationship history, versus what traditional lenders require with a battery of documents they may not even have. Venture capital companies such as Tanda and Esusu are paving the way for traditional systems to detect and use these informal systems; managed by digitization and reporting payment histories to credit bureaus. Yet, most of the community still avoids anything sounding like government systems. The health implications are enormous; these community networks fund medical procedures, create informal insurance pool networks, or provide families support when they have a health crisis in organized ways not doable in formal networks.
I grew up watching something like this happen in small trade groups in Shenzhen. Friends from different provinces formed lending circles where everyone put in a fixed amount, and each month one person got the lump sum. No banks, no contracts, just trust. It worked because people needed quick cash for inventory or shipping, and banks weren't flexible. Companies like Tala and Paga have tried to digitize similar models in emerging markets, but many circles still stay offline. If financial groups could track the flow, it'd highlight who's reliable with money. That insight would ripple into areas like healthcare or even education loans, showing policymakers where stability already exists outside the formal system.
Ayuuto is a traditional Somali practice of a rotating, interest-free savings circle. It brings a group of people together to save regularly and to access a large lump sum when it's their turn. The emphasis is on trust, mutual aid, and communal support. How Ayuuto works 1. The group forms and agrees on terms such as the number of participants, the fixed contribution per period, and the order of receiving the lump sum. 2. At each interval (for example, monthly), every member contributes the agreed amount. 3. The total pot is allocated to one member in rotation, until every member has received the lump sum once. 4. After each full round, the cycle can end or begin a new round with the same or a revised arrangement. 5. Because Ayuuto is typically interest-free, the benefit comes from timely access to a larger amount rather than earning interest on savings. Example There are 10 participants each contributing $100 every month on the 1st. Also each month, 1 of the participants are chosen to receive the "pot" of $1000. This happens monthly until every participant receives the pot. One can only receive the pot once in the cycle. When every participant receives the pot, the cycle starts over.
Just like Jewish and other European communities established their own internal economies (due to prejudice and their unique cultural nuances), modern waves have followed suit. This is not just about recruiting in mosques or churches, but also developing insular supply chains that operate independently from mainstream control points of funding pools. After years of working intimately with the diaspora Chinese community, I have positioned myself as a trusted external partner, understanding how they connect via WeChat, Xiaohongshu, and Weibo. While Chinese Americans contribute over $300 billion to the national economy, the lion's share is non-integrated, and this presents a unique opportunity for outsiders to tap in, assuming that they can develop a culturally sensitive outreach team and spend time understanding their values and expectations.
Immigrant communities foster their own economies through mechanisms like "susus" or ROSCAs, which are informal lending and borrowing circles based on trust. These groups enable members to save and access capital, promoting financial cohesion and self-reliance without needing traditional banks. Engaging experts in finance and community development can provide deeper insights into how these economies operate and impact society at large.
Hi there, I'm a psychotherapist with 12 years of experience working with first and second-generation immigrants—and as an immigrant and child of immigrants myself, I bring both professional and lived experience to this topic. While I am not a finance expert, I believe I can offer a perspective that supports the goals of your article. Looking at relevant expertise outside of the field of finance is one way to offer insights that traditional finance groups have little or no insight into. Here are some high-level talking points we could discuss as they relate to your piece: - The psychology and sociology of economic systems are fundamental to understanding all financial habits, but especially immigrant economies and how/why they work - Immigrant economies are relationship-driven. Financial networks within immigrant communities are about trust-building, religious/cultural values, social accountability, and communal goals. These are all misunderstood or overlooked by classic banking. - Social collateral and social capital are sophisticated processes and powerful motivators in "informal" economies. For example, in many communities I work with, the shame of defaulting on a tanda isn't just personal—it affects your family's standing, your children's marriage prospects, and your access to future business opportunities. This creates accountability mechanisms that are far more powerful than credit scores. - Emotional components are also worth noting: anxiety, pride/self-efficacy, intergenerational trauma - The differences between individualistic cultures and collectivist cultures, and how they treat finances - There is also a difference between how first-generation immigrants relate to informal economies compared to how their children/second-generation immigrants navigate financial decisions These dynamics directly explain why traditional financial inclusion efforts often fail, and why stakeholders need to understand the relational infrastructure that already exists in these communities. I know this response pushes the edges of your query, so thank you for your time. Please do not hesitate to reach out to me if you'd like to talk further about how these psychosocial dynamics could add depth to your piece.
Many of my clients are part of immigrant communities that build their own safety nets when traditional banking or credit systems aren't accessible. These economies are built on trust and necessity. I often see clients participating in lending circles, community savings clubs, or informal credit lines through relatives and neighbors. One client paid his entire green card application fees through a community susu (rotating savings club). Another pooled money with cousins to open a neighborhood grocery store, keeping profits circulating locally and supporting other immigrant-owned businesses. Bringing these networks into the light could benefit more than finance. If policymakers had a better understanding of the scale and reliability of these community economies, they could design programs that complement—not compete with—them. It could mean more effective microloan programs, targeted healthcare outreach where cash is exchanged, and education campaigns that meet people where they are.