Informal savings clubs are a common form of thrift outside of traditional banking. Researchers report that in addition to being a way to provide insurance or purchase durable goods, they create a mechanism to deliver to their participants the self-discipline for saving.
Are informal savings clubs a good alternative to traditional banking? Unlike with the latter, there aren’t rigorous legal protections for these clubs, which tend to be popular in areas without access to traditional banking structures, primarily in developing economies and among immigrant communities. Instead of legal protections, these clubs are based on reciprocity and trust in the social and familial bonds among those who are involved, and they leverage those ties to create the motivation for saving.
Key Takeaways
- Informal savings clubs, such as “susus” (also spelled “sousous”), are community pools where members each pay in a set amount at certain intervals, and the full sum is paid out to one member at a time on a rotating basis.
- They are common in areas without access to traditional banking, although they have also become more common in the West.
- They aren’t simply financial implements; instead, they are rather old tools that have been developed in many cultures around the world and promote cultural continuity within societies.
- As a financial tool, they often don’t offer legal protections and instead rely on trust within the members of the club, who are often family members or…
