‘Informal’ Financial Practices in the South Bronx: Family, Compadres, and Acquaintances

Abstract

This paper explores the role of ‘informal’ financial practices in shaping the resilience of immigrant urban communities, many of which are centered around families—nuclear, extended, and chosen. It looks at financial transactions and services, with particular attention to Rotating Credit and Savings Associations (ROSCAs), whose members are frequently related to each other through ties of kinship, especially in Hispanic circles. In a pioneering study documenting ROSCAs, they were defined as associations where members agree to make regular contributions of money to a fund that is given to each contributor in rotation. Because of their presence in various cultures and geographies, researchers from various disciplines have studied them, mostly in developing countries and immigrant communities within the United States. It is argued that such mechanisms substitute or complement formal financial services that do not fulfill their needs and play a key role in the infrastructures of immigrant communities to be resilient in the face of adverse circumstances. Findings from the present study’s fieldwork, conducted in one neighborhood in New York City’s South Bronx, show that these kinds of groups address the members’ short-term safety and resilience needs. However, given their low returns and unclear procedures to address wrongdoings, they entail higher risks for long term planning and social mobility. Nevertheless, given their persistent and organic nature across cultures and borders, they provide important insights to address those gaps and shed light on the contributions of family dynamics to the public domain.

Appendices

Appendix 1: Tanda Coordinator’s Ties

See Fig. 1.

Fig. 1

Source Author’s notes from research

Marina’s weak and strong ties.

Appendix 2: Interview Protocol

‘Informal’ financial mechanisms in an urban community

Interview Protocol

Hello, my name is _______ and I am a doctoral student at the New School in New York. I have been visiting your neighborhood quite regularly for over a year now, as I’m trying to better understand how communities like yours manage their finances and use different financial services. Some of this research will be part of my dissertation, and that is why I would like to talk with you.

Just so you know, you do not have to answer any questions you do not feel comfortable with. Also, everything you say to me will be completely confidential and I will not use your name or any other identifying information on my work. And please feel free to ask me any question you may have.

• 1. How long have you been living here?

  PROBE: where did you move here from?

  PROBE: is this the first place you moved into when you arrived in the US (if they came from abroad).

  BANKING ACTIVITY

• 2. Do you currently have a bank account?

  PROBE: If not, why?

• 3. IF YES, do you use your account for personal transactions, business or both?

• 4. Do you have a debit card?

  PROBE: Bank or Prepaid?

• 5. When you need cash, where do you usually get it? [PROBE: family/friends; advance from work; credit card; informal lender?].

• 6. What do you generally use your account for? [PROBE: depositing checks, taking out money, saving, sending money, etc.]

• 7. When did you open your account(s)? What motivated you to get it in the first place? [PROBE: had to get one for direct deposit or Grameen; have always had one; direct deposit, convenience…].

• 8. IF NO, Why do you NOT have a bank account?

  Did you have one in the past and close it? IF SO, why? Or did the bank close it on you?

  CREDIT

• 9. In the past 12 months, have YOU borrowed money from:

  • a. A bank, credit union or any other institution.

  • b. A store by using installment credit or buying on credit.

  • c. Payday loan.

  • d. Family or friends.

  • e. Employer.

  • f. Pawnshop.

  • g. Informal lender (loan shark, etc.).

  • h. Grameen.

    PROBE: IF NOT, WHY?

• 10. Why did you take out the loan or loans? FOLLOW UP ON EVERY LOAN.

• 11. What did you use the loan or loans for? FOLLOW UP ON EVERY LOAN.

• 12. Do you have a credit card? Do you know what the interest rate is? What do you use it for? Do you generally pay it off in full or carry a balance?

  CREDIT HISTORY

• 13. Do you know your credit score?

  PROBE: when was the last time you checked it?

  PROBE: Has your credit score every made it difficult for you to do certain things—get a job, get an apartment, get a loan?

  ALTERNATIVE FINANCIAL SERVICES

• 14. Do you ever go to a check casher?

  IF YES, what transactions do you usually do there?

  How often would you say you go?

• 15. Have you ever taken a payday advance / loan?

  IF YES, was it online or storefront?

  Where did you get it? Where you in New York State?

  What did you use it for?

  Can you recall why you needed it at the time?

  Do you currently have any loans with a payday/online payday lender?

• 16. Have you ever pawned any belongings at a pawnshop?

  IF YES, how many times have you done it in the last year?

  IF YES, what was it that you used the money for?

  IF YES, what was the item that you pawned? Can you remember how much money you got for it? Were you able to get it back?

  Do you currently have a pawn loan?

• 17. Do you have a car? IF YES, have you ever taken a car loan?

  How long ago did you take it?

  What did you need it for?

  Do you currently have one of these loans?

  INFORMAL BORROWING

• 18. Have you ever borrowed money from a family member or friend?

  What was the situation that led you to do that?

  Were you able to pay the loan back when you said you would be?

  How often do you do that?

  How is borrowing from a family member or friend different from borrowing in another way (bank loan, money lender, etc.)

• 19. I’ve met some people in this neighborhood who lend money to people who need it. Have you ever borrowed money from someone who is not a family or friend, or a bank?

  IF YES, what was the situation that led you to do that?

    What did you use the loan for?

    How did you know where to go to get the loan?

    How much did you borrow and what did it cost?

    How often do you do this?

    Were you able to pay back the loan on time?

    IF NOT, what happened?

    IF YES, what do you think would have happened if you did not pay it back on time?

• 20. Have you ever gotten credit on purchases at a bodega?

   IF YES, how did you get it in the first place? Did you ask for it?

   How long have you been able to do this for?

   Do you do this at more than one store?

   Can you tell me a bit more about this?

• 21. Do you currently receive food stamps?

   Have you ever changed them for cash?

   IF YES, did you have to pay an extra for what you got?

   What led you to ask for this?

   Where did you do it?

  INFORMAL SAVING (ROSCA)

• 22. Are you a member of any lending and savings group (tanda, sociedad, asociacion)?

• 23. How long have you been in the group?

• 24. How did you find out about it?

• 25. When did you meet the COORDINATOR?

• 26. How did you meet the COORDINATOR?

  PROBE: Can you tell me about when you met?

• 27. Who else in the group do you know?

  PROBE: If so, can you tell me a bit about them?

• 28. Do you see them anywhere else? (social events, work, church, etc.?).

• 29. How do you get your group money? (Cash, deposit?).

• 30. Do you always get it on time?

• 31. How do you give your money? (cash collected, deposit check?).

• 32. Do you always turn it on the same day?

• 33. What made you want to join?

• 34. How is saving in the ROSCA different from saving in a bank or elsewhere? If you don’t have a bank account, how do you think it would be different?

• 35. Had you ever been in one before? Here in the US or in your home country? How is this [ROSCA] group similar to/different from others you have participated in?

• 36. Have you ever had any problem getting your money when it is due?

  PROBE: can you tell me about it?

• 37. How difficult do you find it to refrain yourself from spending [$200] of your income each week?

• 38. What makes you want to save it here?

• 39. Does everyone (i.e. husband) in your household know about your participation in the [ROSCA]?

  IF NOT, why?

  What would happen if they found out?

• 40. What do you usually use this money for?

  • a. Expenses in the future like an event (wedding, birthday).

  • b. Big purchase (appliances, furniture).

  • c. Business purchase / investment.

  • d. Education.

  • e. Send to family abroad.

  • f. Emergencies.

  • g. Other.

• 41. Have you ever had any problems to pay the weekly contribution?

  PROBE: If so, what did you do?

• 42. What would you do if anyone failed to put their share in the group one week and you knew who that person was?

• 43. I’ve heard about some [ROSCAs] that have broken up because one person stopped paying, or the leader took the money and left. Has this ever happened to you? Do you worry about it?

• 44. Do you save elsewhere?

  a. Using an account at a bank, credit union or other institution.

  b. Keeping it at home.

  c. Give it to someone else to keep (money keeper).

  d. Sending abroad.

  e. Other.

  IF YES, how do you differentiate between the different ways you save?

  IF NO, why have you chosen to save in a [ROSCA] instead of in other ways? (bank, at home, etc.).

• 45. Have you ever borrowed any money from the coordinator or from anyone in the group?

  IF YES, how much have you borrowed?

  What did you need it for?

  Did you pay back what you had borrowed or did you pay something extra? (giving a ‘tip’, doing a favor such as watching children, doing errands).

• 46. Do you usually pick the number you want in the group?

  IF YES, what number placement do you usually pick? Why?

• 47. Have you ever asked the coordinator for an advance in your turn to get your money ahead of time?

   IF YES, did you get it?

   Did you have to pay anything to get it?

   How often have you done this?

• 48. Have you ever asked the coordinator or anyone else to hold your money for you until you needed it? Some people I’ve talked to don’t trust themselves or the people they live with and having someone else hold the money helps them save it.

  INSURANCE

• 49. Do you have health or medical insurance?

  PROBE: What type?

• 50. What do you do if you don’t have money to pay bills or any other important emergency?

• 51. Have you been in such situation in the past?

  IF YES, what happened?

• 52. How did you handle it?

  TRUST

• 53. In general, do you trust the people in the ROSCA?

• 54. Generally speaking, would you say that most people in your neighborhood can be trusted or that you need to be very careful in dealing with people?

• 55. How satisfied are you with the financial situation of your household?

• 56. Do you have any questions for me?

• 57. Could I contact you again if I have any other questions?

Thank you very much for your time!

Appendix 3: Table of participants

See Table 1.

Table 1 Members in Marina’s Tandas

Appendix 4: Interviewed Neighborhood Residents

See Table 2.

Table 2 Interviewed neighborhood residents