Outside of the gaze of formal finance, an often-demonized form of informal social finance flourishes. This finance consists of the regular pooling of money among friends and neighbors. It’s a way for individuals to amass chunks of money for paying for a new (used) car, educational expenses, household emergencies, and other major expenses. The system is relied upon by millions of Black women in Africa, the Caribbean, and North America as a trusted alternative to formal banking systems that often exclude them.
There are many names for these traditional systems – susu, partner, meeting-turn, box-hand, sol, depending upon the culture in which they arise. But they are generically known as ROSCAs, an acronym for “rotating savings and credit associations.” ROSCAs are a vital way for people of color and modest means to take care of their financial needs when banking systems are unfriendly or unaffordable, often for racialized reasons.
Professor Caroline Shenaz Hossein has studied the Black social economy for years, and especially cooperatives and informal economies. She has paid particular attention to ROSCAs as familiar, practical social vehicles for savings and credit.
In my latest Frontiers of Commoning podcast (Episode #18), Professor Hossein and I discuss the largely unknown realities of informal banking and the power of the Black social economy.
Black people have been “so traumatized by formal finance,” said Hossein, “that there are people who are unbanked or they choose to be under-banked. This means they’ll do the most minimal activities [with banks] because of the horror stories they have to endure – racism. Anti-black racism in commercial banking is not a secret anymore,” she said, which explains why many African-American women choose to “avoid those kind of stresses and engage with people who actually value their humanity” – their friends and neighbors.
Hossein is a professor of Global Development at the University of Toronto at Scarborough, in Ontario, Canada. Much of her scholarship aims to decolonize our very conception of “the economy” by showcasing the vital role played by informal, racialized, and feminist systems of commoning in the Solidarity and Social Economies.
For more, see the Diverse Economies Collective website and Hossein's books, such as Politicized Microfinance (2016), The Black Social Economy (editor; 2018), and her forthcoming Community Economies in the Global South (co-edited).
For generations, Black women in the African diaspora have relied on “do it together” ROSCAs to pay for major expenses and avoid getting implicated in mainstream banking and state regulation. For their troubles, “Black banker ladies” are often harassed by the banking industry and state authorities, who reflexively regard them “terrorists” or drug dealers because they manage large amounts of cash.
After years of racialized abuse from those very systems, Black banker ladies have little desire to interact with mainstream banks. They turn instead to self-organized groups of ten, twenty, or sometimes dozens of friends, as a more trusted, convivial form of finance.
ROSCAs are more than informal financial institutions. They are forms of personal support and neighborly solidarity. Through casual and flexible means, they perform various types of community development – home improvement, professional training, neighborhood solidarity – that formal banking is not equipped or inclined to perform.
Sometimes, ROSCAs are even sources of seed money for the campaigns of political candidates who wish to be champions for struggling working people. Hossein recalled how ROSCAs have paid for the lawn signs of candidates, for example. It is not surprising that mainstream banking would prefer to neutralize the empowerment that ROSCA-style finance can provide.
Professor Hossein is a big believer in the generative value of informal systems:
“Our primary focus in the West with marginalized groups has been to formalize everyone, and to demonize the concept of the informal. I like to think that Covid has really pushed us to a place where we now understand the value of mutual aid and getting things informally. It’s actually a good thing. Not everything in the informal is dark and dirty. It is a way for people who have been under persecution to thrive.”
Update: Here is a wonderful profile of ROSCAs and Banker Ladies in The Globe and Mail (Canada), and here is a short piece in Medium by the Post Growth Institute.