Pooling community dollars: a 'susu' can mean money

[Olùkọ́ Ọbádélé]

Pooling community dollars: a 'susu' can mean money for your business - rotating credit associations

Black Enterprise, May, 1997 by Sheryl E. Huggins

If you're an aspiring entrepreneur or have been in business for less than three years, you've probably had to be pretty creative in order to raise capital and earn credit. You know about credit card financing, factoring and begging family and friends. But have you ever tried a susu?

Susus, as rotating credit associations are called in parts of the Caribbean, are especially popular among immigrants for raising capital quickly. Susu is derived from the Yoruba word "esusu," which roughly translates to "pooling the funds and rotating the pot." According to Roy Hastick Sr., CEO of the Caribbean American Chamber of Commerce & Industry in Brooklyn, New York, a susu involves a group (usually five to 10 family members or friends) that contributes a set amount of money each week into a pool for a certain period of time. Each week, one member gets a "hand"--the entire amount of the pool collected for that week. Once each member has received a hand, the susu is usually dissolved. Weekly contributions can run anywhere from $5,000-$1,000. Hands generally range from $5,000-$15,000, depending on the size of the susu. Although susu hands are most often used for securing home mortgages, they also come in handy for cash flow management and raising seed capital.

Delroy Wright, owner of the Source Health Food Store in Brooklyn, made regular use of a susu for funding inventory purchases during the first years of his four-year-old business. And the practice runs in the family. His sister Gloria Thompson has been a susu banker for over 24 years. She financed her Brooklyn-based business, Gs Laundromat, using an $80,000 hand.

Susu bankers assume the responsibility for collecting and keeping track of the contributions. While no specific qualifications are required, the banker is generally someone who is trusted and respected throughout the community. Wright says susu members should also trust and know each other well. While participants can purchase insurance to protect against loss, trust is the prevailing factor.

Banks are beginning to recognize the idea. The Central Brooklyn Federal Credit Union looks at recommendation letters from susu bankers when reviewing credit histories and has even put together two business-related susus as a way of attracting more customers.

If you're interested in starting a susu:

* Deposit the funds collected in an accredited financial institution on a regular basis.

* Keep the cycle short--two to four months is typical--and the weekly contributions realistic. Members shouldn't commit to anything more than they can comfortably part with.

* Don't hesitate to inquire about the salary, employment and credit histories of prospective members.

* Keep the number of members low. The more members, the harder it will be to run things smoothly.

For more information, contact the Caribbean American Chamber of Commerce & Industry at 718-8344544, or the Central Brooklyn Federal Credit Union at 718-399-1763.

COPYRIGHT 1997 Earl G. Graves Publishing Co., Inc.
COPYRIGHT 2004 Gale Group

[alvasakima]

I don't understand this concept. Let's keep the numbers small for sake of discussion.

Say I create a 10 member susu.
Each member contributes 10 dollars a week.
The susu then runs for 10 weeks. 10 members, 1 hand each equals 10 weeks.
So, each hand would be 100 dollars. 10 members times 10 dollars equals 100 dollars.

What is the benefit? Say I'm dealt the last hand. Well, I had to pay out $100 anyway over the course of the susu so I just get my money back?

This is retarded.

[Olùkọ́ Ọbádélé]

Originally Posted by alvasakima

I don't understand this concept. Let's keep the numbers small for sake of discussion.

Say I create a 10 member susu.
Each member contributes 10 dollars a week.
The susu then runs for 10 weeks. 10 members, 1 hand each equals 10 weeks.
So, each hand would be 100 dollars. 10 members times 10 dollars equals 100 dollars.

What is the benefit? Say I'm dealt the last hand. Well, I had to pay out $100 anyway over the course of the susu so I just get my money back?

This is retarded.

I trust lack of understanding is an impetus for further research.

Money pools float immigrant dreams
By Ari Rabinovitch

Money from the Rotating Credit Associations is used to start businesses and buy houses.

It’s called susu, and this is how you play.

A minimum of 20 people participate, and the cost is $100 a week. Every week the players pay their share until the susu organizer collects a stack of bills totaling $2,000. And every week, one player takes home all the cash. The rotation ends 20 weeks later after everybody has had a payday.

Susu is the West Indian term for money pools. Mexicans refer to them as tandas. In Korean they are called kaes. Money pools of this kind exist in almost every immigrant community across America. At best, they are guaranteed lotteries that help new immigrants start their own businesses, pay for weddings or put a down payment on a new home. At the very least, it’s a savings plan for those without access to a bank.

And with immigrant communities growing, money pools are more popular than ever, according to researchers.

“When immigrants are economically at the bottom rung, the only way to save and invest their money is to pool their resources,” said Carlos Velez-Ibanez, a professor of anthropology at Arizona State University who specializes in social organizations within ethnic and minority groups. “And if they are undocumented and cannot go to banks, they have no other choice.”

The rotating credit association, or money pool, is a practice immigrants bring with them from their country of origin and can be slightly different for each group. Some pools last longer than others. Some people play with bigger stakes. But central to every pool is strong, mutual trust among participants. They are neighbors, coworkers and sometimes even family. In such an arrangement, Velez-Ibanez explained, the social pressure on members to fulfill their commitments is very strong.

In traditional Asian societies, people formed economic and social networks, said Pyong Gap Min, author of "Ethnic Business Enterprise: Korean Small Business in Atlanta." Centuries ago, these networks used agriculture products in lieu of money and slowly developed into the modern rotating credit associations. Historically, they are contingent on strong social trust, and have not spread into mainstream America, possibly because “they are too risky for Americans,” Min said.

As the money pools pass from generation to generation they become a more formalized and practical way for individuals to assist others in their community. In the American Southwest, Velez-Ibanez said, transnational tandas are popular for Mexican immigrants. The organizer collects payments from the players in the United States and then crosses the border into Mexico. Socially, this keeps friends and families connected. Economically, the immigrants are helping the players across the border by playing with U.S. Dollars.

Wayne, a 43-year-old from Trinidad, works in a Manhattan hospital and has been playing susu for 15 years. He belongs to a susu that is comprised of his hospital coworkers. Though the money pools are not illegal, Wayne requested his last name be withheld. Such large sums of unreported cash make most participants, especially the organizers, reluctant to identify themselves. It makes them targets for neighborhood thieves or even the Internal Revenue Service.

“We play with big stakes,” he said. “I have to pay $500 every two weeks. But when it’s my turn to collect, I will bring home $25,000. Cash.”

The susu has been a compulsory savings plan for Wayne. He knows that if he put the $500 in a bank, it would be gone a few weeks later. The susu forces him to sacrifice the extra spending, and though technically he is not making a profit, he looks at his payday as money earned.

Wayne just began a new round of susu. Because he will be one of the first people to collect in the rotation, the $25,000 payout next month will be comparable to an interest-free loan. “My mother-in-law bought a house with her susu money. I’m thinking about doing the same thing,” he said.

While the benefits of these money pools are substantial, there are also drawbacks. Wayne lost $5,000 a few years ago when one of the players collected her payment and left halfway through the rotation. Violating the money pool rules bring communitywide shame and embarrassment to the forfeiter, but in the end there is no way to force a person to pay.

And such large sums of cash make the money pools a target for robbery. One woman, who asked to remain anonymous, organizes a quota in the Bronx and has had her apartment burglarized three times on collection day. Quota is the term used by immigrants from Central America. They even have a special word, tumbe, for a quota robbery.

“You don’t want to be high profile,” she said. She now has to rotate between different apartments each week. About the stolen money, she added, “There’s nothing you can do. You can’t report to the cops all that money. They won’t believe why you got all that cash at your place.”

At CAMBA, a nonprofit organization in Brooklyn that helps low-income individuals and families become economically and socially self-sufficient, it is not uncommon to encounter beneficiaries of these money pools.

“We’ve seen entrepreneurs come who’ve just got a susu payment,” said Brian Singer, program director for CAMBA Small Businesses. The money has helped finance new West African food grocery stores or restaurants, he said. “There’s no doubt it’s positive," Singer said, "because there is no way the entrepreneurs would otherwise have access to that kind of money.”

E-mail: alr2115@columbia.edu

[alvasakima]

Maybe I wasn't clear. I do understand the susu concept, what I don't understand is the value.

It's simply a forced savings plan. Whether you contribute a million dollars a week or hundred dollars a week each member is responsible for coming up with the total.

What does it matter if my susu hand is a million dollars if I have to pay out a million dollars over the course of the susu anyway? I might as well just have held onto my money. Also there is no interest to be gained, no asset protection, and its based on trust/faith which has no business in finance in the first place.

A better way to go is the Investment club model. Same basic idea as the susu in that money is pooled among the members. It can be set up with a simple partnership agreement or made into an elaborate LLC type arrangement. You get to keep the money in a black owned bank with federally insured capital (doesn't necessarily have to be a US bank).

The difference is there is no floating hand that goes around weekly. Instead the cash is pooled to be invested as a group. This is a way for a group of Africans to start opening businesses and things very quickly... Depending only on group consensus, the amount of money contributed, and the frequency of those contributions. The only caveat is that the businesses would be owned by the whole group and not a specific individual.

[Olùkọ́ Ọbádélé]

I understand what you are saying now. Much success to you with your investment ideas. Hopefully they will be as successful for you as Susu saving is for those who use that system.

Obadele