Cestas Populares  

Cestas Populares, an innovative project of the Mission Asset Fund (MAF) in San Francisco and OneCal Bank, is bringing traditional informal lending circles into formalized modern banking. People who have long been accountable to one another are establishing credit histories and opening up their opportunities for lower-cost financial services. “Cestas Populares bridges two worlds—the banking world and an informal social practice based in trust,” says José Quiñonez, Executive Director of MAF.

Throughout Latin America and in immigrant communities in the U.S., lending circles may be called Cestas, Tandas or Sans. Bonded by trust, circle members participate in a cycle of lending and borrowing. At a monthly meeting around a kitchen table six people may each contribute $100. One person borrows the $600 that month and everyone eventually gets a turn at receiving. Loans are repaid by the monthly contributions. Groups set the contribution amount according to their comfort level and determine the loan order, perhaps by drawing numbered slips of paper from a basket.

A study by Social Compact found that 44% of all families in San Francisco’s Mission District have no credit histories. In informal lending, borrowers who repay faithfully aren’t establishing credit scores. With good scores, people can avoid high-cost, predatory lending.

Now, rather than lay dollars on a kitchen table, Cestas Populares participants contribute through checking accounts at banks of their choice. OneCal Bank debits the accounts through ACH (Automated Clearing House), an electronic network for U.S. financial transactions. Loan payments are reported and cash flows to MAF. MAF makes electronic deposits to the accounts of the next borrowers.

Groups meet at homes or at MAF, which facilitates group dynamics and provides education about credit scores and other financial literacy. The MAF/OneCal partnership enables lending circles to thrive in the best of both worlds: retaining the trust of the informal practice while gaining new access to a broader array of financial services and capital. Members choose how to use the loans— for bills, repairs, paying down high-rate credit.

“Many people feel locked out of the financial system,” Quiñonez says. “This program provides incentive for participants to open bank accounts. And it provides a way to build and improve credit history. Credit scores have morphed into something more than just to determine credit worthiness. People, nowadays, need a good credit score even to get an apartment.” It may take year-long participation in Cestas Populares to realize anticipated results, but participants can continue to enjoy their monthly gatherings and build social capital, while gaining better understanding of the credit market.

Learn more: www.MissionAssetFund.org