Credit Repair Blog

Neighbors Helping Neighbors—Alternative Ways to Get Access to Money

Community savings funds are cash pools set up by small groups of people to help each other get access to larger sums of money periodically.  These pools are very common in many countries (including parts of Africa, the Caribbean and South America).  Here’s how they work. 

Friends agree to pitch in a set amount of money each week.  In return, one of the members gets to withdraw a large amount each week.  So, if 10 friends start a pool, and agree to pitch in $100 each week, one of the members will get to withdraw $1,000 each week. The member can withdraw $1,000 every 10 weeks, allowing them to plan for (and pay for) large expenses every 10 weeks.

For folks who don’t have access to more “traditional” forms of credit, these funds can be a lifesaver.  When compared to other “non-traditional” forms of credit (such as payday loans and car title loans), community savings funds are a great way to go.  They do have a number of drawbacks, including the fact that they do not allow members to actually build a credit history—remember that credit histories are built only when creditors report good credit behavior to the credit bureaus.