Tandas

Tandas play a significant role in the Mexican economy. For people who lack access to traditional banking services, tandas represent their only opportunity to obtain loans and generate savings. Distrust of government and financial institutions, which have a reputation for corruption, also steers many Mexicans toward unofficial forms of economic activity. By some estimates, nearly one-third (31%) of the country’s population belong to a tanda.

Most tandas involve between 10 and 20 members, and require contributions at regular intervals over a set period of time. At the end of each interval – normally a month – one member withdraws the full amount of the pool. As long as everyone fulfills their monthly contribution, the same sum remains available for each member in their turn. The order in which members withdraw funds can be determined either by consensus or at random.

For people who withdraw near the beginning of the tanda, the funds serve as a type of loan, which they can use to invest or pay off a major expense. For people who withdraw later in the cycle, the funds represent the lump total of their regular contributions.

Rooted in shared social and cultural values, tandas usually involve groups of people who know and trust each other, such as family members, friends or co-workers. A sense of confianza – or mutual trust – resides at the heart of the tanda. Because a tanda lacks formal mechanisms such as contracts or liens to guard against default or fraud, the good faith of all participants is critical to the venture’s success.

Despite the lack of conventional safeguards, tandas often prove more reliable than traditional banks. For the vast majority of tanda participants, the social consequences associated with betraying other members of a closely-knit community far outweigh any financial penalty. This emotional component provides a powerful incentive for members to uphold their obligations to the tanda. In a survey of tanda practices in communities along the U.S.-Mexico border, anthropologist Carlos G. Vélez-Ibáñez found the default rate on repayments to be approximately .005%.

Tandas also enjoy popularity among Mexican and Latino immigrant populations in the United States, providing financial opportunities to people who lack the documentation needed to open a traditional bank account. The social aspect of tandas also serves to forge relationships among people who’ve traveled far from home in pursuit of new opportunities. An approach to mutual aid based on a common cultural heritage, tandas build solidarity and community among people living on the margins of traditional financial networks.

Contributor: Stephen Meyer