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SPAIN: Self-Financed Communities “A Tool for Building Trust”

Inés Benítez

MÁLAGA, Spain, Nov 29 2011 (IPS) - On the first Sunday of every month, Abdoulaye Fall, from Senegal, meets a group of people in Barcelona, to contribute money to a common fund or to take out a loan. This is one of 60 self-financed communities in Spain, an alternative to traditional banking systems that is having a powerful social effect.

“I’ll contribute 20 euros (27 dollars),” says one of the 15 Senegalese members of the Axell (which means “providence” in Wolof, the dominant language in Senegal) self-financing community (SFC). “I’ll put in 100 (133 dollars),” says the person sitting next to him. The accountant writes down the amounts and the treasurer puts the money into a box, from which loans approved by the meeting will be made later.

SFCs are community financial organisations in which members are at once owners of the capital and loan customers, borrowers as well as lenders of credit, with a flat interest rate of one percent in most groups.

Fall told IPS that the communities grant loans to fill small urgent or unforeseen needs, such as a trip, a health emergency or payment of a fine, and they are not devoted to creating businesses.

“One of our most recent loans, for 1,200 euros (1,600 dollars) was to travel to the Sheep Festival in Senegal,” said Fall, who works in a Barcelona restaurant and studies at the university.

Termed “susus” in Venezuela or “tontine” in some countries in Africa, and going by at least 54 other names around the world, self-financed communities are a system of group organising that has always existed in every culture, David Schurjin from Ecuador, an expert with the Association of Self-Financed Communities (ACAF) in Barcelona, told IPS.

ACAF is dedicated to creating groups, supporting them and following them up, and teaching them the methodology. It was founded seven years ago by economics professor Jean Claude Rodríguez-Ferrera, who adapted a model of community finances he had learned in Venezuela, to the Spanish context.

Rodríguez-Ferrera is a member of Ashoka, the largest global network of social entrepreneurs.

Unlike microcredit, the funds for SFCs are contributed by the members themselves, instead of coming from an NGO or a bank, which means that users are empowered to a greater extent, according to Schurjin.

Users also have a greater sense of responsibility for loans, “because the group members are friends, acquaintances or relatives,” he said.

The microcredit system, invented by Bangladeshi economist Muhammad Yunus, is aimed at poor people who have no access to bank loans, and allows them to finance employment projects for the most disadvantaged, especially in developing countries.

Spain has 60 self-financed communities, 50 of them in Barcelona and the rest in the cities of Lleida, Valencia, Pamplona, Seville, Madrid, Santander and the island of Lanzarote.

Most of these SFCs are made up of immigrants, people who are normally excluded from ordinary financial systems.

“Immigrant communities respond best to this model, because they are more accustomed to sharing, or because they have a greater need for credit,” said Schurjin.

Members may ask for loans of up to four times the amount they have contributed, so the greater their contribution, the larger the potential loan. Moreover, they must be backed by one or two other members who will guarantee the loan with their own money in case it is not repaid, so they have to earn trust.

The low interest payments go into the common fund, and the cash is commonly distributed at the end of the year. The return on the loans is usually greater than if it had been placed in a bank or hidden under a mattress.

In addition to meeting small financial needs, these communities have a social impact, because they create a discussion space about needs and concerns and contribute to the users’ financial education.

Fall, who has been in Spain for 11 years and is active in ACAF, says the system has different components: financial, social and educational. “The capital is provided by the people themselves, who have sovereignty over the money and manage it,” he said.

In Schurjin’s view, “after a time we realised that the need was less for credit than for creating a social network.”

According to the expert, a 2009 study found that 75 percent of SFC members were motivated to join because they wanted to belong to the group, rather than because they wanted access to money. In fact, Schurjin said the money was sort of an “excuse” to bring people together, while solving economic problems.

The groups, based on mutual aid, are normally made up of friends, acquaintances and relatives belonging to the same community, and they only accept people that they trust as members.

Schurjin said that SFCs promote saving, because the amount of credit available is proportional to the amount deposited, and the interest is also distributed according to what has been contributed.

“Credit will not lift people out of poverty, but saving will,” said Schurjin, who pointed out that the system prevents overindebtedness, “because if you have no savings capacity, you cannot ask for a loan.”

The severe economic crisis in Spain is prompting some Spaniards to form self-financed communities, overcoming “the social inertia that leads people to rely on banks, institutions over which they have no control,” Schurjin said.

The AnaBella Foundation, in the southern city of Seville, has found the community financing system to be an effective tool for empowering women survivors of gender violence, the head of the foundation that bears her name told IPS.

The non-profit organisation works to help women who are at risk of exclusion because of domestic violence, and a month ago it created the first SFC in the southern region of Andalusia. “The model is a perfect match to the needs of women on their own with low purchasing power, or who have been subjected to domestic abuse,” Bella said.

The foundation’s SFC in Seville is made up of seven women, and according to Bella, in addition to providing flexible access to credit, it creates a “social support network” which helps the women evolve from victims to survivors.

“It’s a tool for building trust, and a way for the group to grow together,” said Bella, who is also a member of Ashoka.