An old tradition for tough times: Money sharing
By Daniel Gonzalez
The Arizona Republic (Phoenix), May 29, 2009
Blanca Cordero fell and injured her back this year, putting her out of work for four months. The Mesa resident's bills began to mount.
Although others might have resorted to credit cards or high-interest payday loans, Cordero, an immigrant from Mexico, turned to an Old World method of raising cash quickly: cundinas.
The popular monetary practice based on rotating credit is deeply rooted in Mexican culture but little known to outsiders. In a cundina, participants – typically about 10 family members, friends, neighbors or colleagues – contribute a set amount of money each week. Those contributions are pooled, and each week, a different participant takes home the entire pot.
Extremely popular in Mexico, their attractiveness in this country has surged in recent months as growing numbers of immigrants hit hard by the recession struggle to pay their bills. But watch out, some experts warn: Cundinas, which are based on an honor system, can easily be turned into scams.
'It's a form of surviving,' said Elias Bermudez, founder of Immigrants Without Borders, an immigrant-advocacy group in Phoenix. 'What I have seen is because of the bad economy, people are finding ways to help each other, and this is a way. But it's not overt. It's secretive.'
Latino immigrants nationwide have been especially hard hit by job losses due to the recession, according to a new report by the Center for Immigration Studies, a research group in Washington, D.C. In Arizona, the number of immigrants employed fell 11 percent from the first quarter of 2007 to the first quarter of this year, from 544,000 to 482,000, the report said.
Cordero, 36, participated in two cundinas with people from her church after she slipped and fell at her child's day care and couldn't work as a home health aide. With the money she received upfront from the two cundinas – one was worth $600, the other $1,000 – she paid utility bills and bought food and clothing for her family. About $300 also went to cover the cost of passports for her three children for a trip to Mexico this summer. Cordero, who came to the U.S. 17 years ago, said she earned enough money baby-sitting in her home to pay the weekly $100 until the cundinas ended.
Popular in Mexico
The name 'cundina' comes from the Spanish verb 'cundir,' to spread or propagate.
Carlos Vlez-Ibez, an anthropology professor at Arizona State University who has studied cundinas since the 1970s, said cundinas, also called tandas in some parts of Mexico, grow in popularity during tough economic times. But they are also used to raise investment capital when the economy is good by immigrants who can't get bank loans because they lack collateral. Although the standard amount raised by a cundina is $1,000, cundinas can reach as high as $100,000, he said.
'Without tandas and cundinas, half of the new Mexican businesses wouldn't be created. That's what gives them the capital,' Vlez-Ibez said.
He is author of the book 'Bonds of Mutual Trust: The Cultural System of Rotating Credit Associations among Urban Mexicans and Chicanos.'
Cundinas are popular in all levels of society in Mexico but are mostly limited to working-class immigrants in the United States, he said.
They first appeared in the southwestern United States but have spread throughout the country with Mexican migration. Immigrants from other Latin American countries also have introduced their own form of cundinas to the United States, he said.
Trust is important
Cundinas are based largely on trust, so to avoid getting ripped off, participants are usually family members or close friends, Vlez-Ibez said.
Anne Hilby, a spokeswoman for the Arizona Attorney General's Office, said cundinas are not illegal, but that doesn't mean they aren't without risk.
'You should always be cautious when loaning or investing money,' Hilby said. 'To protect yourself, make sure you understand and are comfortable with the level of risk associated with the transaction (and) never put in more than you can afford to lose.'
Cordero said her husband does not approve of cundinas because he is afraid some people will back out and she will lose her money.
Even so, Cordero is planning to participate in another. Her back is better, and she hopes to be working soon. But now, her husband is out of work because of the bad economy.
'This helps me to have access to cash when I need it,' Cordero said. 'And it's interest-free.'