Cestas Help Aspiring Latino Biz Owners

Communal lending pools known as cestas help aspiring business owners in Latino communities, and banks are beginning to partner with them to help the informal borrowers establish credit, Paul van Slambrouck reports in the Christian Science Monitor.

Eight members strong, the Champions have come together in an upstairs office in this city’s predominantly Latino Mission District. Nearly all have spent the day laboring in low-paying jobs, and nearly all have dreams of brighter economic futures.

So here, over pupusas and sodas, they are meeting to take part in a pioneering program — apparently the first of its kind in the United States — that lets them pool their modest resources, disburse them among themselves at agreed intervals, and build individual credit in the process.

The program was established a little over a year ago by the nonprofit Mission Asset Fund (MAF). The groups usually consist of six to 12 individuals and are called “cestas,” the Spanish word for baskets. A longtime communal alternative to traditional banking, these arrangements had one major drawback: The activity never registered among the major credit agencies, meaning participants remained stuck in a world of either no credit or exorbitantly high-priced credit. MAF’s innovation is to link this peer-to-peer networking to the credit markets.

“It’s a breakthrough,” enthuses economist Barbara Robles of Arizona State University in Phoenix. And it’s a model that, according to Ms. Robles, “other nonprofits can replicate.”

Photo by The Christian Science Monitor.

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